Attached files

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EX-12 - RATIO OF EARNINGS TO FIXED CHARGES - NEW YORK TIMES COex12_92715.htm
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION - NEW YORK TIMES COex311_92715.htm
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION - NEW YORK TIMES COex322_92715.htm
EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION - NEW YORK TIMES COex321_92715.htm
EX-10.2 - SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - NEW YORK TIMES COex102_92715.htm
EX-10.1 - DEFERRED EXECUTIVE COMPENSATION PLAN - NEW YORK TIMES COex101_92715.htm
EX-10.4 - SUPPLEMENTAL EXECUTIVE SAVINGS PLAN - NEW YORK TIMES COex104_92715.htm
EX-10.3 - SAVINGS RESTORATION PLAN - NEW YORK TIMES COex103_92715.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION - NEW YORK TIMES COex312_92715.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2015
Commission file number 1-5837
THE NEW YORK TIMES COMPANY
(Exact name of registrant as specified in its charter)
 
NEW YORK
 
13-1102020
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
620 EIGHTH AVENUE, NEW YORK, NEW YORK
(Address of principal executive offices)
10018
(Zip Code)
Registrant’s telephone number, including area code 212-556-1234
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   x     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
 
Accelerated filer  o
 
Non-accelerated filer  o 
 
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   o     No  x
Number of shares of each class of the registrant’s common stock outstanding as of October 27, 2015 (exclusive of treasury shares): 
Class A Common Stock
  
 
161,074,241

  shares
Class B Common Stock
  
 
816,635

  shares
 




THE NEW YORK TIMES COMPANY
INDEX

 
 
ITEM NO.
 
 
PART I
 
 
 
Financial Information
 
Item
1
 
Financial Statements
 
 
 
 
Condensed Consolidated Balance Sheets as of September 27, 2015 (unaudited) and December 28, 2014
 
 
 
 
Condensed Consolidated Statements of Operations (unaudited) for the quarter and nine months ended September 27, 2015 and September 28, 2014
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the quarter and nine months ended September 27, 2015 and September 28, 2014
 
 
 
 
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 27, 2015 and September 28, 2014
 
 
 
 
Notes to the Condensed Consolidated Financial Statements
 
Item
2
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item
3
 
Quantitative and Qualitative Disclosures about Market Risk
 
Item
4
 
Controls and Procedures
 
 
 
PART II
 
 
 
Other Information
 
Item
1
 
Legal Proceedings
 
Item
1A
 
Risk Factors
 
Item
2
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item
6
 
Exhibits
 





PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
September 27, 2015


December 28, 2014

 
(Unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
144,606

 
$
176,607

Short-term marketable securities
499,486

 
636,743

Accounts receivable (net of allowances of $11,624 in 2015 and $12,860 in 2014)
157,570

 
212,690

Deferred income taxes
63,640

 
63,640

Prepaid expenses
22,017

 
25,635

Other current assets
26,764

 
32,780

Total current assets
914,083

 
1,148,095

Other assets
 
 
 
Long-term marketable securities
228,586

 
167,820

Investments in joint ventures
22,870

 
22,069

Property, plant and equipment (less accumulated depreciation and amortization of $872,351 in 2015 and $853,363 in 2014)
638,836

 
665,758

Goodwill
110,469

 
116,422

Deferred income taxes
238,596

 
252,587

Miscellaneous assets
186,474

 
193,723

Total assets
$
2,339,914

 
$
2,566,474

 See Notes to Condensed Consolidated Financial Statements.

1



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS-(Continued)
(In thousands, except share and per share data)
 
 
September 27, 2015

 
December 28, 2014

 
 
(Unaudited)
 
 
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
83,457

 
$
94,401

Accrued payroll and other related liabilities
 
75,501

 
91,755

Unexpired subscriptions
 
60,222

 
58,736

Current portion of long-term debt and capital lease obligations
 

 
223,662

Accrued expenses and other
 
104,608

 
131,954

Total current liabilities
 
323,788

 
600,508

Other liabilities
 
 
 
 
Long-term debt and capital lease obligations
 
430,007

 
426,458

Pension benefits obligation
 
604,812

 
631,756

Postretirement benefits obligation
 
67,485

 
71,628

Other
 
95,302

 
107,775

Total other liabilities
 
1,197,606

 
1,237,617

Stockholders’ equity
 
 
 
 
Common stock of $.10 par value:
 
 
 
 
Class A – authorized: 300,000,000 shares; issued: 2015 – 168,110,083; 2014 – 151,701,136 (including treasury shares: 2015 – 5,817,535; 2014 – 2,180,442)
 
16,811

 
15,170

Class B – convertible – authorized and issued shares: 2015 – 816,635; 2014 – 816,635 (including treasury shares: 2015 – none; 2014 – none)
 
82

 
82

Additional paid-in capital
 
146,112

 
39,217

Retained earnings
 
1,283,533

 
1,291,907

Common stock held in treasury, at cost
 
(132,187
)
 
(86,253
)
Accumulated other comprehensive loss, net of income taxes:
 
 
 
 
Foreign currency translation adjustments
 
1,143

 
5,705

Funded status of benefit plans
 
(498,656
)
 
(539,500
)
Total accumulated other comprehensive loss, net of income taxes
 
(497,513
)
 
(533,795
)
Total New York Times Company stockholders’ equity
 
816,838

 
726,328

Noncontrolling interest
 
1,682

 
2,021

Total stockholders’ equity
 
818,520

 
728,349

Total liabilities and stockholders’ equity
 
$
2,339,914

 
$
2,566,474

 See Notes to Condensed Consolidated Financial Statements.


2



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 
For the Quarters Ended
 
For the Nine Months Ended
 
September 27, 2015

 
September 28, 2014

 
September 27, 2015


September 28, 2014

 
(13 weeks)
 
(39 weeks)
Revenues
 
 
 
 
 
 
 
Circulation
$
209,075

 
$
206,729

 
$
632,203

 
$
626,267

Advertising
135,356

 
138,222

 
433,863

 
454,683

Other
22,973

 
19,767

 
68,463

 
62,895

Total revenues
367,404

 
364,718

 
1,134,529

 
1,143,845

Operating costs
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
Raw materials
18,400

 
20,875

 
57,025

 
64,513

Wages and benefits
88,999

 
90,777

 
268,667

 
267,418

Other
44,632

 
49,525

 
135,748

 
146,173

Total production costs
152,031

 
161,177

 
461,440

 
478,104

Selling, general and administrative costs
178,071

 
193,198

 
533,120

 
565,506

Depreciation and amortization
15,369

 
19,375

 
46,023

 
58,636

Total operating costs
345,471

 
373,750

 
1,040,583

 
1,102,246

Pension settlement charges

 

 
40,329

 
9,525

Multiemployer pension plan withdrawal expense

 

 
4,697

 

Early termination charge

 

 

 
2,550

Operating profit/(loss)
21,933

 
(9,032
)
 
48,920

 
29,524

Income/(loss) from joint ventures
170

 
1,599

 
(758
)
 
(523
)
Interest expense, net
9,127

 
15,254

 
31,095

 
41,760

Income/(loss) from continuing operations before income taxes
12,976

 
(22,687
)
 
17,067

 
(12,759
)
Income tax expense/(benefit)
3,611

 
(10,247
)
 
5,904

 
(12,226
)
Income/(loss) from continuing operations
9,365

 
(12,440
)
 
11,163

 
(533
)
Loss from discontinued operations, net of income taxes

 

