THE NEW YORK TIMES COMPANY The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition as ofDecember 31, 2022 , and results of operations for the two years endedDecember 31, 2022 . Please read this item together with our Consolidated Financial Statements and the related Notes included in this Annual Report. We have omitted discussion of 2020 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2021 Annual Report on Form 10-K, filed with theSEC onFebruary 23, 2022 , which is incorporated herein by reference. OnFebruary 1, 2022 , we acquiredThe Athletic Media Company , a global digital subscription-based sports media business that provides national and local coverage of clubs and teams inthe United States and around the world, and beginning in the first quarter of 2022, the Company has two reportable segments:The New York Times Group and The Athletic. See Note 5 of the Notes to the Consolidated Financial Statements for additional information related to this acquisition. The Company has adopted a change to its fiscal calendar and as a result, its 2022 fourth quarter and fiscal year included an additional six days compared with 2021.
Significant components of the management's discussion and analysis of results of operations and financial condition section include:
PAGE
Executive Overview: The executive overview section provides a summary of The
Times Company and our business.
Results of Operations: The results of operations section provides an analysis of our
32
results on a consolidated basis and segment information.
Non-Operating and Non-GAAP The non-operating and non-GAAP items section provides a comparison 45
Items: of our non-GAAP financial measures to the most directly comparable
GAAP measures for the two years ended December 31, 2022 , and
December 26, 2021 .Liquidity and Capital The liquidity and capital resources section provides a discussion 50
Resources: of our cash flows for the two years ended December 31, 2022 , and
December 26, 2021 , and restricted cash, capital expenditures and
third-party financing, commitments and contingencies existing as
of December 31, 2022 .
Critical Accounting The critical accounting policies and
estimates section provides 54
Estimates: detail with respect to accounting policies that are considered by
management to require significant judgment and use of estimates
and that could have a significant impact on our financial
statements.
Pensions and Other The pensions and other postretirement benefits section provides a 56
Postretirement Benefits: discussion of our benefit plans, including our pension liability,
funding status, annual contributions, and actuarial assumptions.
EXECUTIVE OVERVIEW
We are a global media organization focused on creating, collecting and
distributing high-quality news and information that helps our audience
understand and engage with the world. We believe that our original, independent
and high-quality reporting, storytelling and journalistic excellence set us
apart from other news organizations and are at the heart of what makes our
journalism worth paying for. For further information, see "Item 1 - Business -
Overview" and "- Our Strategy."
We generate revenues principally from the sale of subscriptions and advertising.
Subscription revenues consist of revenues from standalone and multi-product
bundle subscriptions to our digital products and subscriptions to and
single-copy and bulk sales of our print products. Advertising revenue is derived
from the sale of our advertising products and services. Other revenues primarily
consist of revenues from licensing, Wirecutter affiliate referrals, commercial
printing, the leasing of floors in the Company Headquarters, retail commerce,
our live events business,
P. 28 - THE NEW YORK TIMES COMPANY
--------------------------------------------------------------------------------our student subscription sponsorship program, and television and film. Our main operating costs are employee-related costs.
In the accompanying analysis of financial information, we present certain information derived from our consolidated financial information but not presented in our financial statements prepared in accordance with generally accepted accounting principles inthe 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. In addition, we present our free cash flow, defined as net cash provided by operating activities less capital expenditures. 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 measures, see "- Results of Operations - Non-GAAP Financial Measures." This report includes a discussion of the estimated impact of the additional six days on our year-over-year comparison of revenues where meaningful. Management believes that estimating the impact of the additional six days on the Company's operating costs and operating profit presents challenges and, therefore, no such estimate is made with respect to these items. For further detail on the impact of the additional week on our results, see the discussion below and "- Results of Operations-Non-GAAP Financial Measures."
2022 Financial Highlights
•On
•Operating profit decreased 24.6% to$202.0 million in 2022 from$268.0 million in 2021. Operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items discussed below under "Non-GAAP Financial Measures" (or "adjusted operating profit," a non-GAAP measure) increased 3.7% to$347.9 million in 2022 from$335.4 million in 2021. Operating profit margin (operating profit expressed as a percentage of revenues) decreased to 8.7% in 2022, compared with 12.9% in 2021. Adjusted operating profit margin (adjusted operating profit expressed as a percentage of revenues) decreased to 15.1% in 2022, compared with 16.2% in 2021.
•Total revenues increased 11.3% to
•Total subscription revenues increased 14.0% to$1.55 billion in 2022 from$1.36 billion in 2021. Digital-only subscription revenues increased 26.5% to$978.6 million in 2022 from$773.9 million in 2021. Paid digital-only subscribers totaled approximately 8.83 million with approximately 10.26 million paid digital-only subscriptions at the end of 2022, a net increase of 1.01 million digital-only subscribers and 1.10 million digital-only subscriptions compared with the end of 2021. The year-over-year net increase in digital-only subscribers and subscriptions excludes approximately 1.03 million subscribers and 1.16 million subscriptions, respectively, that were added as a result of the acquisition of The Athletic in the first quarter of 2022. •Total advertising revenues increased 5.2% to$523.3 million in 2022 from$497.5 million in 2021, due to an increase of 8.4% in print advertising revenues and an increase of 3.2% in digital advertising revenues. •Operating costs increased 13.8% to$2.05 billion in 2022 from$1.80 billion in 2021. Operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or "adjusted operating costs," a non-GAAP measure) increased 12.7% to$1.96 billion in 2022 from$1.74 billion in 2021. •Operating costs that we refer to as "technology costs," consisting of product development costs as well as components of costs of revenues and general and administrative costs as described below, increased 24.5% to$377.2 million in 2022 from$302.9 million in 2021. •Diluted earnings per share from continuing operations were$1.04 and$1.31 for 2022 and 2021, respectively. Diluted earnings per share from continuing operations excluding amortization of acquired intangible assets, severance, non-operating retirement costs and special items discussed below under "Non-GAAP Financial Measures" (or "adjusted diluted earnings per share," a non-GAAP measure) were$1.32 and$1.28 for 2022 and 2021, respectively.THE NEW YORK TIMES COMPANY - P. 29 --------------------------------------------------------------------------------
Industry Trends, Economic Conditions, Challenges and Risks
We operate in a highly competitive environment that is subject to rapid change. Our competitors include content providers and distributors, as well as news aggregators, search engines and social media platforms. Competition among these companies is robust, and new competitors can quickly emerge. We have designed our strategy to take advantage of both the challenges and opportunities presented by this period of transformation in our industry. We and the companies with which we do business are subject to risks and uncertainties caused by factors beyond our control, including economic, public health and geopolitical conditions. These include economic weakness, uncertainty and volatility, including the potential for a recession; a competitive labor market and evolving workforce expectations (including for unionized employees); inflation; supply chain disruptions; rising interest rates; the continued effects of the Covid-19 pandemic; and political and sociopolitical uncertainties and conflicts (including the war inUkraine ). These factors may result in declines and/or volatility in our results. Although we did not see a significant impact from inflation on our financial results in 2022, if inflation remains at current levels, or increases, for an extended period, our employee-related costs are likely to increase. Our printing and distribution costs have been impacted and may be further impacted by inflation and higher costs, including those associated with raw materials, delivery costs and/or utilities. We actively monitor industry trends, economic conditions, challenges and risks to remain flexible and to optimize and evolve our business as appropriate; however, the full impact they will have on our business, operations and financial results is uncertain and will depend on numerous factors and future developments. The risks related to our business are further described in the section titled "Item 1A - Risk Factors."
Liquidity
OnFebruary 1, 2022 , we used approximately$550 million of our cash and cash equivalents to fund the acquisition ofThe Athletic Media Company . Throughout 2022, we returned capital to shareholders through dividends and share repurchases and continued to manage our pension liability as discussed below. As ofDecember 31, 2022 , the Company had cash, cash equivalents and marketable securities of approximately$486 million and was debt-free.
