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The New York Times Company Reports 2018 Third-Quarter Results

November 1, 2018 GMT

NEW YORK--(BUSINESS WIRE)--Nov 1, 2018--The New York Times Company (NYSE:NYT) announced today third-quarter 2018 diluted earnings per share from continuing operations of $.15 compared with $.20 in the same period of 2017. Adjusted diluted earnings per share from continuing operations (defined below) was $.15 in the third quarter of 2018 compared with $.12 in the third quarter of 2017.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20181101005554/en/

Operating profit rose to $41.4 million in the third quarter of 2018 from $31.8 million in the same period of 2017, principally driven by higher digital subscription, digital advertising and other revenues, as well as a gain from a pension liability adjustment, partially offset by higher operating costs. Adjusted operating profit (defined below) was $53.7 million in the third quarter of 2018, flat compared with $54.0 million in the third quarter of 2017 as higher digital subscription, digital advertising and other revenues were offset by higher adjusted operating costs.

Mark Thompson, president and chief executive officer, The New York Times Company, said, “This was a strong third quarter for the Company. We added 203,000 total net new digital-only subscriptions in the quarter and grew total revenue by 8 percent against the same quarter in 2017. We also passed two significant milestones, and now have more than 3 million digital-only subscriptions and more than 4 million total subscriptions.

“We’re executing on our subscription-first strategy; this quarter, subscription revenues accounted for nearly two-thirds of the Company’s revenues. We’re investing aggressively in our journalism, product and marketing and are seeing tangible results in our digital growth.

“Turning to advertising, as expected, we are seeing a much stronger second half of the year. We had an exceptional third quarter with digital advertising up 17 percent and growth of 7 percent in total advertising.”

Comparisons Unless otherwise noted, all comparisons are for the third quarter of 2018 to the third quarter of 2017.

In the first quarter of 2018, the Company adopted Accounting Standards Update 2017-07 Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The Company has recast its third quarter and nine months ended September 24, 2017, results to reflect the impact of the adoption of ASU 2017-07 for comparability purposes; there was no impact to net income as a result of the adoption. Refer to the Condensed Consolidated Statements of Operations for more details.

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, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit); and operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs). Refer to Reconciliation of Non-GAAP Information in the exhibits for a discussion of management’s reasons for the presentation of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.

In connection with the adoption of ASU 2017-07 in the first quarter of 2018, the Company modified its definitions of adjusted operating profit, adjusted operating costs and non-operating retirement costs in response to changes in the GAAP presentation of single employer pension and postretirement benefit costs. For comparability purposes, the Company has also presented each of its non-GAAP financial measures for the third quarter and first nine months ended September 24, 2017, reflecting the recast of its financial statements for such periods to account for the adoption of ASU 2017-07 and the revised definitions of the non-GAAP financial measures. Refer to Reconciliation of Non-GAAP Information in the exhibits for more details. As disclosed in the Company’s first quarter 2018 earnings release, in the revised full-year 2017 presentation of non-GAAP financial measures, the Company’s adjusted diluted earnings per share from continuing operations decreased by $.04 from $.80 to $.76, its adjusted operating costs increased by $9.7 million, and its adjusted operating profit decreased by the same amount, in each case compared with the previously reported amounts.

Third-quarter 2018 results included the following special item:

Third-quarter 2017 results included the following special items:

Results from Continuing Operations

Revenues Total revenues for the third quarter of 2018 increased 8.2 percent to $417.3 million from $385.6 million in the third quarter of 2017. Subscription revenues increased 4.5 percent, while advertising revenues increased 7.1 percent and other revenues increased 49.3 percent.

Subscription revenues in the third quarter of 2018 rose primarily due to growth in recent years in the number of subscriptions to the Company’s digital-only products. Revenue from the Company’s digital-only subscription products (which include our news product, as well as our Crossword and Cooking products) increased 18.1 percent compared with the third quarter of 2017, to $101.2 million.