 

 
(994
)
Net income/(loss)
9,365

 
(12,440
)
 
11,163

 
(1,527
)
Net loss/(income) attributable to the noncontrolling interest
50

 
(59
)
 
390

 
(41
)
Net income/(loss) attributable to The New York Times Company common stockholders
$
9,415

 
$
(12,499
)
 
$
11,553

 
$
(1,568
)
Amounts attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
Income/(loss) from continuing operations
$
9,415

 
$
(12,499
)
 
$
11,553

 
$
(574
)
Loss from discontinued operations, net of income taxes

 

 

 
(994
)
Net income/(loss)
$
9,415

 
$
(12,499
)
 
$
11,553

 
$
(1,568
)
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
165,052

 
150,822

 
165,130

 
150,728

Diluted
166,981

 
150,822

 
167,574

 
150,728

Basic earnings/(loss) per share attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
Income/(loss) from continuing operations
$
0.06

 
$
(0.08
)
 
$
0.07

 
$
0.00

Loss from discontinued operations, net of income taxes

 

 

 
(0.01
)
Net income/(loss)
$
0.06

 
$
(0.08
)
 
$
0.07

 
$
(0.01
)
Diluted earnings/(loss) per share attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
Income/(loss) from continuing operations
$
0.06

 
$
(0.08
)
 
$
0.07

 
$
0.00

Loss from discontinued operations, net of income taxes

 

 

 
(0.01
)
Net income/(loss)
$
0.06

 
$
(0.08
)
 
$
0.07

 
$
(0.01
)
Dividends declared per share
$
0.04

 
$
0.04

 
$
0.12

 
$
0.12

 See Notes to Condensed Consolidated Financial Statements.

3



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
For the Quarters Ended
 
For the Nine Months Ended
 
September 27, 2015

 
September 28, 2014

 
September 27, 2015

 
September 28, 2014

 
(13 weeks)
 
(39 weeks)
Net income/(loss)
$
9,365

 
$
(12,440
)
 
$
11,163

 
$
(1,527
)
Other comprehensive income, before tax:
 
 
 
 
 
 
 
Loss on foreign currency translation adjustments
(482
)
 
(6,581
)
 
(7,102
)
 
(7,163
)
Pension and postretirement benefits obligation
9,166

 
29,877

 
67,646

 
43,471

Other comprehensive income, before tax
8,684

 
23,296

 
60,544

 
36,308

Income tax expense
3,635

 
9,410

 
24,211

 
14,551

Other comprehensive income, net of tax
5,049

 
13,886

 
36,333

 
21,757

Comprehensive income
14,414

 
1,446

 
47,496

 
20,230

Comprehensive loss/(income) attributable to the noncontrolling interest
50

 
(59
)
 
339

 
(41
)
Comprehensive income attributable to The New York Times Company common stockholders
$
14,464

 
$
1,387

 
$
47,835

 
$
20,189

 See Notes to Condensed Consolidated Financial Statements.

4



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
For the Nine Months Ended
 
September 27, 2015

 
September 28, 2014

 
(39 weeks)
Cash flows from operating activities
 
 
 
Net income/(loss)
$
11,163

 
$
(1,527
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on insurance settlement

 
(1,421
)
Pension settlement charges
40,329

 
9,525

Multiemployer pension plan withdrawal expense
4,697

 

Early termination charge

 
2,550

Depreciation and amortization
46,023

 
58,636

Stock-based compensation expense
7,588

 
6,120

Undistributed loss of joint ventures
758

 
523

Long-term retirement benefit obligations
(7,767
)
 
(42,255
)
Uncertain tax positions
147

 
11,211

Other-net
14,303

 
9,947

Changes in operating assets and liabilities:
 
 
 
Accounts receivable-net
55,120

 
42,191

Other current assets
10,742

 
(6,268
)
Accounts payable, accrued payroll and other liabilities
(76,555
)
 
(53,871
)
Unexpired subscriptions
1,486

 
882

Net cash provided by operating activities
108,034

 
36,243

Cash flows from investing activities
 
 
 
Purchases of marketable securities
(555,040
)
 
(398,124
)
Maturities of marketable securities
626,697

 
382,376

Repayment of borrowings against cash surrender value of corporate-owned life insurance

 
(26,005
)
Purchase of investments – net of proceeds
(3,592
)
 
(1,005
)
Capital expenditures
(21,150
)
 
(25,819
)
Proceeds from insurance settlement

 
1,200

Change in restricted cash
(1,190
)
 
(1,100
)
Other-net
(343
)
 
(238
)
Net cash provided by/(used in) investing activities
45,382

 
(68,715
)
Cash flows from financing activities
 
 
 
Long-term obligations:
 
 
 
Repayment of debt and capital lease obligations
(223,653
)
 
(18,860
)
Dividends paid
(20,053
)
 
(18,166
)
Capital shares:
 
 
 
Stock issuances
102,803

 
1,120

Repurchases
(43,561
)
 

Net cash used in financing activities
(184,464
)
 
(35,906
)
Net decrease in cash and cash equivalents
(31,048
)
 
(68,378
)
Effect of exchange rate changes on cash
(953
)
 
224

Cash and cash equivalents at the beginning of the period
176,607

 
482,745

Cash and cash equivalents at the end of the period
$
144,606

 
$
414,591

 See Notes to Condensed Consolidated Financial Statements.

5


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1. BASIS OF PRESENTATION
In the opinion of The New York Times Company’s (the “Company”) management, the Condensed Consolidated Financial Statements present fairly the financial position of the Company as of September 27, 2015 and December 28, 2014, and the results of operations and cash flows of the Company for the periods ended September 27, 2015 and September 28, 2014. The Company and its consolidated subsidiaries are referred to collectively as “we,” “us” or “our.” All adjustments necessary for a fair presentation have been included and are of a normal and recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by accounting principles generally accepted in the United States of America have been condensed or omitted from these interim financial statements. These financial statements, therefore, should be read in conjunction with the Consolidated Financial Statements and related Notes included in our Annual Report on Form 10-K for the year ended December 28, 2014. Due to the seasonal nature of our business, operating results for the interim periods are not necessarily indicative of a full year’s operations. The fiscal periods included herein comprise 13 weeks for the third-quarter periods and 39 weeks for the full nine-month periods.
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements. Actual results could differ from these estimates.
For comparability, certain prior-year amounts have been reclassified to conform with the current period presentation. See Management’s Discussion and Analysis of Results of Operations for additional information regarding reclassified amounts.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of September 27, 2015, our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the year ended December 28, 2014, have not changed.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”). ASUs not specifically identified in our disclosures are either not applicable to the Company or will not have a material effect on our financial condition or results of operations.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” which prescribes a single comprehensive model for entities to use in the accounting of revenue arising from contracts with customers. The new guidance will supersede virtually all existing revenue guidance under GAAP and International Financial Reporting Standards. There are two transition options available to entities: the full retrospective approach or the modified retrospective approach. Under the full retrospective approach, the Company would restate prior periods in compliance with Accounting Standards Codification 250, “Accounting Changes and Error Corrections”. Alternatively, the Company may elect the modified retrospective approach, which allows for the new revenue standard to be applied to existing contracts as of the effective date and record a cumulative catch-up adjustment to retained earnings effective for fiscal years beginning after December 31, 2017, subject to finalization. Early application is permitted. We are currently in the process of evaluating the impact of the new revenue guidance.