Capital Return
The Company aims to return at least 50% of free cash flow to stockholders in the form of dividends and share repurchases over the next three to five years, an increase from the target initially announced inJune 2022 . We have paid quarterly dividends on the Class A and Class B Common Stock each quarter since late 2013. InFebruary 2023 , the Board of Directors approved a quarterly dividend of$0.11 per share, an increase of$0.02 per share from the previous quarter. We currently expect to continue to pay comparable cash dividends in the future, although changes in our dividend program will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant. InFebruary 2022 , the Board of Directors approved a$150.0 million Class A share repurchase program. ThroughFebruary 21, 2023 , we repurchased 3,727,594 shares for approximately$127.2 million (excluding commissions) and approximately$22.8 million remained under this authorization. InFebruary 2023 , in addition to the amount remaining under the 2022 authorization, the Board of Directors approved a$250.0 million Class A share repurchase program. The authorizations provide that shares of Class A Common Stock may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. We expect to repurchase shares to offset the impact of dilution from our equity compensation program and to return capital to our stockholders. There is no expiration date with respect to these authorizations. As ofFebruary 21, 2023 , there have been no repurchases under the 2023$250.0 million authorization.
Managing Pension Liability
We remain focused on managing our pension plan obligations. We have taken steps over the last several years to reduce the size and volatility of our pension obligations, including freezing accruals under all but one of our qualified defined benefit pension plans, making immediate pension benefits offers in the form of lump-sum payments to certain former employees and transferring certain future benefit obligations and administrative costs to insurers. P. 30 -THE NEW YORK TIMES COMPANY -------------------------------------------------------------------------------- As ofDecember 31, 2022 , our qualified pension plans had plan assets that were approximately$70 million above the present value of future benefits obligations, compared with approximately$74 million as ofDecember 26, 2021 . We made contributions of approximately$11 million and$10 million to certain qualified pension plans in 2022 and 2021, respectively. We expect to make contributions in 2023 to satisfy minimum funding requirements of approximately$11 million . We will continue to look for ways to reduce the size and volatility of our pension obligations. While we have made significant progress in our liability-driven investment strategy to reduce the funding volatility of our qualified pension plans, the size of our pension plan obligations relative to the size of our current operations will continue to have an impact on our reported financial results. We expect to continue to experience volatility in our retirement-related costs, particularly due to the impact of changing discount rates and mortality assumptions on our unfunded, non-qualified pension plans and retiree medical costs. We may also incur additional withdrawal obligations related to multiemployer plans in which we participate as well as multiemployer plans from which we previously withdrew.THE NEW YORK TIMES COMPANY - P. 31
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RESULTS OF OPERATIONS
Overview
Fiscal year 2022 was comprised of 52 weeks and an additional six days, and fiscal year 2021 was comprised of 52 weeks. The following table presents our consolidated financial results:
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
(52 weeks and (52 weeks)
six days)
Revenues
Digital $ 978,574 $ 773,882 26.5
Print 573,788 588,233 (2.5)
Subscription revenues 1,552,362 1,362,115 14.0
Digital 318,440 308,616 3.2
Print 204,848 188,920 8.4
Advertising revenues 523,288 497,536 5.2
Other 232,671 215,226 8.1
Total revenues 2,308,321 2,074,877 11.3
Operating costs
Cost of revenue (excluding depreciation and
amortization) 1,208,933 1,039,568 16.3
Sales and marketing 267,553 294,947 (9.3)
Product development 204,185 160,871 26.9
General and administrative 289,259 250,124 15.6
Depreciation and amortization 82,654 57,502 43.7
Total operating costs 2,052,584 1,803,012 13.8
Acquisition-related costs 34,712 - *
Multiemployer pension plan liability adjustment 14,989 - *
Impairment charge 4,069 - *
Lease termination charge - 3,831 *
Operating profit 201,967 268,034 (24.6)
Other components of net periodic benefit costs 6,659 10,478 (36.4)
Interest income and other, net 40,691 32,945 23.5
Income from continuing operations before income taxes 235,999 290,501 (18.8)
Income tax expense 62,094 70,530 (12.0)
Net income attributable to
$ 173,905 $ 219,971 (20.9)
* Represents a change equal to or in excess of 100% or one that is not meaningful.
P. 32 -THE NEW YORK TIMES COMPANY --------------------------------------------------------------------------------
Revenues
Subscription, advertising and other revenues were as follows:
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
(52 weeks and six days) (52 weeks)
Subscription $ 1,552,362 $ 1,362,115 14.0
Advertising 523,288 497,536 5.2
Other 232,671 215,226 8.1
Total $ 2,308,321 $ 2,074,877 11.3
Subscription Revenues
Subscription revenues consist of revenues from subscriptions to our digital and
print products (which include our news product, as well as The Athletic and our
Cooking, Games, Audm and Wirecutter products), and single-copy and bulk sales of
our print products (which represent less than 5% of these revenues).
Subscription revenues are based on both the number of copies of the printed
newspaper sold and digital-only subscriptions, and the rates charged to the
respective customers.
Subscription revenues increased 14.0% in 2022 compared with 2021. The increase
was primarily due to the large number of subscribers whose introductory
promotional subscriptions have graduated to higher prices, growth in the number
of subscribers to the Company's digital-only products, the inclusion of
subscription revenue from The Athletic and the impact of the additional six days
in the year. The increases in digital-only subscription revenue were partially
offset by a decrease in print subscription revenue. This decrease in 2022
compared with 2021 was primarily attributable to declines in domestic home
delivery revenue and single-copy sales of 2.2% and 4.7%, respectively, driven by
secular trends, partially offset by an increase in home delivery subscription
prices and the impact of the additional six days. There is no print subscription
revenue generated from The Athletic.
The Company ended 2022 with approximately 9.55 million paid subscribers with
approximately 10.98 million paid subscriptions across its print and digital
products. Of the 9.55 million subscribers, approximately 8.83 million were paid
digital-only subscribers with approximately 10.26 million paid digital-only
subscriptions.
There was a net increase of 1,010,000 digital-only subscribers and 1,100,000
digital-only subscriptions at the end of 2022 compared with the end of 2021. The
year-over-year result excludes approximately 1,029,000 subscribers and 1,161,000
subscriptions that were added as a result of the acquisition of The Athletic in
the first quarter of 2022.
Print domestic home delivery subscribers totaled approximately 730,000 with 720,000 print subscriptions at the end of 2022, a net decrease of 70,000 subscribers and 70,000 subscriptions compared with the end of 2021. The year-over-year decrease is a result of secular declines.
THE NEW YORK TIMES COMPANY - P. 33 --------------------------------------------------------------------------------
The following table summarizes digital and print subscription revenues for the
years ended
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
(52 weeks and (52 weeks)
six days)
Digital-only subscription revenues(1) $ 978,574 $ 773,882 26.5
Print subscription revenues
Domestic home delivery subscription revenues(2) 517,395 529,039 (2.2)
Single-copy,
56,393 59,194 (4.7)
Subtotal print subscription revenues 573,788 588,233 (2.5)
Total subscription revenues $ 1,552,362 $ 1,362,115 14.0
(1) Includes revenue from digital-only bundled and standalone subscriptions to our news product, as well as The Athletic
and our Cooking, Games, Audm and Wirecutter products.
(2) Domestic home delivery subscriptions include access to our digital news product, as well as The Athletic and our
Cooking, Games and Wirecutter products.
(3) NYT International is the international edition of our print newspaper.
We began reporting the number of subscribers and certain supplementary
subscriber supplementary metrics with our first quarter 2022 results. While we
are moving toward an emphasis on individual subscriber growth rather than growth
of total subscriptions, we are reporting on the number of subscriptions at least
through 2022.
We offer a digital subscription package (or "bundle") that includes access to
our digital news product, as well as The Athletic and our Cooking, Games and
Wirecutter products. We also offer standalone digital subscriptions to our
digital news product, as well as to The Athletic, and our Cooking, Games, Audm
and Wirecutter products. The Company has set out below the number of
digital-only, print and total subscribers to the Company's products as well as
certain additional metrics, including average revenue per subscriber. A
digital-only subscriber is defined as a subscriber who has subscribed (and
provided a valid method of payment) for the right to access one or more of the
Company's digital products.
Beginning with the second quarter of 2022, the Company has updated its rounding
methodology for subscribers (including net subscriber additions), subscriptions
(including net subscription additions) and subscriber-related metrics (other
than ARPU) and rounds to the nearest ten thousand instead of the nearest
thousand as it had previously been presenting.