Paid digital-only subscriptions totaled approximately 3,095,000 at the end of the third quarter of 2018, a net increase of 203,000 subscriptions compared with the end of the second quarter of 2018 and a 24.4 percent increase compared with the end of the third quarter of 2017. Of the 203,000 additions, 143,000 came from the Company’s digital news products, while the remainder came from the Company’s Cooking and Crossword products.

Third-quarter digital advertising revenue increased 17.3 percent, while print advertising revenue decreased 0.7 percent. Digital advertising revenue was $57.8 million, or 47.5 percent of total Company advertising revenues, compared with $49.2 million, or 43.3 percent, in the third quarter of 2017. The increase in digital advertising revenue reflected growth in both creative services and traditional direct-sold advertising on our digital platforms.

Other revenues rose 49.3 percent in the third quarter primarily as a result of growth in our commercial printing operations, four and a half additional floors of rental income from our New York headquarters building and affiliate referral revenue associated with the product review and recommendation website, Wirecutter.

Operating Costs Operating costs increased in the third quarter of 2018 to $380.8 million compared with $351.3 million in the third quarter of 2017, while adjusted operating costs increased to $363.7 million from $331.6 million in the third quarter of 2017 largely due to higher marketing expenses incurred to promote our brand and products, labor and raw material costs from commercial printing, newsroom costs and costs related to our advertising business.

Marketing expenses increased to $40.4 million in the third quarter of 2018 from $26.6 million in 2017 largely due to an increase in subscription acquisition and brand marketing costs.

Other Data

Other Components of Net Periodic Benefit Costs/(Income) Other components of net periodic benefit costs/(income) increased in the third quarter of 2018 to $2.3 million compared with ($1.2) million in the third quarter of 2017 primarily due to lower expected returns on pension assets, partially offset by lower interest costs.

Interest Expense and Other, net Interest expense and other, net decreased in the third quarter of 2018 to $4.0 million compared with $4.7 million in the third quarter of 2017 as a result of higher interest income from cash and cash equivalents and marketable securities.

Income Taxes The Company had income tax expense of $10.1 million in the third quarter of 2018 compared with $23.4 million in the third quarter of 2017. The decrease was primarily due to taxes incurred for a gain related to a joint venture in the third quarter of 2017 and the reduction in the U.S. federal corporate income tax rate that took effect in 2018.

Liquidity As of September 30, 2018, the Company had cash and marketable securities of $794.5 million (excluding restricted cash of $18.2 million, substantially all of which is set aside to collateralize certain workers’ compensation obligations). Included within marketable securities are approximately $68 million of securities used as collateral for letters of credit issued by the Company in connection with the leasing of floors in our headquarters building. Total debt and capital lease obligations were $252.8 million.

Capital Expenditures Capital expenditures totaled approximately $15 million in the third quarter of 2018 compared with $39 million in the third quarter of 2017. The expenditures were primarily related to improvements at our College Point printing and distribution facility and the redesign and consolidation of space in our headquarters building.

Outlook The Company’s fourth quarter of 2018 contains 13 weeks compared with 14 weeks in 2017. The following outlook reflects both the inclusion and exclusion of the impact of this additional week in the prior year.

On a 13-week 2018 to 14-week 2017 basis (including the impact of the additional week in 2017):

Total subscription revenues in the fourth quarter of 2018 are expected to decrease in the low to mid-single digits compared with the fourth quarter of 2017, with digital-only subscription revenue expected to increase in the high-single digits.

Total advertising revenues in the fourth quarter of 2018 are expected to decrease in the mid-single digits compared with the fourth quarter of 2017, with digital advertising revenue expected to increase in the mid-single digits.

Other revenues in the fourth quarter of 2018 are expected to increase approximately 40 percent compared with the fourth quarter of 2017.