6


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 3. MARKETABLE SECURITIES
Our marketable debt securities consisted of the following:
(In thousands)
 
September 27, 2015

 
December 28, 2014

Short-term marketable securities
 
 
 
 
Marketable debt securities
 
 
 
 
U.S Treasury securities
 
$
170,815

 
$
238,488

Corporate debt securities
 
184,579

 
208,346

U.S. agency securities
 
56,274

 
32,009

Municipal securities
 
3,242

 
13,622

Certificates of deposit
 
63,583

 
109,293

Commercial paper
 
20,993

 
34,985

Total short-term marketable securities
 
$
499,486

 
$
636,743

Long-term marketable securities
 
 
 
 
Marketable debt securities
 
 
 
 
Corporate debt securities
 
$
96,454

 
$
71,191

U.S. agency securities
 
132,132

 
95,204

Municipal securities
 

 
1,425

Total long-term marketable securities
 
$
228,586

 
$
167,820

As of September 27, 2015, our short-term and long-term marketable securities had remaining maturities of less than 1 month to 12 months and 13 months to 36 months, respectively. See Note 8 for additional information regarding the fair value of our marketable securities.
NOTE 4. GOODWILL
The changes in the carrying amount of goodwill as of September 27, 2015 and December 28, 2014 were as follows:
(In thousands)
 
Total Company
Balance as of December 28, 2014
 
$
116,422

Foreign currency translation
 
(5,953
)
Balance as of September 27, 2015
 
$
110,469

The foreign currency translation line item reflects changes in goodwill resulting from fluctuating exchange rates related to the consolidation of certain international subsidiaries.
NOTE 5. INVESTMENTS
Equity Method Investments
As of September 27, 2015, our investments in joint ventures consisted of equity ownership interests in the following entities:
Company
 
 
 
Approximate %
Ownership
Donohue Malbaie Inc.
 
 
 
49
%
Madison Paper Industries
 
 
 
40
%
Women in the World Media, LLC
 
 
 
30
%
We have investments in Donohue Malbaie Inc. (“Malbaie”), a Canadian newsprint company, Madison Paper Industries (“Madison”), a partnership operating a supercalendered paper mill in Maine (together, the “Paper Mills”), and Women in the World Media, LLC, a live-event conference business.

7


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

We received no distributions from our equity method investments during the nine-month periods ended September 27, 2015 and September 28, 2014.
We purchase newsprint and have purchased supercalendered paper from the Paper Mills at competitive prices. Such purchases totaled $8.8 million and $15.2 million for the nine-month periods ended September 27, 2015 and September 28, 2014, respectively. Effective February 2015, we no longer purchase supercalendered paper.
NOTE 6. DEBT OBLIGATIONS
Our current indebtedness includes senior notes and the repurchase option related to a sale-leaseback of a portion of our New York headquarters. Our total debt and capital lease obligations consisted of the following:
(In thousands, except percentages)
 
Coupon Rate

 
September 27, 2015

 
December 28, 2014

Current portion of long-term debt and capital lease obligations:
 
 
 
 
 
 
Senior notes due in March 2015
 
5.0
%
 
$

 
$
223,662

Long-term debt and capital lease obligations:
 
 
 
 
 
 
Senior notes due in December 2016
 
6.625
%
 
188,178

 
187,604

Option to repurchase ownership interest in headquarters building in 2019
 
 
 
235,077

 
232,118

Long-term capital lease obligations
 
 
 
6,752

 
6,736

Total long-term debt and capital lease obligations
 
 
 
430,007

 
426,458

Total debt and capital lease obligations
 
 
 
$
430,007

 
$
650,120

See Note 8 for information regarding the fair value of our long-term debt.
In March 2015, we repaid, at maturity, the remaining $223.7 million principal amount of our 5.0% senior notes.
“Interest expense, net,” as shown in the accompanying Condensed Consolidated Statements of Operations was as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 27, 2015

 
September 28, 2014

 
September 27, 2015

 
September 28, 2014

Cash interest expense
 
$
9,919

 
$
12,795

 
$
32,008

 
$
38,999

Premium on debt repurchases
 

 
2,188

 

 
2,188

Amortization of debt issuance costs and discount on debt
 
1,180

 
1,314

 
3,540

 
3,632

Capitalized interest
 
(85
)
 
(47
)
 
(242
)
 
(129
)
Interest income
 
(1,887
)
 
(996
)
 
(4,211
)
 
(2,930
)
Total interest expense, net
 
$
9,127

 
$
15,254

 
$
31,095

 
$
41,760

NOTE 7. OTHER
Severance Costs
We recognized severance costs of $1.0 million in the third quarter of 2015 and $4.3 million in the first nine months of 2015. We recognized severance costs of $21.4 million in the third quarter of 2014 and $26.7 million in the first nine months of 2014, the majority of which related to workforce reductions that the Company announced on October 1, 2014. These costs are recorded in “Selling, general and administrative costs” in our Condensed Consolidated Statements of Operations.
We had a severance liability of $14.9 million and $34.6 million included in “Accrued expenses and other” in our Condensed Consolidated Balance Sheets as of September 27, 2015 and December 28, 2014, respectively.
Pension Settlement Charges
During the first quarter of 2015, we recorded a pension settlement charge of $40.3 million in connection with a lump-sum payment offer made to certain former employees who participated in certain qualified pension plans. These lump-sum payments were made with cash from the qualified pension plans, not with Company cash.

8


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

During the second quarter of 2014, we recorded a pension settlement charge of $9.5 million in connection with a lump-sum payment offer made to certain former employees who participated in certain non-qualified pension plans.
See Note 9 for additional information regarding the pension settlement charges.
Multiemployer Pension Plan Withdrawal Expense
During the first quarter of 2015, we recorded a $4.7 million charge for a partial withdrawal obligation under a multiemployer pension plan.
Early Termination Charge
In the first quarter of 2014, we recorded a $2.6 million charge for the early termination of a distribution agreement.
Advertising Expenses
Advertising expenses incurred to promote our consumer and marketing services were $20.6 million in the third quarter of 2015 and $63.1 million in the first nine months of 2015 compared to $20.1 million in the third quarter of 2014 and $67.7 million in the first nine months of 2014.
Capitalized Computer Software Costs
Amortization of capitalized computer software costs included in “Depreciation and amortization” in our Condensed Consolidated Statements of Operations were $2.9 million in the third quarter of 2015 and $8.9 million in the first nine months of 2015 compared to $6.9 million in the third quarter of 2014 and $21.2 million in the first nine months of 2014.
NOTE 8. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received upon the sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The transaction would be in the principal or most advantageous market for the asset or liability, based on assumptions that a market participant would use in pricing the asset or liability.
The fair value hierarchy consists of three levels:
Level 1–quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2–inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3–unobservable inputs for the asset or liability.
Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The following table summarizes our financial liabilities measured at fair value on a recurring basis as of September 27, 2015 and December 28, 2014:
(In thousands)
 
September 27, 2015
 
December 28, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Deferred compensation
 
$
34,330

 
$
34,330

 
$

 
$

 
$
45,136

 
$
45,136

 
$

 
$

The deferred compensation liability, included in “Other liabilities—Other” in our Condensed Consolidated Balance Sheets, consists of deferrals under The New York Times Company Deferred Executive Compensation Plan (the “DEC”), which enables certain eligible executives to elect to defer a portion of their compensation on a pre-tax basis. The deferred amounts are invested at the executives’ option in various mutual funds. The fair value of deferred compensation is based on the mutual fund investments elected by the executives and on quoted prices in active markets for identical assets. The DEC has been frozen effective December 31, 2015.