P. 34 - THE NEW YORK TIMES COMPANY
--------------------------------------------------------------------------------The following table summarizes digital and print subscribers as of the end of the five most recent fiscal quarters:
December 31, 2022 September 25, 2022 June 26, 2022 March 27, 2022 December 26, 2021
Digital-only subscribers (1) 8,830 8,590 8,410 8,230 6,783
Print subscribers(2) 730 740 760 780 795
Total subscribers (3) 9,550 9,330 9,170 9,010 7,578
(1) Subscribers with paid digital-only subscriptions to one or more of our news product, The Athletic, or our Cooking, Games and Wirecutter products. Subscribers with a
paid domestic home-delivery print subscription to The New York Times are excluded. The number of digital-only subscribers includes group corporate and group education
subscriptions (which collectively represented approximately 5% of paid digital-only subscribers as of the fourth quarter of 2022). The number of group subscribers is
derived using the value of the relevant contract and a discounted subscription rate.
(2) Subscribers with a paid domestic home delivery or mail print subscription to The New York Times , which also includes access to our digital news product, as well as
The Athletic and our Cooking, Games and Wirecutter products, or a paid print subscription to our Book Review or Large Type Weekly products. Book Review, Mail and Large
Type Weekly subscribers are included in the count of subscribers but not subscriptions.
(3) The sum of individual metrics may not always equal total amounts indicated due to rounding.
The following table summarizes supplementary subscriber metrics as of the end of the five most recent fiscal quarters:
December 31, September 25, March 27, December 26,
2022 2022 June 26, 2022 2022 2021
Digital-only subscriber ARPU(1)
$ 8.83
2,500 2,130 1,980 1,835 1,607
Digital-only subscribers with
News(3) 6,370 6,210 6,140 6,101 5,826
Digital-only subscribers with The
Athletic(4) 2,680 2,290 1,690 1,216 -
(1) "Digital-only subscriber Average Revenue per User" or "Digital-only subscriber ARPU" is calculated by dividing the average monthly digital subscription revenue (calculated by dividing digital subscription revenue in the quarter by 3.25 to reflect a 28-day billing cycle) in the measurement period by the average number of digital subscribers during the period. (2) Subscribers with a digital bundle or paid digital-only subscriptions that includes access to two or more of the Company's products, including through separate standalone subscriptions. (3) Subscribers with a paid digital-only subscription that includes the ability to access the Company's digital news product. (4) Subscribers with a paid digital-only subscription that includes the ability to access The Athletic.
The following table summarizes digital and print subscriptions as of the end of the five most recent fiscal quarters:
December 31, 2022 September 25, 2022 June 26, 2022 March 27, 2022 December 26, 2021
Digital-only subscriptions(1) 10,260 10,020 9,810 9,579 8,005
Print subscriptions(2) 720 730 750 770 784
Total subscriptions(3) 10,980 10,750 10,560 10,349 8,789
(1) Paid digital-only subscriptions to our news product, as well as The Athletic and our Cooking, Games, Audm and Wirecutter products. Standalone subscriptions to these
products are counted separately and bundle subscriptions are counted as one subscription. The number of paid digital-only subscriptions includes group corporate and group
education subscriptions (which collectively represented approximately 4% of paid digital-only subscriptions as of the fourth quarter of 2022). The number of group
subscriptions is derived using the value of the relevant contract and a discounted subscription rate.
(2) Paid domestic home-delivery print subscriptions to The New York Times , which also include access to our digital news product, as well as The Athletic and our Cooking,
Games and Wirecutter products. Excludes subscriptions to our Book Review or Large Type Weekly products and subscriptions to The New York Times that are delivered by mail.
(3) The sum of individual metrics may not always equal total amounts indicated due to rounding.
THE NEW YORK TIMES COMPANY - P. 35
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We believe that the significant growth over the last several years in
subscribers to our products demonstrates the success of our "subscription-first"
strategy and the willingness of our readers to pay for high-quality journalism.
The Company is increasing its emphasis on subscriber growth rather than growth
of total subscriptions. The following charts illustrate the growth in net
digital-only subscribers and corresponding subscription revenues as well as the
relative stability of our print domestic home delivery subscription products.
[[Image Removed: nyt-20221231_g2.jpg]]
[[Image Removed: nyt-20221231_g3.jpg]]
(1) Amounts may not add due to rounding.
(2) Includes access to some of our digital products.
(3) Includes Book Review, Mail and Large Type Weekly subscribers.
(4) Print Other includes single-copy, NYT International and other subscription
revenues.
P. 36 - THE NEW YORK TIMES COMPANY
--------------------------------------------------------------------------------Advertising Revenues
Advertising revenue is principally from advertisers (such as technology, financial and luxury goods companies) promoting products, services or brands on digital platforms in the form of display ads, audio and video ads, and in print in the form of column-inch ads.
Advertising revenue is primarily derived from offerings sold directly to marketers by our advertising sales teams. A smaller proportion of our total advertising revenues is generated through programmatic auctions run by third-party ad exchanges.
Advertising revenue is primarily determined by the volume (e.g., impressions or column inches), rate and mix of advertisements.
Digital advertising includes our core digital advertising business and other digital advertising. Our core digital advertising business includes direct-sold website, mobile application, podcast, email and video advertisements. Direct-sold display advertising, a component of core digital advertising, includes offerings on websites and mobile applications sold directly to marketers by our advertising sales teams. Other digital advertising includes open-market programmatic advertising and creative services fees.The New York Times Group has revenue from all categories discussed above. The Athletic has revenue from direct-sold display advertising, podcast, email and video advertisements. There was no significant other digital advertising revenue generated from The Athletic in 2022.
Print advertising includes revenue from column-inch ads and classified advertising, as well as preprinted advertising, also known as freestanding inserts. There is no print advertising revenue generated from The Athletic.
The following table summarizes digital and print advertising revenues for the
years ended
Years Ended % Change
(In thousands) December 31, 2022 December 26, 2021 2022 vs. 2021
(52 weeks and six days) (52 weeks)
Advertising revenues
Digital $ 318,440 $ 308,616 3.2 %
Print 204,848 188,920 8.4 %
Total advertising $ 523,288 $ 497,536 5.2 %
Digital advertising revenues, which represented 60.9% of total advertising
revenues in 2022, increased $9.8 million , or 3.2%, to $318.4 million , compared
with $308.6 million in 2021. The increase was primarily driven by higher
direct-sold advertising at The New York Times Group , the addition of $12.0
million in advertising revenue from The Athletic, and the impact of the
additional six days, which more than offset declines in revenue from fewer
programmatic advertising impressions; in addition, we believe the macroeconomic
environment adversely impacted advertising spend. Core digital advertising
revenue increased $29.0 million , which includes $12.0 million from The Athletic,
due to growth in direct-sold display advertising revenue and podcast advertising
revenues as well as the impact of the additional six days in the year.
Direct-sold display impressions increased 33%, while the average rate decreased
16%. Other digital advertising revenue decreased $19.2 million , primarily due to
a 19.8% decrease in open-market programmatic advertising revenue, as well as a
28.7% decrease in creative services fees. Programmatic impressions decreased by
26%, while the average rate increased 8%.
Print advertising revenues, which represented 39.1% of total advertising
revenues in 2022, increased $15.9 million , or 8.4%, to $204.8 million in 2022
compared with $188.9 million in 2021. The increase was primarily in the
entertainment and luxury categories, which were more severely impacted by the
effects of the Covid-19 pandemic in 2021. The increase was partially offset by
secular trends and in addition we believe the macroeconomic environment
adversely impacted advertising spend.