Operating costs and adjusted operating costs are expected to increase in the mid-single digits in the fourth quarter of 2018 compared with the fourth quarter of 2017 as a result of higher marketing costs and growth in commercial printing operations.

On a comparable 13-week basis (excluding the impact of the additional week in 2017):

Total subscription revenues in the fourth quarter of 2018 are expected to increase in the mid-single digits compared with the fourth quarter of 2017, with digital-only subscription revenue expected to increase in the mid-teens.

Total advertising revenues in the fourth quarter of 2018 are expected to be approximately flat compared with the fourth quarter of 2017, with digital advertising revenue expected to increase in the mid-teens.

Other revenues in the fourth quarter of 2018 are expected to increase approximately 40 percent compared with the fourth quarter of 2017.

The Company expects the following on a pre-tax basis in 2018:

Conference Call Information The Company’s third-quarter 2018 earnings conference call will be held on Thursday, November 1 at 11:00 a.m. E.T.

Participants can pre-register for the telephone conference at dpregister.com/10124755, which will generate dial-in instructions allowing participants to bypass an operator at the time of the call. Alternatively, to access the call without pre-registration, dial 844-413-3940 (in the U.S.) or 412-858-5208 (international callers). Online listeners can link to the live webcast at investors.nytco.com.

An archive of the webcast will be available beginning about two hours after the call at investors.nytco.com. The archive will be available for approximately three months. An audio replay will be available at 877-344-7529 (in the U.S.) and 412-317-0088 (international callers) beginning approximately two hours after the call until 11:59 p.m. E.T. on Thursday, November 15. The passcode is 10124755.

Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, and actual results could differ materially from those predicted by such forward-looking statements. These risks and uncertainties include changes in the business and competitive environment in which the Company operates, the impact of national and local conditions and developments in technology, each of which could influence the levels (rate and volume) of the Company’s subscriptions and advertising, the growth of its businesses and the implementation of its strategic initiatives. 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 31, 2017. 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 is a global media organization dedicated to enhancing society by creating, collecting and distributing high-quality news and information. The Company includes The New York Times, NYTimes.com and related properties. It is known globally for excellence in its journalism, and innovation in its print and digital storytelling and its business model. Follow news about the company at @NYTimesPR.

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In this release, the Company has referred to non-GAAP financial information with respect to 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, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit); and operating costs before depreciation, amortization, severance and multiemployer pension withdrawal costs (or adjusted operating costs). The Company has included these non-GAAP financial measures because management reviews them on a regular basis and uses them to evaluate and manage the performance of the Company’s operations. Management believes that, for the reasons outlined below, these non-GAAP financial measures provide useful information to investors as a supplement to reported diluted earnings/(loss) per share from continuing operations, operating profit/(loss) and operating costs. However, these measures should be evaluated only in conjunction with the comparable GAAP financial measures and should not be viewed as alternative or superior measures of GAAP results.

As a result of the adoption of ASU 2017-07 during the first quarter of 2018, all single employer pension and other postretirement benefit expenses with the exception of service cost were reclassified from operating costs to “Other components of net periodic benefit costs/(income)”. See note (d) to the Footnotes to the Condensed Consolidated Statement of Operations above. In connection with the adoption of ASU 2017-07, the Company made the following changes to its non-GAAP financial measures in order to align them with the new GAAP presentation:

• revised the components of non-operating retirement costs to include amortization of prior service credit of single employer pension and other postretirement benefit expenses; and

• revised the definition of adjusted operating profit and adjusted operating costs to exclude only multiemployer pension plan withdrawal costs (which historically have been and continue to be a component of non-operating retirement costs), rather than all non-operating retirement costs. As a result of the adoption of ASU 2017-07 non-operating retirement costs other than multiemployer pension plan withdrawal costs are now separately presented outside of operating costs and accordingly have no impact on operating profit and cost under GAAP, or adjusted operating profit or adjusted operating costs. Multiemployer pension plan withdrawal costs remain in GAAP operating costs and therefore continue to be an adjustment to these non-GAAP measures.