9


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis
Certain non-financial assets, such as goodwill, other intangible assets, property, plant and equipment and certain investments, that were part of operations that have been classified as discontinued operations are only recorded at fair value if an impairment charge is recognized. The following table presents non-financial assets that were measured and recorded at fair value on a non-recurring basis and the total impairment losses recorded on those assets as of December 28, 2014.
(In thousands)
 
Net Carrying
 Value as of
 
Fair Value Measured and Recorded Using
 
Impairment Losses as of
 
December 28, 2014
 
Level 1
 
Level 2
 
Level 3
 
December 28, 2014
Investments in joint ventures
 
$

 
$

 
$

 
$

 
$
9,216

The impairment of assets in 2014 reflects the impairment of our investment in Madison. During the fourth quarter of 2014, we estimated the fair value using unobservable inputs (Level 3). We recorded a $9.2 million non-cash charge in the fourth quarter of 2014. Our proportionate share of the loss was $4.7 million after tax and adjusted for the allocation of the loss to the non-controlling interest.
Financial Instruments Disclosed, But Not Reported, at Fair Value
Our marketable securities, which include U.S. Treasury securities, corporate debt securities, U.S. government agency securities, municipal securities, certificates of deposit and commercial paper, are recorded at amortized cost (see Note 3). As of September 27, 2015 and December 28, 2014, the amortized cost approximated fair value because of the short-term maturity and highly liquid nature of these investments. We classified these investments as Level 2 since the fair value estimates are based on market observable inputs for investments with similar terms and maturities.
The carrying value of our long-term debt was $423 million as of September 27, 2015 and $420 million as of December 28, 2014. The fair value of our long-term debt was $520 million as of September 27, 2015 and $527 million as of December 28, 2014. We estimate the fair value of our debt utilizing market quotations for debt that have quoted prices in active markets. Since our debt does not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2).
NOTE 9. PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension
Single-Employer Plans
We sponsor several single-employer defined benefit pension plans, the majority of which have been frozen. We also participate in two single-employer defined benefit plans, which are established pursuant to collective bargaining and cover Company employees who are members of The Newspaper Guild of New York. The plans are sponsored by a Board of Trustees consisting of representatives of The Newspaper Guild of New York and the Company. The Newspaper Guild of New York-The New York Times Pension Fund (the “Guild Plan”) is a frozen plan. The Guild-Times Adjustable Pension Plan is a new defined benefit plan that replaced the Guild Plan.

10


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The components of net periodic pension cost were as follows:
 
 
For the Quarters Ended
 
 
September 27, 2015
 
September 28, 2014
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
Service cost
 
$
2,989

 
$

 
$
2,989

 
$
2,386

 
$

 
$
2,386

Interest cost
 
18,514

 
2,502

 
21,016

 
21,112

 
2,382

 
23,494

Expected return on plan assets
 
(28,832
)
 

 
(28,832
)
 
(28,460
)
 

 
(28,460
)
Amortization of actuarial loss
 
9,478

 
1,271

 
10,749

 
6,655

 
990

 
7,645

Amortization of prior service credit
 
(487
)
 

 
(487
)
 
(486
)
 

 
(486
)
Net periodic pension cost
 
$
1,662

 
$
3,773

 
$
5,435

 
$
1,207

 
$
3,372

 
$
4,579

 
 
For the Nine Months Ended
 
 
September 27, 2015
 
September 28, 2014
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
Service cost
 
$
8,964

 
$

 
$
8,964

 
$
7,158

 
$

 
$
7,158

Interest cost
 
55,966

 
7,506

 
63,472

 
63,336

 
7,968

 
71,304

Expected return on plan assets
 
(86,439
)
 

 
(86,439
)
 
(85,380
)
 

 
(85,380
)
Amortization of actuarial loss
 
28,354

 
3,811

 
32,165

 
19,964

 
3,077

 
23,041

Amortization of prior service credit
 
(1,459
)
 

 
(1,459
)
 
(1,456
)
 

 
(1,456
)
Effect of settlement
 
40,329

 

 
40,329

 

 
9,525

 
9,525

Net periodic pension cost
 
$
45,715

 
$
11,317

 
$
57,032

 
$
3,622

 
$
20,570

 
$
24,192

During the first nine months of 2015 and 2014, we made pension contributions of $5.3 million and $12.5 million, respectively, to certain qualified pension plans. We expect to make total contributions of $7.7 million in 2015 to satisfy funding requirements.
As part of our strategy to reduce the pension obligations and the resulting volatility of our overall financial condition, we have offered lump-sum payments to certain former employees participating in both our qualified and non-qualified pension plans.
In the first quarter of 2015, we recorded a pension settlement charge of $40.3 million in connection with a lump-sum payment offer made to certain former employees who participated in certain qualified pension plans. These lump-sum payments totaled $98.3 million and were made with cash from the qualified pension plans, not with Company cash. The effect of this lump-sum payment offer was to reduce our pension obligations by $142.8 million.
In the second quarter of 2014, we recorded a pension settlement charge of $9.5 million in connection with a lump-sum payment offer made to certain former employees who participated in certain non-qualified pension plans. These lump-sum payments totaled $24.0 million and were paid out of Company cash. The effect of this lump-sum payment offer was to reduce our pension obligations by $32.0 million.
Multiemployer Plans
During the first quarter of 2015, we recorded a $4.7 million charge related to a partial withdrawal obligation under a multiemployer pension plan.

11


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Other Postretirement Benefits
The components of net periodic postretirement benefit expense were as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 27, 2015

 
September 28, 2014

 
September 27, 2015

 
September 28, 2014

Service cost
 
$
148

 
$
145

 
$
442

 
$
439

Interest cost
 
688

 
930

 
2,065

 
2,950

Amortization of actuarial loss
 
1,303

 
1,237

 
3,909

 
3,605

Amortization of prior service credit
 
(2,399
)
 
(1,800
)
 
(7,349
)
 
(5,000
)
Net periodic postretirement benefit (credit) expense
 
$
(260
)
 
$
512

 
$
(933
)
 
$
1,994

NOTE 10. INCOME TAXES
The Company had income tax expense of $3.6 million and $5.9 million in the third quarter and first nine months of 2015, respectively, and an effective tax rate of 27.8% and 34.6% in the third quarter and first nine months of 2015, respectively. The effective income tax rate for the third quarter of 2015 was lower than the statutory tax rate principally due to the tax deduction for domestic production activities. The Company had an income tax benefit of $10.2 million and $12.2 million in the third quarter and first nine months of 2014, respectively. The tax benefits in the third quarter and first nine months of 2014 were primarily due to pre-tax losses from continuing operations and a reduction in our reserve for uncertain tax positions, respectively.
NOTE 11. EARNINGS/(LOSS) PER SHARE
We compute earnings/(loss) per share using a two-class method, an earnings allocation method used when a company’s capital structure includes either two or more classes of common stock or common stock and participating securities. This method determines earnings/(loss) per share based on dividends declared on common stock and participating securities (i.e., distributed earnings), as well as participation rights of participating securities in any undistributed earnings.
Earnings/(loss) per share is computed using both basic shares and diluted shares. The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. Our stock options, stock-settled long-term performance awards and restricted stock units could have the most significant impact on diluted shares. The increase in our basic shares is due to the exercise of warrants in January 2015, partially offset by repurchases of the Company’s Class A Common Stock.
Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when a loss from continuing operations exists or when the exercise price exceeds the market value of our Class A Common Stock, because their inclusion would result in an anti-dilutive effect on per share amounts.
The number of stock options excluded from the computation of diluted earnings per share because they were anti-dilutive was approximately 5 million in the third quarter and first nine months of 2015 and approximately 6 million in the third quarter and first nine months of 2014.


