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OFFON

THE NEW YORK TIMES COMPANY

(NYT)
  Report
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NEW YORK TIMES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/05/2021 | 03:10pm EDT
EXECUTIVE OVERVIEW
We are a global media organization that includes digital and print products and
related businesses. We have one reportable segment with businesses that include
our core news product and other interest-specific products, and related content
and services.
We generate revenues principally from subscriptions and advertising. In
addition, we generate other revenues primarily consisting of revenues from
licensing, Wirecutter affiliate referrals, the leasing of floors in our New York
headquarters building located at 620 Eighth Avenue, New York, New York (the
"Company Headquarters"), commercial printing, retail commerce, television and
film and our live events business.
Our main operating costs are employee-related costs.
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 or multiemployer pension plan withdrawal 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 measures, see "Non-Operating Items-Non-GAAP
Financial Measurements."
Financial Highlights
Diluted earnings per share from continuing operations were $0.24 and $0.20 for
the first quarters of 2021 and 2020, respectively. 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 $0.26 and $0.17 for the first quarters of 2021 and 2020,
respectively.
The Company had an operating profit of $51.7 million in the first quarter of
2021, compared with $27.3 million in the first quarter of 2020. The increase was
principally driven by higher digital-only subscription revenues and, to a lesser
extent, higher digital advertising revenues, which more than offset lower print
advertising, print subscription and other revenues. Operating profit before
depreciation, amortization, severance, multiemployer pension plan withdrawal
costs and special items discussed below (or "adjusted operating profit," a
non-GAAP measure) increased to $68.1 million in the first quarter of 2021 from
$44.3 million in the first quarter of 2020, primarily as a result of the factors
identified above.
Total revenues increased 6.6% to $473.0 million in the first quarter of 2021
from $443.6 million in the first quarter of 2020, primarily driven by an
increase in subscription revenue. The increase was partially offset by lower
advertising and other revenues.
Subscription revenues increased 15.3% in the first quarter of 2021 compared with
the same prior-year period, primarily due to year-over-year growth of 39.8% in
the number of subscriptions to the Company's digital-only products. Paid
digital-only subscriptions totaled approximately 6,991,000 at the end of the
first quarter of 2021, a net increase of 301,000 subscriptions compared with the
end of the fourth quarter of 2020 and a net increase of 1,990,000 compared with
the end of the first quarter of 2020. Of the 301,000 total net additions,
167,000 came from the Company's digital news product, while 134,000 came from
the Company's Cooking, Games and Audm products. We experienced significant
growth in the number of subscriptions to our digital-only products in 2020, and
we do not expect the 2020 growth rate to be sustainable or indicative of results
for future periods. In February and March of this year, we began to see declines
in the rate of net subscription additions for our digital-only products, when
compared with the same months in 2020, and we expect net subscription additions
to continue at a moderated pace in the second quarter. We expect total net
subscription additions for the 2021 year to be in the range of the number of
total net subscription additions in 2019.
Total advertising revenues decreased 8.5% in the first quarter of 2021 compared
with the same prior-year period, as declines in print advertising were partially
offset by increases in digital advertising revenues. Digital advertising
revenues increased 16.3% compared with the prior-year period, reflecting higher
direct-sold advertising, including traditional display and podcasts, as well as
the impact of the comparison to weak digital advertising revenues in the first
quarter of 2020 caused by reduced advertiser spending during the start of the
Covid-19 pandemic. Print advertising revenues declined 31.6% compared with the
prior-year period, reflecting continued reduced spending on print advertising by
businesses negatively impacted by the Covid-19 pandemic, which further
accelerated secular trends. We expect reduced advertiser spending by these
businesses, along with secular trends, to continue to adversely affect our print
advertising revenues. Some of our print advertising revenues may not return to
pre-pandemic levels once economic conditions improve.
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Operating costs increased in the first quarter of 2021 to $421.4 million from
$416.3 million in the first quarter of 2020, largely due to an increase in cost
of revenue, general and administrative costs and product development costs,
partially offset by a decrease in sales and marketing costs. Operating costs
before depreciation, amortization, severance and multiemployer pension plan
withdrawal costs (or "adjusted operating costs," a non-GAAP measure) increased
in the first quarter of 2021 to $404.9 million from $399.3 million in the first
quarter of 2020, primarily as a result of the factors identified above.
At this time, the full impact that the Covid-19 pandemic will have on our
business, operations and financial results is uncertain. The extent to which the
pandemic will continue to impact us will depend on numerous evolving factors and
future developments, including the scope and duration of the pandemic (including
the extent of any resurgence); the effect of ongoing vaccination efforts; the
impact of the pandemic on economic conditions and the companies with which we do
business; governmental, business and other actions; the status of travel
restrictions; and the status of social distancing measures, among many other
factors. We will continue to actively monitor the situation and may take further
actions that alter our business operations as may be required by federal, state,
local or foreign authorities, or that we determine are appropriate. Please see
"Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year ended
December 27, 2020, for more information.