THE NEW YORK TIMES COMPANY - P. 37
--------------------------------------------------------------------------------Other Revenues
Other revenues primarily consist of revenues from licensing, Wirecutter affiliate referrals, commercial printing, the leasing of floors in the Company Headquarters, retail commerce, our live events business, our student subscription sponsorship program, and television and film. Digital other revenues, which consist primarily of Wirecutter affiliate referral revenue, digital licensing revenue, and television and film revenue, totaled$114.6 million and$111.4 million in 2022 and 2021, respectively. Building rental revenue consists of revenue from the leasing of floors in our Company Headquarters, which totaled$28.5 million and$22.9 million in 2022 and 2021, respectively. Other revenues increased 8.1% in 2022 compared with 2021, primarily as a result of higher Wirecutter affiliate referral revenues mainly due to Wirecutter's presence on our core news website (NYTimes.com ) homepage for the full year, resulting in increased views, higher revenue from our live events business mainly due to an increase in the number of in-person events, higher commercial printing revenue as we began printing several News Corporation publications in mid-2021 and several other publications in 2022 in ourCollege Point, N.Y. , printing and distribution facility, and the impact of the additional six days in the year. These increases were partially offset by lower television series revenues as a result of fewer episodes in 2022 compared to 2021. P. 38 -THE NEW YORK TIMES COMPANY --------------------------------------------------------------------------------
Operating Costs
Operating costs were as follows:
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
(52 weeks and six (52 weeks)
days)
Operating costs:
Cost of revenue (excluding depreciation and
amortization)(1) $ 1,208,933 $ 1,039,568 16.3
Sales and marketing 267,553 294,947 (9.3)
Product development(1) 204,185 160,871 26.9
General and administrative(1) 289,259 250,124 15.6
Depreciation and amortization(2) 82,654 57,502 43.7
Total operating costs $ 2,052,584 $ 1,803,012 13.8
(1) Technology costs, which include product development costs and certain components of cost of revenue and general and
administrative costs as described below, increased 24.5% to $377.2 million in 2022 from $302.9 million in 2021.
(2) Includes amortization of intangible assets related to our acquisitions of approximately $25 million for 2022.
The components of operating costs as a percentage of total operating costs were
as follows:
Years Ended
December 31, December 26,
2022 2021
(52 weeks and (52 weeks)
six days)
Components of operating costs as a percentage of total operating
costs
Cost of revenue (excluding depreciation and amortization) 59 % 58 %
Sales and marketing 13 % 16 %
Product development 10 % 9 %
General and administrative 14 % 14 %
Depreciation and amortization 4 % 3 %
Total 100 % 100 %
THE NEW YORK TIMES COMPANY - P. 39
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The components of operating costs as a percentage of total revenues were as
follows:
Years Ended
December 31 , December 26,
2022 2021
(52 weeks and (52 weeks)
six days) Components of operating costs as a percentage of total revenues Cost of revenue (excluding depreciation and amortization)
52 % 50 %
Sales and marketing 12 % 14 %
Product development 9 % 8 %
General and administrative 13 % 12 %
Depreciation and amortization 4 % 3 %
Total 90 % 87 %
P. 40 - THE NEW YORK TIMES COMPANY
--------------------------------------------------------------------------------Cost of Revenue (excluding depreciation and amortization)
Cost of revenue includes all costs related to content creation, subscriber and advertiser servicing and print production and distribution, as well as infrastructure costs related to delivering digital content that include all cloud and cloud-related costs as well as compensation for employees that enhance and maintain that infrastructure. Cost of revenue increased in 2022 by$169.4 million , or 16.3%, compared with 2021, largely due to higher journalism costs of$112.6 million , higher subscriber servicing costs of$23.3 million , higher print production and distribution costs of$17.7 million , higher digital content delivery costs of$12.8 million , and higher advertising service costs of$2.9 million . The increase in journalism costs was largely driven by the inclusion of$64.5 million in journalism costs from The Athletic, as well as growth in the number of employees who work inThe New York Times Group newsroom and on our Cooking, Games, audio and Wirecutter products. The increase in subscriber servicing costs was primarily due to the inclusion of$7.6 million in subscriber servicing costs from The Athletic, and higher credit card processing fees and third-party commissions due to increased subscriptions. The increase in print production and distribution costs was largely due to an increase in newsprint pricing and fuel costs which were impacted by inflation and increased commercial printing activity. The increase in digital content delivery costs was primarily due to higher cloud-related costs forThe New York Times Group , the inclusion of$1.3 million in digital content delivery costs from The Athletic, and higher compensation and benefits. Advertising servicing costs increased primarily due to an increase in live events. Technology costs in cost of revenue, which include costs related to content delivery and subscriber technology, increased 21.2% to$106.3 million compared with$87.7 million in 2021 due to the growth in the number of employees and increases in cloud-related costs.
Sales and Marketing
Sales and marketing includes costs related to the Company's marketing efforts as well as advertising sales costs.
Sales and marketing costs decreased in 2022 by$27.4 million , or 9.3%, compared with 2021, primarily due to lower media expenses, offset by the inclusion of$23.6 million in sales and marketing costs from The Athletic in 2022. Media expenses, a component of sales and marketing costs that represents the cost to promote our subscription business, decreased to$134.1 million in 2022 from$187.3 million in 2021. The decrease was the result of lower brand marketing expenses atThe New York Times Group , partially offset by the inclusion media expenses from The Athletic of$15.3 million in 2022.
Product Development
Product development includes costs associated with the Company's investment into developing and enhancing new and existing product technology, including engineering, product development and data insights. All product development costs are technology costs.
Product development costs increased in 2022 by$43.3 million , or 26.9%, compared with 2021, largely due to growth in the number of digital product development employees in connection with digital subscription strategic initiatives and the inclusion of product development costs from The Athletic of$15.0 million in 2022.
General and Administrative Costs
General and administrative costs include general management, corporate enterprise technology, building operations, unallocated overhead costs, severance and multiemployer pension plan withdrawal costs.
General and administrative costs increased in 2022 by$39.1 million , or 15.6%, compared with 2021, primarily as a result of growth in the number of employees, the inclusion of$ 9.6 million in general and administrative costs from The Athletic and higher building operations and maintenance costs related to employees returning to the office. Technology costs in general and administrative costs, which include costs related to technology and information security, increased 23.1% to$66.8 million compared with$54.3 million in 2021.
Depreciation and Amortization
Depreciation and amortization costs increased
THE NEW YORK TIMES COMPANY - P. 41 --------------------------------------------------------------------------------
Segment Information
We acquiredThe Athletic Media Company on, and the results of The Athletic have been included in our Consolidated Financial Statements beginning,February 1, 2022 . Beginning in the first quarter of 2022, we have two reportable segments:The New York Times Group and The Athletic. Management, including our President and Chief Executive Officer (who is our Chief Operating Decision Maker), uses adjusted operating profit by segment (as defined below) in assessing performance and allocating resources. We include in our presentation revenues and adjusted operating costs (as defined below) to arrive at adjusted operating profit by segment. See "Non-GAAP Financial Measures" below for more information on adjusted operating costs and adjusted operating profit. Subscription revenue from our multi-product digital subscription package (or "bundle") is allocated toThe New York Times Group and The Athletic. We allocate revenue first to our digital news product based on its list price and then the remaining bundle revenue is allocated to the other products in the bundle, including The Athletic, based on their relative list price. The direct variable expenses associated with the bundle, which include credit card fees, third-party fees and sales taxes, are allocated toThe New York Times Group and The Athletic based on a historical actual percentage of these costs to bundle revenue. Years Ended % Change December 31, December 26, (in thousands) 2022 2021 2022 vs. 2021 (52 weeks and (52 weeks) six days)(1) Revenues The New York Times Group$ 2,222,589 $ 2,074,877 7.1 % The Athletic 85,732 - * Total revenues$ 2,308,321 $ 2,074,877 11.3 % Adjusted operating costs The New York Times Group$ 1,838,784 $ 1,739,478 5.7 % The Athletic 121,606 - * Total adjusted operating costs$ 1,960,390 $ 1,739,478 12.7 % Adjusted operating profit The New York Times Group$ 383,805 $ 335,399 14.4 % The Athletic (35,874) - * Total adjusted operating profit$ 347,931 $ 335,399 3.7 %
Adjusted operating profit margin % -
17.3 % 16.2 % 110 bps
(1) The results of The Athletic have been included in our Consolidated Financial Statements beginning
P. 42 -THE NEW YORK TIMES COMPANY --------------------------------------------------------------------------------
Revenues detail by segment
Years Ended % Change
December 31, December 26,
(in thousands) 2022 2021 2022 vs. 2021
(52 weeks and (52 weeks)
six days)(1)
The New York Times Group
Subscription $ 1,479,209 $ 1,362,115 8.6 %
Advertising 511,320 497,536 2.8 %
Other 232,060 215,226 7.8 %
Total $ 2,222,589 $ 2,074,877 7.1 %
The Athletic
Subscription $ 73,153 $ - *
Advertising 11,968 - *
Other 611 - *
Total $ 85,732 $ - *
The New York Times Company
Subscription $ 1,552,362 $ 1,362,115 14.0 %
Advertising 523,288 497,536 5.2 %
Other 232,671 215,226 8.1 %
Total $ 2,308,321 $ 2,074,877 11.3 %
(1) The results of The Athletic have been included in our Consolidated Financial Statements beginning
THE NEW YORK TIMES COMPANY - P. 43 --------------------------------------------------------------------------------
Adjusted operating costs (operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs) detail by segment
Years Ended % Change
December 31, December 26,
(in thousands) 2022 2021 2022 vs. 2021
(52 weeks and (52 weeks)
six days)(3)
The New York Times Group
Cost of revenue (excluding depreciation and amortization)
9.2 %
Sales and marketing 243,936 294,947 (17.3) %
Product development 189,027 160,871 17.5 %
Adjusted general and administrative(1) 270,303 244,092 10.7 %
Total $ 1,838,784 $ 1,739,478 5.7 %
The Athletic
Cost of revenue (excluding depreciation and amortization) $ 73,415 $ - *
Sales and marketing 23,617 - *
Product development 15,158 - *
Adjusted general and administrative(2) 9,416 - *
Total $ 121,606 $ - *
The New York Times Company
Cost of revenue (excluding depreciation and amortization)
16.3 %
Sales and marketing 267,553 294,947 (9.3) %
Product development 204,185 160,871 26.9 %
Adjusted general and administrative 279,719 244,092 14.6 %
Total $ 1,960,390 $ 1,739,478 12.7 %
(1) Excludes severance of $4.7 million for the 12 months of 2022 and multiemployer pension withdrawal costs of $4.9 million
for the 12 months of 2022. Excludes severance of $0.9 million for the 12 months of 2021 and multiemployer pension withdrawal
costs of $5.2 million for the 12 months of 2021.