12


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 12. SUPPLEMENTAL STOCKHOLDERS’ EQUITY INFORMATION
Stockholders’ equity is summarized as follows:
(In thousands)
 
Total New York Times Company Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance as of December 28, 2014
 
$
726,328

 
$
2,021

 
$
728,349

Net income/(loss)
 
11,553

 
(390
)
 
11,163

Other comprehensive income, net of tax
 
36,282

 
51

 
36,333

Effect of issuance of shares
 
100,624

 

 
100,624

Share repurchases
 
(45,953
)
 

 
(45,953
)
Dividends declared
 
(19,926
)
 

 
(19,926
)
Stock-based compensation
 
7,930

 

 
7,930

Balance as of September 27, 2015
 
$
816,838

 
$
1,682

 
$
818,520

(In thousands)
 
Total New York Times Company Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance as of December 29, 2013
 
$
842,910

 
$
3,624

 
$
846,534

Net (loss)/income
 
(1,568
)
 
41

 
(1,527
)
Other comprehensive income, net of tax
 
21,757

 

 
21,757

Effect of issuance of shares
 
(841
)
 

 
(841
)
Dividends declared
 
(18,179
)
 

 
(18,179
)
Stock-based compensation
 
7,163

 

 
7,163

Balance as of September 28, 2014
 
$
851,242

 
$
3,665

 
$
854,907

In January 2009, pursuant to a securities purchase agreement, we issued warrants to affiliates of Carlos Slim Helú, then the beneficial owner of approximately 8% of our Class A Common Stock (excluding the warrants), to purchase 15.9 million shares of our Class A Common Stock at a price of $6.3572 per share. On January 14, 2015, the warrant holders exercised these warrants in full and the Company received cash proceeds of $101.1 million from this exercise.
On January 13, 2015, the Board of Directors terminated an existing authorization to repurchase shares of the Company’s Class A Common Stock and approved a new repurchase authorization of $101.1 million, equal to the cash proceeds received by the Company from the exercise of warrants. As of September 27, 2015, the Company had repurchased 3,637,639 Class A shares under this authorization for a cost of $45.9 million (excluding commissions). Our Board of Directors has authorized us to purchase shares from time to time as market conditions permit. There is no expiration date with respect to this authorization.

13


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes the changes in AOCI by component as of September 27, 2015:
(In thousands)
 
Foreign Currency Translation Adjustments
 
Funded Status of Benefit Plans
 
Total Accumulated Other Comprehensive Loss
Balance as of December 28, 2014
 
$
5,705

 
$
(539,500
)
 
$
(533,795
)
Other comprehensive loss before reclassifications, before tax(1)
 
(7,102
)
 

 
(7,102
)
Amounts reclassified from accumulated other comprehensive income, before tax(1)
 

 
67,595

 
67,595

Income tax (benefit)/expense(1)
 
(2,540
)
 
26,751

 
24,211

Net current-period other comprehensive (loss)/income, net of tax
 
(4,562
)
 
40,844

 
36,282

Balance as of September 27, 2015
 
$
1,143

 
$
(498,656
)
 
$
(497,513
)
(1)
All amounts are shown net of noncontrolling interest.
The following table summarizes the reclassifications from AOCI for the periods ended September 27, 2015:
(In thousands)
 
For the Nine Months Ended September 27, 2015
 
 
Detail about accumulated other comprehensive loss components
 
 Amounts reclassified from accumulated other comprehensive loss
 
Affect line item in the statement where net income is presented
Funded status of benefit plans:
 
 
 
 
Amortization of prior service credit(1)
 
$
(8,808
)
 
Selling, general & administrative costs
Amortization of actuarial loss(1)
 
36,074

 
Selling, general & administrative costs
Pension settlement charge
 
40,329

 
Pension settlement charges
Total reclassification, before tax(2)
 
67,595

 
 
Income tax expense
 
26,751

 
Income tax (benefit)/expense
Total reclassification, net of tax
 
$
40,844

 
 
(1)
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost for pension and other retirement benefits. See Note 9 for additional information.
(2)
There were no reclassifications relating to noncontrolling interest for the quarter ended September 27, 2015.
NOTE 13. SEGMENT INFORMATION
We have one reportable segment that includes The New York Times, International New York Times, NYTimes.com, international.nytimes.com and related businesses. Therefore, all required segment information can be found in the Condensed Consolidated Financial Statements.
Our operating segment generated revenues principally from circulation and advertising. Other revenues consist primarily of revenues from news services/syndication, digital archives, rental income, NYT Live business (which includes conferences and live events), e-commerce and the Crossword product.


14


THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 14. CONTINGENT LIABILITIES
Restricted Cash
We were required to maintain $29.0 million of restricted cash as of September 27, 2015 and $30.2 million as of December 28, 2014, primarily related to certain collateral requirements for obligations under our workers’ compensation programs.
Newspaper and Mail Deliverers–Publishers’ Pension Fund
In September 2013, the Newspaper and Mail Deliverers-Publishers’ Pension Fund (the “Fund”) assessed a partial withdrawal liability to the Company in the amount of $26 million for the plan years ending May 31, 2012 and 2013, an amount that was increased to approximately $34 million in December 2014, when the Fund issued a revised partial withdrawal liability assessment for the plan year ending May 31, 2013. The Fund claims that when City & Suburban Delivery Systems, Inc., a retail and newsstand distribution subsidiary of the Company and the largest contributor to the Fund, ceased operations in 2009, it triggered a decline of more than 70% in contribution base units in each of these two plan years. The Company disagrees with both the Fund’s determination that a partial withdrawal occurred and the methodology by which it calculated the withdrawal liability, and the matter is currently being arbitrated. We do not believe that a loss is probable on this matter and have not recorded a loss contingency for the period ended September 27, 2015. However, as required by the Employee Retirement Income Security Act of 1974, we have been making the quarterly payments to the Fund set forth in the demand letters. As of September 27, 2015, we made total payments of $9.8 million since the receipt of the initial demand letter, including $5.3 million in 2015.
Other
We are involved in various legal actions incidental to our business that are now pending against us. These actions are generally for amounts greatly in excess of the payments, if any, that may be required to be made. It is the opinion of management after reviewing these actions with our legal counsel that the ultimate liability that might result from these actions would not have a material adverse effect on our Condensed Consolidated Financial Statements.