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RESULTS OF OPERATIONS
The following table presents our consolidated financial results:
                                                                   For the Quarters Ended
(In thousands)                                                March 28, 2021           March 29, 2020                  % Change
Revenues
Subscription                                            $      329,084             $       285,434                      15.3  %
Advertising                                                     97,116                     106,137                      (8.5) %
Other                                                           46,845                      52,065                     (10.0) %
Total revenues                                                 473,045                     443,636                       6.6  %
Operating costs
Cost of revenue (excluding depreciation and
amortization)                                                  250,997                     243,484                       3.1  %
Sales and marketing                                             60,153                         73,784                  (18.5) %
Product development                                             38,943                      31,002                      25.6  %
General and administrative                                      56,577                      52,861                       7.0  %
Depreciation and amortization                                   14,717                      15,185                      (3.1) %
Total operating costs                                          421,387                     416,316                       1.2  %

Operating profit                                                51,658                      27,320                      89.1  %
Other components of net periodic benefit costs                   2,599                       2,314                      12.3  %

Interest income and other, net                                   1,511                      13,854                     (89.1) %
Income from continuing operations before income
taxes                                                           50,570                      38,860                      30.1  %
Income tax expense                                               9,461                       6,006                      57.5  %

Net income                                                      41,109                      32,854                      25.1  %

Net income attributable to The New York Times
Company common stockholders                             $       41,109             $        32,854                      25.1  %



                                       20
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Revenues

Subscription Revenues
Subscription revenues consist of revenues from subscriptions to our digital and
print products (which include our news product, as well as our Games, Cooking
and Audm 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 15.3% in the first quarter of 2021 compared with
the same prior-year period, primarily due to year-over-year growth of 39.8% in
the number of subscriptions to the Company's digital-only products, as well as a
benefit from subscriptions graduating to higher prices from introductory
promotional pricing. Subscription revenues also benefited from an increase in
revenue from our domestic home delivery print subscription products. The
increases were partially offset by a decrease in revenue from single-copy and
bulk sales as a result of business closures, increased levels of remote working
and reductions in travel due to the Covid-19 pandemic.
Paid digital-only subscriptions totaled approximately 6,991,000 at the end of
the first quarter of 2021, a net increase of 301,000 subscriptions compared with
the end of the fourth quarter of 2020 and a net increase of 1,990,000 compared
with the end of the first quarter of 2020. We experienced significant growth in
the number of subscriptions to our digital-only products in 2020, and we do not
expect the 2020 growth rate to be sustainable or indicative of results for
future periods. In February and March of this year, we began to see declines in
the rate of net subscription additions for our digital-only products, when
compared with the same months in 2020, and we expect net subscription additions
to continue at a moderated pace in the second quarter. We expect total net
subscription additions for the 2021 year to be in the range of the number of
total net subscription additions in 2019.
Digital-only news product subscriptions totaled approximately 5,257,000 at the
end of the first quarter of 2021, a 167,000 net increase compared with the end
of the fourth quarter of 2020 and a 1,360,000 increase compared with the end of
the first quarter of 2020. Other product subscriptions (which include our Games,
Cooking and Audm products) totaled approximately 1,734,000 at the end of the
first quarter of 2021, an increase of 134,000 subscriptions compared with the
end of the fourth quarter of 2020 and an increase of 630,000 subscriptions
compared with the end of the first quarter of 2020.
Print domestic home delivery subscriptions totaled approximately 825,000 at the
end of the first quarter of 2021, relatively flat compared with the end of the
fourth quarter of 2020 and a net decrease of 15,000 compared with the end of the
first quarter of 2020.
The following table summarizes digital and print subscription revenues for the
first quarters of 2021 and 2020:
                                                             For the Quarters Ended
(In thousands)                                          March 28, 2021           March 29, 2020                  % Change
Digital-only subscription revenues:
News product subscription revenues(1)             $      161,287             $       118,958                      35.6  %
Other product subscription revenues(2)                    18,312                      11,052                      65.7  %
  Subtotal digital-only subscription
revenues                                                 179,599                     130,010                      38.1  %
Print subscription revenues:
Domestic home delivery subscription
revenues(3)                                              134,395                     133,736                       0.5  %
Single-copy, NYT International and other
subscription revenues(4)                                  15,090                      21,688                     (30.4) %
  Subtotal print subscription revenues                   149,485                     155,424                      (3.8) %
Total subscription revenues                       $      329,084             $       285,434                      15.3  %
(1) Includes revenues from subscriptions to the Company's news product. News product subscription packages that include
access to the Company's Games and Cooking products are also included in this category.
(2) Includes revenues from standalone subscriptions to the Company's Games, Cooking and Audm products.
(3) Includes free access to some of the Company's digital products.
(4) NYT International is the international edition of our print newspaper.