(2) Excludes $0.2 million of severance for the 12 months of 2022.
(3) The results of The Athletic have been included in our Consolidated Financial Statements beginning February 1, 2022 .
* Represents a change equal to or in excess of 100% or not meaningful.
The New York Times Group revenues increased in 2022 by$147.7 million , or 7.1%, compared with 2021. Subscription revenues increased by$117.1 million , or 8.6%, compared with 2021, primarily due to growth in subscription revenues from digital-only products. Advertising revenues increased by$13.8 million , or 2.8%, compared with 2021, primarily due to growth in print advertising.The New York Times Group adjusted operating costs increased in 2022 by$99.3 million , or 5.7%, compared with 2021, primarily related to growth in the number of employees, partially offset by lower media expenses.The New York Times Group adjusted operating profit increased in 2022 by$48.4 million , or 14.4%, compared with 2021, as higher revenues and the impact of the additional six days in the year more than offset higher costs. P. 44 -THE NEW YORK TIMES COMPANY --------------------------------------------------------------------------------
The Athletic
The Athletic revenues totaled
The Athletic adjusted operating costs totaled
The Athletic adjusted operating loss totaled
Other Items
See Note 7 of the Notes to the Consolidated Financial Statements for more information regarding other items.
NON-OPERATING AND NON-GAAP ITEMS
Interest Income and Other, Net
See Note 7 of the Notes to the Consolidated Financial Statements for information regarding interest income and other.
Income Taxes
See Note 12 of the Notes to the Consolidated Financial Statements for information regarding income taxes.
Other Components of Net Periodic Benefit Costs
See Notes 9 and 10 of the Notes to the Consolidated Financial Statements for information regarding other components of net periodic benefit costs.
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 amortization of acquired intangible assets, 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, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit, and as a percentage of revenues, adjusted operating profit margin);
•operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs); and
•free cash flow (defined as net cash provided by operating activities less capital expenditures).
The special items in 2022 consisted of:
•a
•a
•a
•a$34.2 million gain ($24.9 million or$0.15 per share after tax) related to an agreement to lease and subsequently sell approximately four acres of land at our printing and distribution facility inCollege Point, N.Y. The gain is included in Interest income and other, net in our Consolidated Statements of Operations; and
•a
THE NEW YORK TIMES COMPANY - P. 45 --------------------------------------------------------------------------------
of
The special items in 2021 consisted of:
•a$27.2 million gain ($19.8 million after tax or$0.12 per share) related to a non-marketable equity investment transaction. The gain consists of a$15.2 million realized gain due to the partial sale of the investment and an$11.9 million unrealized gain due to the mark to market of the remaining investment, and is included in Interest income and other, net in our Consolidated Statements of Operations; and
•a
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 from continuing operations 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 (and adjusted operating profit margin) 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. Beginning with the fourth quarter of 2022, the Company has updated its definition of adjusted diluted earnings per share from continuing operations to exclude amortization of acquired intangible assets in addition to previously excluded severance, non-operating retirement costs and special items. Excluding amortization of acquired intangible assets to arrive at adjusted diluted earnings per share allows for comparability between periods of the Company's operating performance. 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. Excluded from our non-GAAP financial measures are non-operating retirement costs that 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. The Company considers free cash flow, which is defined as net cash provided by operating activities less capital expenditures, to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company's balance sheet and for strategic opportunities including, among others, investing in the Company's business, strategic acquisitions, dividend payouts and repurchasing stock. See "Liquidity and Capital Resources - Free Cash Flow" below for more information and a reconciliation of free cash flow to net cash provided by operating activities. P. 46 - THE NEW YORK TIMES COMPANY --------------------------------------------------------------------------------
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.
In addition, the Company has adopted a change to its fiscal calendar and as a result, its 2022 fourth quarter and fiscal year included an additional six days compared with 2021. Included below is the estimated impact of the additional six days on fiscal year revenue. Management believes that estimating the impact of the additional six days on the Company's operating costs and operating profit presents challenges and, therefore, no such estimate is made with respect to these items.
Reconciliation of diluted earnings per share from continuing operations excluding amortization of acquired intangible assets, severance, non-operating retirement costs and special items (or adjusted diluted earnings per share from continuing operations)
Years Ended % Change
December 31, December 26,
2022 2021 2022 vs. 2021
(52 weeks and (52 weeks)
six days)
Diluted earnings per share from continuing operations $ 1.04 $ 1.31 (20.6) %
Add:
Amortization of acquired intangible assets 0.16 0.01 * Severance 0.03 0.01 * Non-operating retirement costs: Multiemployer pension plan withdrawal costs 0.03 0.03 - Other components of net periodic benefit costs 0.04 0.06 (33.3) % Special items: Acquisition-related costs 0.21 - * Gain from non-marketable equity security - (0.16) * Impairment charge 0.02 - * Lease termination charge - 0.02 * Gain on the sale of land (0.20) - * Multiemployer pension plan liability adjustment (1) 0.09 - * Income tax expense/(benefit) of adjustments (0.10) 0.01 *
Adjusted diluted earnings per share from continuing operations (2)(3)
$ 1.32 $ 1.28 3.1 %
* Represents a change equal to or in excess of 100% or one that is not meaningful.
(1) Twelve months ended
(2) Amounts may not add due to rounding.
(3) Recast to conform 2021 periods to the updated definition of adjusted diluted
earnings per share.
THE NEW YORK TIMES COMPANY - P. 47--------------------------------------------------------------------------------
Reconciliation of operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit) and of adjusted operating profit margin
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
(52 weeks and (52 weeks)
six days)
Operating profit $ 201,967 $ 268,034 (24.6) %
Add:
Depreciation and amortization 82,654 57,502 43.7 %
Severance 4,669 882 *
Multiemployer pension plan withdrawal costs 4,871 5,150 (5.4) %
Special items:
Acquisition-related costs 34,712 - *
Impairment charge 4,069 - *
Lease termination charge - 3,831 *
Multiemployer pension plan liability adjustment 14,989 - *
Adjusted operating profit $ 347,931 $ 335,399 3.7 %
Divided by:
Revenue 2,308,321 2,074,877 11.3 %
Operating profit margin 8.7 % 12.9 % (420) bps
Adjusted operating profit margin 15.1 % 16.2 % (110) bps
* Represents a change equal to or in excess of 100% or one that is not meaningful.