15



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXECUTIVE OVERVIEW
We are a global media organization that includes newspapers, digital businesses and investments in joint ventures. We currently have one reportable segment comprising businesses that include The New York Times (“The Times”), International New York Times (“INYT”), NYTimes.com, international.nytimes.com and related businesses.
We generate revenues principally from circulation and advertising. Other revenues primarily consist of revenues from news services/syndication, digital archives, rental income, NYT Live business (which includes conferences and live events), e-commerce and the Crossword product.
Our main operating costs are employee-related costs and raw materials, primarily newsprint.
In the accompanying analysis of financial information, we present certain information derived from consolidated financial information but not presented in our financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). We are presenting in this report supplemental non-GAAP financial performance measures that exclude depreciation, amortization, severance, non-operating retirement costs and certain identified special items, as applicable. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures, and should be read in conjunction with financial information presented on a GAAP basis. For further information and reconciliations of these non-GAAP measures to the most directly comparable GAAP items, respectively, diluted (loss)/earnings per share, operating profit and operating costs, see “Results of Operations—Non-GAAP Financial Measures.”
Financial Highlights
For the third quarter of 2015, diluted earnings per share from continuing operations were $0.06, compared with a loss of $0.08 for the third quarter of 2014. Diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and special items discussed below (or “adjusted diluted earnings per share,” a non-GAAP measure) were $0.09 and $0.03 for the third quarters of 2015 and 2014, respectively.
The Company had an operating profit of $21.9 million in the third quarter of 2015, compared with an operating loss of $9.0 million for the third quarter of 2014. Operating profit before depreciation, amortization, severance, non-operating retirement costs and special items discussed below (or “adjusted operating profit,” a non-GAAP measure) was $47.6 million and $40.0 million for the third quarters of 2015 and 2014, respectively.
Total revenues increased slightly to $367.4 million in the third quarter of 2015 from $364.7 million in the third quarter of 2014.
Compared with the third quarter of 2014, circulation revenues increased 1.1% in the third quarter of 2015, as digital subscription growth and a print home-delivery price increase for The Times more than offset a decline in the number of print copies sold. Circulation revenues from our digital-only subscription packages, e-readers and replica editions increased 13.8% in the third quarter of 2015 compared with the same period in 2014.
Paid subscribers to digital-only subscription packages totaled approximately 1,041,000 as of September 27, 2015, a net increase of approximately 51,000 compared to the end of the second quarter of 2015.
Total advertising revenues decreased 2.1% in the third quarter of 2015 compared with the same period in 2014, reflecting a 0.9% decrease in print advertising revenues and a 5.0% decrease in digital advertising revenues. The decrease in print advertising revenues resulted from declines from INYT, partially offset by increased revenue from The Times. The decrease in digital advertising revenues primarily reflected a decrease in non-repeating advertising campaigns compared to the third quarter of 2014 and a decline in traditional website display advertising in favor of our mobile and video platforms and Paid Posts. Our recent transition to the new industry-wide standard on viewability also had some impact.
Compared with the third quarter of 2014, other revenues increased 16.2% during the third quarter of 2015, driven primarily by increased revenues from the Company’s NYT Live business, Crossword product and rental income.

16



Operating costs decreased 7.6% to $345.5 million in the third quarter of 2015, compared with $373.8 million in the third quarter of 2014. The decrease was primarily due to declines in severance, depreciation and amortization, efficiencies in print distribution, and declines in raw materials costs and external printing expenses. Operating costs before depreciation, amortization, severance and non-operating retirement costs discussed below (or “adjusted operating costs,” a non-GAAP measure) decreased 1.5% to $319.8 million during the third quarter of 2015, compared with $324.7 million in the third quarter of 2014.
Non-operating retirement costs increased to $9.4 million during the third quarter of 2015 compared to $8.3 million in the third quarter of 2014 primarily due to higher multiemployer pension plan withdrawal obligations.
Outlook
We remain in a challenging business environment, reflecting an increasingly competitive and fragmented landscape, and visibility remains limited.
For the fourth quarter of 2015, we expect circulation revenues to increase at a rate similar to that of the third quarter of 2015, driven by the benefit from our digital subscription initiatives, partially offset by lower expected print circulation revenue. We expect to add approximately 40,000-45,000 net digital subscribers in the fourth quarter of 2015.
We expect advertising trends to remain challenging and subject to significant month-to-month volatility. In the fourth quarter of 2015, we expect advertising revenues to decrease in the mid-single digits compared with the fourth quarter of 2014. We expect digital advertising revenue to increase in the mid-single digits compared with the fourth quarter of 2014.
Similar to other publishers, we have been optimizing our website to meet an industry-wide standard on viewability, a measurement standard intended to ensure that advertisers only pay for impressions that have actually been viewed by users.  As we continue transitioning to this standard, our fourth quarter 2015 advertising revenues may be affected. In the long term, however, we expect that this transition will benefit digital advertising growth as it aligns with our strength in user engagement.  
In addition, we are continuing to monitor the development of technology used to block the display of digital advertising and are exploring options to mitigate the impact it may have on our business should adoption rates increase.
We expect other revenues to grow in the mid-single digits in the fourth quarter of 2015 compared with the fourth quarter of 2014.
We expect operating costs to decrease in the low- to mid-single digits in the fourth quarter of 2015 compared with the fourth quarter of 2014. 
We expect non-operating retirement costs in the fourth quarter of 2015 to be approximately $8 million compared with $11.2 million in the fourth quarter of 2014 due to lower other postretirement benefits costs.
We also expect 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: approximately $35 million.

17




RESULTS OF OPERATIONS
The following table presents our consolidated financial results:
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 27, 2015

 
September 28, 2014

 
% Change

 
September 27, 2015

 
September 28, 2014

 
% Change

Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Circulation
 
$
209,075

 
$
206,729

 
1.1
 %
 
$
632,203

 
$
626,267

 
0.9
 %
Advertising
 
135,356

 
138,222

 
(2.1
)%
 
433,863

 
454,683

 
(4.6
)%
Other
 
22,973

 
19,767

 
16.2
 %
 
68,463

 
62,895

 
8.9
 %
Total revenues
 
367,404

 
364,718

 
0.7
 %
 
1,134,529

 
1,143,845

 
(0.8
)%
Operating costs
 
 
 
 
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
 
 
 
 
 
Raw materials
 
18,400

 
20,875

 
(11.9
)%
 
57,025

 
64,513

 
(11.6
)%
Wages and benefits
 
88,999

 
90,777

 
(2.0
)%
 
268,667

 
267,418

 
0.5
 %
Other
 
44,632

 
49,525

 
(9.9
)%
 
135,748

 
146,173

 
(7.1
)%
Total production costs
 
152,031

 
161,177

 
(5.7
)%
 
461,440

 
478,104

 
(3.5
)%
Selling, general and administrative costs
 
178,071

 
193,198

 
(7.8
)%
 
533,120

 
565,506

 
(5.7
)%
Depreciation and amortization
 
15,369

 
19,375

 
(20.7
)%
 
46,023

 
58,636

 
(21.5
)%
Total operating costs
 
345,471

 
373,750

 
(7.6
)%
 
1,040,583

 
1,102,246

 
(5.6
)%
Pension settlement charges
 

 

 
*

 
40,329

 
9,525

 
*

Multiemployer pension plan withdrawal expense
 

 

 
*

 
4,697

 

 
*

Early termination charge
 

 

 
*

 

 
2,550

 
*

Operating profit/(loss)
 
21,933

 
(9,032
)
 
*

 
48,920

 
29,524

 
65.7
 %
Income/(loss) from joint ventures
 
170

 
1,599

 
(89.4
)%
 
(758
)
 
(523
)
 
44.9
 %
Interest expense, net
 
9,127

 
15,254

 
(40.2
)%
 
31,095

 
41,760

 
(25.5
)%
Income/(loss) from continuing operations before income taxes
 
12,976

 
(22,687
)
 
*

 
17,067

 
(12,759
)
 
*

Income tax expense/(benefit)
 
3,611

 
(10,247
)
 
*

 
5,904

 
(12,226
)
 
*

Income/(loss) from continuing operations
 
9,365

 
(12,440
)
 
*

 
11,163

 
(533
)
 
*

Loss from discontinued operations, net of income taxes
 

 

 
*

 

 
(994
)
 
*

Net income/(loss)
 
9,365

 
(12,440
)
 
*

 
11,163

 
(1,527
)
 
*

Net loss/(income) attributable to the noncontrolling interest
 
50

 
(59
)
 
*

 
390

 
(41
)
 
*

Net income/(loss) attributable to The New York Times Company common stockholders
 
$
9,415

 
$
(12,499
)
 
*

 
$
11,553

 
$
(1,568
)
 
*

* Represents a change equal to or in excess of 100% or not meaningful.