Non-operating retirement costs include (i) interest cost, expected return on plan assets, amortization of actuarial gains and loss components and amortization of prior service credits of single employer pension expense, (ii) interest cost, amortization of actuarial gains and loss components and amortization of prior service credits of retirement medical expense and (iii) all multiemployer pension plan withdrawal costs.

These non-operating retirement costs are primarily tied to financial market performance and changes in market interest rates and investment performance. Management considers non-operating retirement costs to be outside the performance of the business and believes that presenting adjusted diluted earnings per share from continuing operations excluding non-operating retirement costs and presenting adjusted operating results excluding multiemployer pension plan withdrawal costs, in addition to the Company’s GAAP diluted earnings per share from continuing operations and GAAP operating results, provide increased transparency and a better understanding of the underlying trends in the Company’s operating business performance.

Adjusted diluted earnings per share provides useful information in evaluating the Company’s period-to-period performance because it eliminates items that the Company does not consider to be indicative of earnings from ongoing operating activities. Adjusted operating profit is useful in evaluating the ongoing performance of the Company’s business as it excludes the significant non-cash impact of depreciation and amortization as well as items not indicative of ongoing operating activities. Total operating costs include depreciation, amortization, severance and multiemployer pension plan withdrawal costs. Total operating costs excluding these items provide investors with helpful supplemental information on the Company’s underlying operating costs that is used by management in its financial and operational decision-making.

Management considers special items, which may include impairment charges, pension settlement charges and other items that arise from time to time, to be outside the ordinary course of our operations. Management believes that excluding these items provides a better understanding of the underlying trends in the Company’s operating performance and allows more accurate comparisons of the Company’s operating results to historical performance. In addition, management excludes severance costs, which may fluctuate significantly from quarter to quarter, because it believes these costs do not necessarily reflect expected future operating costs and do not contribute to a meaningful comparison of the Company’s operating results to historical performance.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are set out in the tables below.

Reconciliation of 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)

Reconciliation of operating profit before depreciation & amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit)

Reconciliation of operating costs before depreciation & amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs)

Impact of Modification of Non-GAAP Measures In connection with the adoption of ASU 2017-07 in the first quarter of 2018, the Company modified its definitions of adjusted operating profit, adjusted operating costs and non-operating retirement costs in response to changes in the GAAP presentation of single employer pension and postretirement benefit costs. For comparability purposes, the Company has presented each of its non-GAAP financial measures for the third quarter of 2017 and first nine months of 2017 reflecting the recast of its financial statements for such periods to account for the adoption of ASU 2017-07 and the revised definitions of the non-GAAP financial measures. The following tables show the adjustments to the previously presented metrics.

Adjustments made to the reconciliation of diluted earnings per share from continuing operations to adjusted diluted earnings per share from continuing operations

Adjustments made to the reconciliation of operating profit to adjusted operating profit

Adjustments made to the reconciliation of operating costs to adjusted operating costs

The following table reconciles other components of net periodic benefit costs/(income), excluding special items, to the comparable non-GAAP metric, non-operating retirement costs.

View source version on businesswire.com:https://www.businesswire.com/news/home/20181101005554/en/

CONTACT: The New York Times Company

For Media:

Danielle Rhoades Ha, 212-556-8719;danielle.rhoades-ha@nytimes.com

or

For Investors:

Harlan Toplitzky, 212-556-7775;harlan.toplitzky@nytimes.com

KEYWORD: UNITED STATES NORTH AMERICA NEW YORK

INDUSTRY KEYWORD: ENTERTAINMENT OTHER ENTERTAINMENT COMMUNICATIONS PUBLISHING

SOURCE: The New York Times Company

Copyright Business Wire 2018.

PUB: 11/01/2018 08:30 AM/DISC: 11/01/2018 08:30 AM

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