Reconciliation of operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs)
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
(52 weeks and six (52 weeks)
days)
Operating costs $ 2,052,584 $ 1,803,012 13.8 %
Less:
Depreciation and amortization 82,654 57,502 43.7 %
Severance 4,669 882 *
Multiemployer pension plan withdrawal costs 4,871 5,150 (5.4) %
Adjusted operating costs $ 1,960,390 $ 1,739,478 12.7 %
P. 48 - THE NEW YORK TIMES COMPANY
--------------------------------------------------------------------------------
Reconciliation of revenues excluding the estimated impact of the additional six days in 2022
Years Ended % Change
December 31, Additional Six December 31, December 26,
2022 As Reported Days 2022 Adjusted 2021 2022 vs. 2021
Digital subscription revenue $ 978,574 $ (16,981) $ 961,593 $ 773,882 24.3 %
Print subscription revenue 573,788 (5,120) 568,668 588,233 (3.3) %
Total subscription revenue 1,552,362 (22,101) 1,530,261 1,362,115 12.3 %
Digital advertising revenue 318,440 (5,398) 313,042 308,616 1.4 %
Print advertising revenue 204,848 (1,267) 203,581 188,920 7.8 %
Total advertising revenues 523,288 (6,665) 516,623 497,536 3.8 %
Other revenue 232,671 (1,743) 230,928 215,226 7.3 %
Total revenues $ 2,308,321 $ (30,509) $ 2,277,812 $ 2,074,877 9.8 %
THE NEW YORK TIMES COMPANY - P. 49--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Overview
The following table presents information about our financial position:
Financial Position Summary
Years Ended % Change
December 31, December 26,
(In thousands, except ratios) 2022 2021 2022 vs. 2021
Cash and cash equivalents $ 221,385 $ 319,973 (30.8)
Marketable securities 264,889 754,455 (64.9)
Total cash and cash equivalents and marketable
securities (1) 486,274 1,074,428 (54.7)
Total New York Times Company stockholders' equity 1,597,967 1,538,720 3.9
Ratios:
Current assets to current liabilities 1.15 1.70 (1) Approximately$550.0 million of cash and marketable securities were used inFebruary 2022 to fund the purchase price ofThe Athletic Media Company (refer to commentary below). Our primary sources of cash from operations were revenues from subscription and advertising sales. Subscription and advertising revenues provided about 67% and 23%, respectively, of total revenues in 2022. The remaining cash inflows were primarily from other revenue sources such as licensing, Wirecutter affiliate referrals, commercial printing, the leasing of floors in the Company Headquarters, retail commerce, our live events business, our student subscription sponsorship program, and television and film. Our primary uses of cash from operations were for consideration paid for the acquisition ofThe Athletic Media Company inFebruary 2022 , employee compensation and benefits and other operating expenses. We believe our cash and cash equivalents, marketable securities balance and cash provided by operations, in combination with other sources of cash, will be sufficient to meet our financing needs over the next 12 months and beyond. As ofDecember 31, 2022 , we had cash and cash equivalents and marketable securities of$486.3 million and approximately$350 million in available borrowings, and no amounts were outstanding under the Credit Facility. Our cash and cash equivalents and marketable securities balances decreased in 2022, primarily due to consideration paid for the acquisition ofThe Athletic Media Company , cash used for shares repurchases, dividend payments and capital expenditures, partially offset by cash proceeds from operating activities. Approximately$550.0 million of cash and marketable securities were used inFebruary 2022 to fund the purchase price ofThe Athletic Media Company (see Note 5 of the Notes to the Consolidated Financial Statements for additional information related to this acquisition). We have paid quarterly dividends on the Class A and Class B Common Stock since late 2013. InFebruary 2023 , the Board of Directors approved a quarterly dividend of$0.11 per share, an increase of$0.02 per share from the previous quarter (see Note 19 of the Notes to the Consolidated Financial Statements for additional information). We currently expect to continue to pay comparable cash dividends in the future, although changes in our dividend program will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant. InFebruary 2022 , the Board of Directors approved a$150.0 million Class A share repurchase program. ThroughFebruary 21, 2023 , repurchases under that program totaled approximately$127.2 million (excluding commissions) and approximately$22.8 million remained. InFebruary 2023 , the Board of Directors approved a$250.0 million Class A share repurchase program in addition to the amount remaining under the 2022 authorization. The authorizations provide that shares of Class A Common Stock may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. We expect to repurchase shares to offset the impact of dilution from our equity compensation program and to return capital to our stockholders. There is no expiration date with respect to these authorizations. As ofFebruary 21, 2023 , there have been no repurchases under the 2023$250.0 million authorization. P. 50 -THE NEW YORK TIMES COMPANY -------------------------------------------------------------------------------- During 2022, we made contributions of$11.2 million to certain qualified pension plans funded by cash on hand. As ofDecember 31, 2022 , our qualified pension plans had plan assets that were$69.5 million above the present value of future benefits obligations, a decrease of$4.8 million from$74.3 million as ofDecember 26, 2021 . We expect contributions made to satisfy minimum funding requirements to total approximately$11 million in 2023. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and instead requires taxpayers to capitalize and amortize such expenditures over five years. In 2022, our cash from operations decreased by approximately$60 million and our net deferred tax assets increased by a similar amount as a result of this legislation. In 2023, we expect a negative impact on our cash from operations of approximately$45 million . The actual impact on fiscal 2023 cash from operations will depend on the amount of research and development costs we incur. The Inflation Reduction Act of 2022 was signed into law inAugust 2022 . We do not expect the tax-related provisions of this legislation to have a material impact on our consolidated financial statements.
Capital Resources
Sources and Uses of Cash
Cash flows provided by/(used in) by category were as follows:
Years Ended % Change
December 31, December 26,
(In thousands) 2022 2021 2022 vs. 2021
Operating activities $ 150,687 $ 269,098 (44.0)
Investing activities $ (73,561) $ (180,807) (59.3)
Financing activities $ (174,306) $ (54,947) 217.2
Operating Activities
Cash from operating activities is generated by cash receipts from subscriptions,
advertising sales and other revenue. Operating cash outflows include payments
for employee compensation, retirement and other benefits, raw materials,
marketing expenses, interest and income taxes.
Net cash provided by operating activities decreased in 2022 compared with 2021
due to higher cash payments for incentive compensation, higher cash tax payments
due to a provision in the Tax Cuts and Jobs Act deferring the deduction for
research and development expenditures, a payment related to the acceleration of
The Athletic Media Company stock options in connection with the acquisition,
lower net income and an increase in prepaid expenses, partially offset by higher
cash collections from accounts receivable.
Investing Activities
Cash from investing activities generally includes proceeds from marketable securities that have matured and the sale of assets, investments or a business. Cash used in investing activities generally includes purchases of marketable securities, payments for capital projects and acquisitions of new businesses and investments. Net cash used in investing activities in 2022 was primarily related to$515.6 million in consideration paid for acquisitions, net of cash acquired, and$37.0 million in capital expenditures payments, partially offset by$478.3 million net maturities of marketable securities.
Financing Activities
Cash from financing activities generally includes borrowings under third-party financing arrangements, the issuance of long-term debt and funds from stock option exercises. Cash used in financing activities generally includes the repayment of amounts outstanding under third-party financing arrangements, the payment of dividends, the payment of long-term debt and capital lease obligations, and stock-based compensation tax withholding.
Net cash used in financing activities in 2022 was primarily related to share
repurchases of
THE NEW YORK TIMES COMPANY - P. 51 --------------------------------------------------------------------------------
See "- Third-Party Financing" below and our Consolidated Statements of Cash Flows for additional information on our sources and uses of cash.
Free Cash Flow
Free cash flow is a non-GAAP financial measure defined as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company's balance sheet and for strategic opportunities including, among others, investing in the Company's business, strategic acquisitions, dividend payouts and repurchasing stock. In addition, management uses free cash flow to set targets for return of capital to stockholders in the form of dividends and share repurchases. The Company aims to return at least 50% of free cash flow to stockholders in the form of dividends and share repurchases over the next three to five years, an increase from the target initially announced inJune 2022 .
The following table presents a reconciliation of net cash provided by operating activities to free cash flow:
Years Ended
December 31, December 26,
(In thousands) 2022 2021
Net cash provided by operating activities $ 150,687 $ 269,098
Less: Capital expenditures (36,961) (34,637)
Free cash flow $ 113,726 $ 234,461
Restricted Cash
We were required to maintain $13.8 million of restricted cash as of December 31,
2022 , and $14.3 million as of December 26, 2021 , substantially all of which is
set aside to collateralize workers' compensation obligations.