18



Revenues
Circulation Revenues
Circulation revenues are based on the number of copies of the printed newspaper (through home-delivery subscriptions and single-copy and bulk sales) and digital subscriptions sold and the rates charged to the respective customers. Total circulation revenues consist of revenues from our print and digital products, including our digital-only subscription packages, e-readers and replica editions.
Circulation revenues increased 1.1% in the third quarter and 0.9% in the first nine months of 2015 compared with the same prior-year periods primarily due to growth in our digital subscription base and the increase in print home-delivery prices at The Times, offset by a reduction in the number of print copies sold. Revenues from our digital-only subscription packages, e-readers and replica editions were $48.6 million in the third quarter of 2015 and $142.2 million in the first nine months of 2015, an increase of 13.8% and 14.0% from the third quarter and first nine months of 2014, respectively.
Advertising Revenues
In the fourth quarter of 2014, the Company reclassified advertising revenues, including prior period information, into three categories: Display, Classified and Other. Display advertising revenue is principally from advertisers promoting products, services or brands, such as financial institutions, movie studios, department stores, American and international fashion and technology in The Times and INYT. In print, display advertising consists of column-inch ads sold. In digital, display advertising consists of banners, video, rich media and other interactive ads on our website and across other digital platforms. Display advertising also includes Paid Posts, a native advertising product that allows advertisers to present longer form marketing content that is distinct from The Times’s editorial content.
Classified advertising revenue includes line-ads sold in the major categories of real estate, help wanted, automotive and other. Other advertising revenue primarily includes creative services fees associated with our branded content studio; revenue from preprinted advertising, also known as free-standing inserts; revenue generated from branded bags in which our newspapers are delivered; and advertising revenues from our News Services business.
Advertising revenues (print and digital) by category were as follows:
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 27, 2015

 
September 28, 2014

 
% Change

 
September 27, 2015

 
September 28, 2014

 
% Change

Display
 
$
121,933

 
$
125,591

 
(2.9
)%
 
$
393,871

 
$
414,703

 
(5.0
)%
Classified
 
8,435

 
9,110

 
(7.4
)%
 
26,055

 
28,177

 
(7.5
)%
Other
 
4,988

 
3,521

 
41.7
 %
 
13,937

 
11,803

 
18.1
 %
Total
 
$
135,356

 
$
138,222

 
(2.1
)%
 
$
433,863

 
$
454,683

 
(4.6
)%
Below is a percentage breakdown of advertising revenues (print and digital) for the first nine months of 2015 and 2014:
 
 
Display
 
Classified
 
Other
 
Total
2015
 
91
%
 
6
%
 
3
%
 
100
%
2014
 
91
%
 
6
%
 
3
%
 
100
%
Print advertising revenues, which represented 73.0% and 70.7% of total advertising revenues for the third quarter and first nine months of 2015, respectively, declined 0.9% in the third quarter of 2015 and 8.6% in the first nine months of 2015 compared with the same prior-year periods. The decrease in print advertising revenues in the third quarter of 2015 resulted from declines from INYT, partially offset by increased revenue from The Times. The decrease in the first nine months of 2015 was primarily due to lower print advertising revenues across most advertising categories.
Digital advertising revenues, which represented 27.0% and 29.3% of total advertising revenues for the third quarter and first nine months of 2015, respectively, decreased 5.0% in the third quarter of 2015 and increased 6.9% in the first nine months of 2015, compared with the same prior-year periods. The decrease in digital advertising revenues in the third quarter of 2015 primarily reflected a decrease in non-repeating advertising campaigns compared with the third quarter of 2014, particularly in the international fashion, technology, corporate, telecommunications and media categories. The decrease also reflected a decline in traditional website display advertising in favor of our mobile and video platforms and Paid Posts, as well as some impact from our transition to the new viewability standard. The increase in the first nine months of 2015 was primarily due to an overall increase

19



in display advertising from our mobile and video platforms, partially offset by a decrease in traditional website display advertising on our homepage.
Other Revenues
Other revenues increased 16.2% in the third quarter of 2015 and 8.9% in the first nine months of 2015, compared with the same prior-year periods, primarily due to revenues from our NYT Live business, Crossword product and rental income.
Operating Costs
Operating costs were as follows:
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 27, 2015

 
September 28, 2014

 
% Change

 
September 27, 2015

 
September 28, 2014

 
% Change

Production costs:
 
 
 
 
 
 
 
 
 
 
 
 
Raw materials
 
$
18,400

 
$
20,875

 
(11.9
)%
 
$
57,025

 
$
64,513

 
(11.6
)%
Wages and benefits
 
88,999

 
90,777

 
(2.0
)%
 
268,667

 
267,418

 
0.5
 %
Other
 
44,632

 
49,525

 
(9.9
)%
 
135,748

 
146,173

 
(7.1
)%
        Total production costs
 
152,031

 
161,177

 
(5.7
)%
 
461,440

 
478,104

 
(3.5
)%
Selling, general and administrative costs
 
178,071

 
193,198

 
(7.8
)%
 
533,120

 
565,506

 
(5.7
)%
Depreciation and amortization
 
15,369

 
19,375

 
(20.7
)%
 
46,023

 
58,636

 
(21.5
)%
Total operating costs
 
$
345,471

 
$
373,750

 
(7.6
)%
 
$
1,040,583

 
$
1,102,246

 
(5.6
)%
Production Costs
Production costs decreased in the third quarter of 2015 compared with the third quarter of 2014 due to a decrease in other expenses (approximately $5 million), raw materials expense (approximately $2 million) and wages and benefits expenses (approximately $2 million). Other expenses decreased primarily as a result of lower outside printing costs. Raw materials expense decreased as a result of a 21.4% decline in newsprint expense in the third quarter of 2015 compared with the third quarter of 2014, with 6.5% from lower consumption and 14.9% from lower pricing. The decline was partially offset by a 31.5% increase in magazine paper expense in the third quarter of 2015 compared with the third quarter of 2014, with 29.9% from higher consumption, driven by an increased number of issues of T Magazine in the third quarter of 2015 compared with the third quarter of 2014, and 1.6% from higher pricing. Wages and benefits expenses decreased as a result of reduced headcount in several departments.
Production costs decreased in the first nine months of 2015 compared with the first nine months of 2014 primarily due to a decrease in other expenses (approximately $10 million) and raw materials expense (approximately $7 million). Lower other expenses decreased primarily as a result of lower outside printing costs. Raw materials expense decreased as a result of a 19.1% decline in newsprint expense in the first nine months of 2015 compared with the first nine months of 2014, with 8.1% from lower consumption and 11.0% from lower pricing. The decline was partially offset by a 23.8% increase in magazine paper expense in the first nine months of 2015 compared with the first nine months of 2014, with 24.8% from higher consumption offset by 1.0% from lower pricing. Higher consumption in the first nine months of 2015 resulted primarily from increased paging in both the Sunday and T Magazines and an increased number of T Magazines issued in the first nine months of 2015, compared with the first nine months of 2014.
Selling, General and Administrative Costs
Selling, general and administrative costs decreased in the third quarter of 2015 compared with the third quarter of 2014 primarily due to a decrease in severance costs (approximately $21 million), partially offset by higher compensation expenses (approximately $7 million). During the third quarter of 2014 the Company recognized $21.4 million in severance costs. Compensation expenses increased in the third quarter of 2015 compared with the third quarter of 2014 as a result of an increase in hiring in departments directly aligned with our growth initiatives.

20



Selling, general and administrative costs decreased in the first nine months of 2015 compared with the first nine months of 2014 primarily due to a decrease in severance costs (approximately $22 million), distribution costs (approximately $15 million), promotion costs (approximately $6 million) and benefits costs (approximately $5 million), partially offset by an increase in compensation (approximately $8 million) and professional and other expenses (approximately $7 million). Severance costs decreased as a result of workforce reductions in 2014 that did not repeat in 2015. Lower distribution costs were mainly due to increased utilization of lower cost vendors, transportation efficiency and fewer print copies produced. The decrease in promotion costs was primarily due to promotions in 2014 for new product launches that did not repeat in 2015. The decrease in benefits costs was primarily due to lower medical claims in the first nine months of 2015 compared with the same period in 2014, while compensation expense increased primarily as a result of increased hiring to support our growth initiatives. Professional and other expenses increased as a result of growth initiatives as well as legal fees.
Depreciation and Amortization
Depreciation and amortization decreased in the third quarter and first nine months of 2015 compared with the same prior-year periods primarily due to $4.0 million and $12.3 million of depreciation expense recognized in the third quarter and first nine months of 2014, respectively, as a result of the Company’s discontinued use of certain software products. 
Other Items
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for more information regarding other items.
NON-OPERATING ITEMS
Joint Ventures
Income from joint ventures was $0.2 million in the third quarter of 2015 compared with income of $1.6 million in the third quarter of 2014 due to lower results from our paper products investments.
Interest Expense, Net
Interest expense, net, was as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 27, 2015

 
September 28, 2014

 
September 27, 2015

 
September 28, 2014

Cash interest expense
 
$
9,919

 
$
12,795

 
$
32,008

 
$
38,999

Premium on debt repurchases
 

 
2,188

 

 
2,188

Amortization of debt issuance costs and discount on debt
 
1,180

 
1,314

 
3,540

 
3,632

Capitalized interest
 
(85
)
 
(47
)
 
(242
)
 
(129
)
Interest income
 
(1,887
)
 
(996
)
 
(4,211
)
 
(2,930
)
Total interest expense, net
 
$
9,127

 
$
15,254

 
$
31,095

 
$
41,760

Interest expense, net decreased in the third quarter of 2015 compared with the third quarter of 2014 mainly due to a lower level of debt outstanding as a result of the repayment, at maturity, of the principal amount of the Company’s 5.0% senior notes (the “5.0% Notes”) made in the first quarter of 2015 and debt repurchases made in 2014.
Income Taxes
The Company had income tax expense of $3.6 million and $5.9 million in the third quarter and first nine months of 2015, respectively, and an effective tax rate of 27.8% and 34.6% in the third quarter and first nine months of 2015, respectively. The effective income tax rate for the third quarter of 2015 was lower than the statutory tax rate principally due to the tax deduction for domestic production activities. The Company had an income tax benefit of $10.2 million and $12.2 million in the third quarter and first nine months of 2014, respectively. The tax benefits in the third quarter and first nine months of 2014 were primarily due to pre-tax losses from continuing operations and a reduction in our reserve for uncertain tax positions, respectively.

21



Non-GAAP Financial Measures
We have included in this report certain supplemental financial information derived from consolidated financial information but not presented in our financial statements prepared in accordance with GAAP. Specifically, we have referred to the following non-GAAP financial measures in this report:
diluted earnings per share from continuing operations excluding severance, non-operating retirement costs and the impact of 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 special items in 2015 consisted of a $40.3 million pension settlement charge in connection with a lump-sum payment offer made to certain former employees who participated in certain qualified pension plans and a $4.7 million charge for a partial withdrawal obligation under a multiemployer pension plan, each in the first quarter.
The special items in 2014 consisted of a $9.5 million pension settlement charge in connection with a lump-sum payment offer made to certain former employees who participated in certain non-qualified pension plans and a reduction in the reserve for uncertain tax positions of $9.5 million, each in the second quarter, and a $2.6 million charge in the first quarter for the early termination of a distribution agreement.
We have included these non-GAAP financial measures because management reviews them on a regular basis and uses them to evaluate and manage the performance of our operations. We believe 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.
Adjusted diluted earnings per share provides useful information in evaluating our period-to-period performance because it eliminates items that we do not consider to be indicative of earnings from ongoing operating activities. Adjusted operating profit is useful in evaluating the ongoing performance of our businesses 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 non-operating retirement costs. Adjusted operating costs, which exclude these items, provide investors with helpful supplemental information on our underlying operating costs that is used by management in its financial and operational decision-making.
Non-operating retirement costs include:
interest cost, expected return on plan assets and amortization of actuarial gain and loss components of pension expense;
interest cost and amortization of actuarial gain and loss components of retiree medical expense; and
all expenses associated with multiemployer pension plan withdrawal obligations, not otherwise included as special items.
These non-operating retirement costs are primarily tied to financial market performance and changes in market interest rates and investment performance. Non-operating retirement costs do not include service costs and amortization of prior service costs for pension and retiree medical benefits, which we believe reflect the ongoing service-related costs of providing pension and retiree medical benefits to our employees. We consider non-operating retirement costs to be outside the performance of our ongoing core business operations and believe that presenting operating results excluding non-operating retirement costs, in addition to our GAAP operating results, will provide increased transparency and a better understanding of the underlying trends in our operating business performance.
Reconciliations of non-GAAP financial measures from, respectively, diluted earnings per share from continuing operations, operating profit and operating costs, the most directly comparable GAAP items, as well as details on the components of non-operating retirement costs, are set out in the tables below.

22



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)
 
 
 
 
 
 
 
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
 
September 27, 2015

 
September 28, 2014

 
% Change
 
September 27, 2015

 
September 28, 2014

 
% Change

Diluted earnings/(loss) per share from continuing operations
$
0.06

 
$
(0.08
)
 
*
 
$
0.07

 
$
0.00

 
*

Add:
 
 
 
 
 
 
 
 
 
 
 
Severance
0.00

 
0.08

 
*
 
0.02

 
0.11

 
(81.8
)%
Non-operating retirement costs
0.03

 
0.03

 
*
 
0.10

 
0.10

 
*

Special items:
 
 
 
 
 
 
 
 
 
 
 
Pension settlement charges

 

 
*
 
0.14

 
0.04

 
*

Multiemployer pension plan withdrawal expense

 

 
*
 
0.02

 

 
*

Early termination charge

 

 
*
 

 
0.01

 
*

Reduction in uncertain tax positions

 

 
*
 

 
(0.06
)
 
*

Adjusted diluted earnings per share from continuing operations(1)
$
0.09

 
$
0.03

 
*
 
$
0.34

 
$
0.20

 
70.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
(1) Amounts may not add due to rounding.