Capital Expenditures
Capital expenditures totaled approximately$36 million and$35 million in 2022 and 2021, respectively. The increase in capital expenditures in 2022 was primarily driven by higher expenditures to enhance technologies that support our transition to hybrid work with employees working both from the office and remotely and higher expenditures related to improvements at ourCollege Point, N.Y. , printing and distribution facility, partially offset by lower expenditures for improvements in our Company Headquarters. The expenditures in 2021 and 2022 were intended to address growth in the number of employees and support hybrid work. The cash payments related to the capital expenditures totaled approximately$37 million and$35 million in 2022 and 2021, respectively, due to the timing of the payments. In 2023, we expect capital expenditures of approximately$50 million , which will be funded from cash on hand. The capital expenditures will be primarily driven by improvements in our Company Headquarters, investments in technology to support our strategic initiatives and expenditures related to ourCollege Point, N.Y. , printing and distribution facility.
Acquisition of
OnFebruary 1, 2022 , we completed the acquisition ofThe Athletic Media Company , a global digital subscription-based sports media business that provides national and local coverage of clubs and teams inthe United States and around the world, for an all-cash purchase price of$550.0 million , subject to customary closing adjustments (see Note 5 of the Notes to the Consolidated Financial Statements for additional information related to this acquisition). The purchase price was funded from cash on hand. Third-Party Financing OnJuly 27, 2022 , we entered into a$350.0 million five-year unsecured Credit Facility that amended and restated a prior facility. Certain of our domestic subsidiaries have guaranteed our obligations under the Credit Facility. As ofDecember 31, 2022 , there was approximately$0.6 million in outstanding letters of credit and the remaining committed amount remains available. As ofDecember 31, 2022 , there were no outstanding borrowings under the Credit Facility and the Company was in compliance with the financial covenants contained in the Credit P. 52 -THE NEW YORK TIMES COMPANY --------------------------------------------------------------------------------
Facility. See Note 7 of the Notes to the Consolidated Financial Statements for information regarding the Credit Facility.
Contractual Obligations
The information provided is based on management's best estimate and assumptions
of our contractual obligations as of
Payment due in
(In thousands) Total 2023 2024-2025 2026-2027 Later Years
Operating leases(1) $ 83,083 $ 12,424 $ 21,028 $ 16,306 $ 33,325
Benefit plans(2) 314,766 41,559 81,942 79,375 111,890
Total $ 397,849 $ 53,983 $ 102,970 $ 95,681 $ 145,215 (1)See Note 17 of the Notes to the Consolidated Financial Statements for additional information related to our operating leases.
(2)The Company's general funding policy with respect to qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations and Guild contracts. Contributions for our qualified pension plans and future benefit payments for our unfunded pension and other postretirement benefit payments have been estimated over a 10-year period; therefore, the amounts included in the "Later Years" column only include payments for the period of 2027-2032. For our funded qualified pension plans, estimating funding depends on several variables, including the performance of the plans' investments, assumptions for discount rates, expected long-term rates of return on assets, rates of compensation increases (applicable only for the Guild-Times Adjustable Pension Plan that has not been frozen) and other factors. Thus, our actual contributions could vary substantially from these estimates. While benefit payments under these plans are expected to continue beyond 2032, we have included in this table only those benefit payments estimated over the next 10 years. Benefit plans in the table above also include estimated payments for multiemployer pension plan withdrawal liabilities. See Notes 9 and 10 of the Notes to the Consolidated Financial Statements for additional information related to our pension and other postretirement benefits plans. Other Liabilities - Other in our Consolidated Balance Sheets include liabilities related to (1) deferred compensation, primarily related to our deferred executive compensation plan (the "DEC") and (2) various other liabilities, including our contingent tax liability for uncertain tax positions and contingent consideration. These liabilities are not included in the table above primarily because the timing of the future payments is not determinable. See Note 11 of the Notes to the Consolidated Financial Statements for additional information. The DEC previously enabled 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 fair value of deferred compensation was$14.6 million as ofDecember 31, 2022 . The DEC was frozen effectiveDecember 31, 2015 , and no new contributions may be made into the plan. See Note 11 of the Notes to the Consolidated Financial Statements for additional information on Other Liabilities - Other. Our liability for uncertain tax positions was approximately$7 million , including approximately$2 million of accrued interest as ofDecember 31, 2022 . Until formal resolutions are reached between us and the taxing authorities, determining the timing and amount of possible audit settlements relating to uncertain tax positions is not practicable. Therefore, we do not include this obligation in the table of contractual obligations. See Note 12 of the Notes to the Consolidated Financial Statements for additional information regarding income taxes. The contingent consideration represents contingent payments in connection with the acquisition of substantially all the assets and certain liabilities ofSerial Productions, LLC . The Company estimated the fair value of the contingent consideration liability using a probability-weighted discounted cash flow model. The estimate of the fair value of contingent consideration requires subjective assumptions to be made regarding probabilities assigned to operational targets and the discount rate. The contingent consideration balance of$5.3 million as ofDecember 31, 2022 , is included in Accrued expenses and other, for the current portion of the liability, and Other Liabilities - Other, for the long-term portion of the liability, in our Consolidated Balance Sheets. See Note 8 of the Notes to the Consolidated Financial Statements for more information.THE NEW YORK TIMES COMPANY - P. 53 -------------------------------------------------------------------------------- We have a contract through the end of 2025 withResolute FP US Inc. , a subsidiary of Resolute Forest Products Inc., a major paper supplier, to purchase newsprint. The contract requires us to purchase annually the lesser of a fixed number of tons or a percentage of our total newsprint requirement at market rate in an arm's length transaction. Since the quantities of newsprint purchased annually under this contract are based on our total newsprint requirement, the amount of the related payments for these purchases is excluded from the table above.
CRITICAL ACCOUNTING ESTIMATES
Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements for the periods presented. We continually evaluate the policies and estimates we use to prepare our Consolidated Financial Statements. In general, management's estimates are based on historical experience, information from third-party professionals and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results may differ from those estimates made by management. Our critical accounting estimates include our accounting for goodwill and intangibles, retirement benefits and revenue recognition. Specific risks related to our critical accounting estimates are discussed below. For a description of our related accounting policies, see Note 2 of the Notes to the Consolidated Financial Statements.Goodwill and Intangibles
We evaluate whether there has been an impairment of goodwill or indefinite-lived intangible assets on an annual basis or in an interim period if certain circumstances indicate that a possible impairment may exist.
December 31, December 26,
(In thousands) 2022 2021
Goodwill $ 414,046 $ 166,360
Intangibles $ 317,314 $ 14,246
Total assets $ 2,533,752 $ 2,564,108
Percentage of goodwill and intangibles to total assets 29 % 7 %
The impairment analysis is considered critical because of the significance of goodwill and intangibles to our Consolidated Balance Sheets.
We test goodwill for impairment at a reporting unit level. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we compare the fair value of a reporting unit with its carrying amount, including goodwill. Fair value is calculated by a combination of a discounted cash flow model and a market approach model.
We test indefinite-lived intangible assets for impairment at the asset level. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the asset is less than its carrying value. If we determine that it is more likely than not that the intangible asset is impaired, we perform a quantitative assessment by comparing the fair value of the asset with its carrying amount. If the fair value, which is based on future cash flows, exceeds the carrying value, the asset is not considered impaired. If the carrying amount exceeds the fair value, an impairment loss would be recognized in an amount equal to the excess of the carrying amount of the asset over the fair value of the asset. Intangible assets that are amortized are tested for impairment at the asset level associated with the lowest level of cash flows whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment exists if the carrying value of the asset (1) is not recoverable (the carrying value of the asset is greater than the sum of undiscounted cash flows) and (2) is greater than its fair value.
The discounted cash flow analysis requires us to make various judgments, estimates and assumptions, many of which are interdependent, about future revenues, operating margins, growth rates, capital expenditures, working capital, discount rates and royalty rates. The starting point for the assumptions used in our discounted cash flow
P. 54 - THE NEW YORK TIMES COMPANY -------------------------------------------------------------------------------- analysis is the annual long-range financial forecast. The annual planning process that we undertake to prepare the long-range financial forecast takes into consideration a multitude of factors, including historical growth rates and operating performance, related industry trends, macroeconomic conditions, and marketplace data, among others. Assumptions are also made for perpetual growth rates for periods beyond the long-range financial forecast period. Our estimates of fair value are sensitive to changes in all of these variables, certain of which relate to broader macroeconomic conditions outside our control.
The market approach analysis includes applying a multiple, based on comparable market transactions, to certain operating metrics of a reporting unit.
The significant estimates and assumptions used by management in assessing the recoverability of goodwill and intangibles are estimated future cash flows, discount rates, growth rates and other factors. Any changes in these estimates or assumptions could result in an impairment charge. The estimates, based on reasonable and supportable assumptions and projections, require management's subjective judgment. Depending on the assumptions and estimates used, the estimated results of the impairment tests can vary within a range of outcomes. In our 2022 annual impairment testing, based on our qualitative assessment, we concluded that goodwill is not impaired and we recorded a$4.1 million impairment of our indefinite-lived intangible asset. See Notes 2 and 5 of the Notes to the Consolidated Financial Statements for more information regarding our impairment testing. Retirement Benefits Our single-employer pension and other postretirement benefit costs and obligations are accounted for using actuarial valuations. We recognize the funded status of these plans - measured as the difference between plan assets, if funded, and the benefit obligation - on the balance sheet and recognize changes in the funded status that arise during the period but are not recognized as components of net periodic pension cost, within other comprehensive income/(loss), net of tax. The assets related to our funded pension plans are measured at fair value.
We also recognize the present value of liabilities associated with the withdrawal from multiemployer pension plans.
We consider accounting for retirement plans critical to our operations because management is required to make significant subjective judgments about a number of actuarial assumptions, which include discount rates and the long-term return on plan assets. These assumptions may have an effect on the amount and timing of future contributions. Depending on the assumptions and estimates used, the impact from our pension and other postretirement benefits could vary within a range of outcomes and could have a material effect on our Consolidated Financial Statements.
See "- Pensions and Other Postretirement Benefits" below for more information on our retirement benefits.
Revenue Recognition
Our contracts with customers sometimes include promises to transfer multiple
products and services to a customer. Determining whether products and services
are considered distinct performance obligations that should be accounted for
separately versus together may require significant judgment. We use an
observable price to determine the standalone selling price for separate
performance obligations if available or, when not available, an estimate that
maximizes the use of observable inputs and faithfully depicts the selling price
of the promised goods or services if we sold those goods or services separately
to a similar customer in similar circumstances.
THE NEW YORK TIMES COMPANY - P. 55
--------------------------------------------------------------------------------PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We maintain the Pension Plan, a frozen single-employer defined benefit pension plan. The Company and The NewsGuild ofNew York (the "Guild") jointly sponsor the Guild-Times Adjustable Pension Plan (the "APP"), which continues to accrue active benefits. Our pension liability also includes our multiemployer pension plan withdrawal obligations. Our liability for postretirement obligations includes our liability to provide health benefits to eligible retired employees.
The table below includes the liability for all of these plans.
December 31 , (In thousands)
2022
$ 284,460 $ 363,445 Total liabilities$ 933,780 $ 1,023,383 Percentage of pension and other postretirement liabilities to total liabilities 30.5 % 35.5 % Pension Benefits
Our Company-sponsored defined benefit pension plans include qualified plans (funded) as well as non-qualified plans (unfunded). These plans provide participating employees with retirement benefits in accordance with benefit formulas detailed in each plan. All of our non-qualified plans, which provide enhanced retirement benefits to select employees, are frozen, except for a foreign-based pension plan discussed below.
Our joint Company and Guild-sponsored plan is a qualified plan and is included in the table below.
We also have a foreign-based pension plan for certain non-U.S. employees (the "foreign plan"). The information for the foreign plan is combined with the information forU.S. non-qualified plans. The benefit obligation of the foreign plan is immaterial to our total benefit obligation.
The funded status of our qualified and non-qualified pension plans as of
December 31, 2022
Qualified Non-Qualified
(In thousands) Plans Plans All Plans
Pension obligation $ 1,076,412 $ 179,608 $ 1,256,020
Fair value of plan assets 1,145,933 - 1,145,933
Pension asset/(obligation), net $ 69,521 $ (179,608) $ (110,087) We made contributions of approximately
Pension expense is calculated using a number of actuarial assumptions, including an expected long-term rate of return on assets (for qualified plans) and a discount rate. Our methodology in selecting these actuarial assumptions is discussed below.
In determining the expected long-term rate of return on assets, we evaluated input from our investment consultants, actuaries and investment management firms, including our review of asset class return expectations, as well as long-term historical asset class returns. Projected returns by such consultants and economists are based on broad equity and bond indices. Our objective is to select an average rate of earnings expected on existing plan assets and expected contributions to the plan (less plan expenses to be incurred) during the year. The expected long-term rate of return determined on this basis was 3.75% at the beginning of 2022. Our plan assets had an average rate of return of approximately -21.93% in 2022 and an average annual return of approximately -2.36% over the three-year period 2020-2022. We regularly review our actual asset allocation and periodically rebalance our investments to meet our investment strategy. P. 56 -THE NEW YORK TIMES COMPANY -------------------------------------------------------------------------------- The market-related value of plan assets is multiplied by the expected long-term rate of return on assets to compute the expected return on plan assets, a component of net periodic pension cost. The market-related value of plan assets is a calculated value that recognizes changes in fair value over three years. Based on the composition of our assets at the end of the year, we estimated our 2023 expected long-term rate of return to be 5.60%. If we had decreased our expected long-term rate of return on our plan assets by 50 basis points in 2022, pension expense would have increased by approximately$7 million for our qualified pension plans. Our funding requirements would not have been materially affected. We determined our discount rate using aRyan ALM, Inc. Curve (the "Ryan Curve"). The Ryan Curve provides the bonds included in the curve and allows adjustments for certain outliers (i.e., bonds on "watch"). We believe the Ryan Curve allows us to calculate an appropriate discount rate. To determine our discount rate, we project a cash flow based on annual accrued benefits. For active participants, the benefits under the respective pension plans are projected to the date of termination. The projected plan cash flow is discounted to the measurement date, which is the last day of our fiscal year, using the annual spot rates provided in the Ryan Curve. A single discount rate is then computed so that the present value of the benefit cash flow equals the present value computed using the Ryan Curve rates.
The weighted-average discount rate determined on this basis was 5.66% for our
qualified plans and 5.64% for our non-qualified plans as of
If we had decreased the expected discount rate by 50 basis points for our qualified plans and our non-qualified plans in 2022, pension expense would have increased by approximately$0.6 million and our pension obligation would have increased by approximately$64 million as ofDecember 31, 2022 . We will continue to evaluate all of our actuarial assumptions, generally on an annual basis, and will adjust as necessary. Actual pension expense will depend on future investment performance, changes in future discount rates, the level of contributions we make and various other factors. We also recognize the present value of pension liabilities associated with the withdrawal from multiemployer pension plans. Our multiemployer pension plan withdrawal liability was approximately$74 million as ofDecember 31, 2022 . This liability represents the present value of the obligations related to complete and partial withdrawals that have already occurred as well as an estimate of future withdrawals that we considered probable and reasonably estimable. For those plans that have yet to provide us with a demand letter, the actual liability will not be known until they complete a final assessment of the withdrawal liability and issue a demand to us. Therefore, the estimate of our multiemployer pension plan liability will be adjusted as more information becomes available that allows us to refine our estimates.
See Note 9 of the Notes to the Consolidated Financial Statements for additional information regarding our pension plans.
Other Postretirement Benefits
We provide health benefits to certain primarily grandfathered retired employee groups (and their eligible dependents) who meet the definition of an eligible participant and certain age and service requirements, as outlined in the plan document. There is a de minimis liability for retiree health benefits for active employees. While we offer pre-age 65 retiree medical coverage to employees who meet certain retiree medical eligibility requirements, we do not provide post-age 65 retiree medical benefits for employees who retired on or afterMarch 1, 2009 . We accrue the costs of postretirement benefits during the employees' active years of service and our policy is to pay our portion of insurance premiums and claims from general corporate assets.
See Note 10 of the Notes to the Consolidated Financial Statements for additional information regarding our other postretirement benefits.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 of the Notes to the Consolidated Financial Statements for information regarding recent accounting pronouncements.
THE NEW YORK TIMES COMPANY - P. 57 --------------------------------------------------------------------------------
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