                                       21
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The following table summarizes digital and print subscriptions as of the end of the first quarters of 2021 and 2020:

                                                                       Quarters Ended
(In thousands)                                                March 28, 2021            March 29, 2020                   % Change
Digital-only subscriptions:
News product subscriptions(1)                                   5,257                         3,897                       34.9  %
Other product subscriptions(2)                                  1,734                         1,104                       57.1  %
  Subtotal digital-only subscriptions                           6,991                         5,001                       39.8  %
Print subscriptions                                               825                           840                       (1.8) %
Total subscriptions                                             7,816                         5,841                       33.8  %

(1) Includes subscriptions to the Company's news product. News product subscription packages that include access to the Company's Games and Cooking products are also included in this category. (2) Includes standalone subscriptions to the Company's Games, Cooking and Audm products.

                                       22
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  We believe that the significant growth over the last several years in
subscriptions to our products demonstrates the success of our
"subscription-first" strategy and the willingness of our readers to pay for
high-quality journalism. The following charts illustrate the growth in net
digital-only subscription additions and corresponding subscription revenues as
well as the relative stability of our print domestic home delivery subscription
products since the launch of the digital pay model in 2011.
                     [[Image Removed: nyt-20210328_g1.jpg]]

                     [[Image Removed: nyt-20210328_g2.jpg]]
(1) Amounts may not add due to rounding.
(2) Print domestic home delivery subscriptions include free access to some of
our digital products.
(3) Print Other includes single-copy, NYT International and other subscription
revenues.
Note: Revenues for 2012 and 2017 include the impact of an additional week.
                                       23
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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, 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), 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. Print
advertising includes revenue from column-inch ads and classified advertising,
including line-ads as well as preprinted advertising, also known as freestanding
inserts.
The following table summarizes digital and print advertising revenues for the
first quarters of 2021 and 2020:
                                      For the Quarters Ended
(In thousands)            March 28, 2021       March 29, 2020     % Change
Advertising revenues:
Digital                $    59,496          $        51,158         16.3  %
Print                       37,620                   54,979        (31.6) %
Total advertising      $    97,116          $       106,137         (8.5) %


Digital advertising revenues, which represented 61.3% of total advertising
revenues in the first quarter of 2021, increased $8.3 million or 16.3%, to $59.5
million compared with $51.2 million in the same prior-year period. The increase
was primarily driven by higher direct-sold advertising, including traditional
display and podcasts, as well as the impact of the comparison to weak digital
advertising revenues in the prior year period caused by reduced advertiser
spending during the start of the Covid-19 pandemic. Core digital advertising
revenue increased $9.5 million due to growth in direct-sold display advertising
revenue and podcast advertising revenues. Direct-sold display impressions
declined 21%, while the average rate grew 33%. Other digital advertising revenue
decreased $1.2 million, primarily as a result of lower creative services revenue
resulting from the closure of our Fake Love digital marketing agency in 2020, as
well as an 8.8% decrease in open-market programmatic advertising revenue, as
impressions decreased by 32%, while the average rate increased 34%.
Print advertising revenues, which represented 38.7% of total advertising
revenues in the first quarter of 2021, declined $17.4 million or 31.6% to $37.6
million compared with $55.0 million in the same prior-year period. The decline
was primarily in the entertainment, travel and luxury categories, and reflected
continued reduced spending on print advertising by businesses negatively
impacted by the Covid-19 pandemic, which further accelerated secular trends. We
expect reduced advertising spending by these businesses, along with secular
trends, to continue to adversely affect our print advertising revenues. Some of
our print advertising revenues may not return to pre-pandemic levels once
economic conditions improve.
Other Revenues
Other revenues primarily consist of revenues from licensing, Wirecutter
affiliate referrals, the leasing of floors in the Company Headquarters,
commercial printing, retail commerce, television and film and our live events
business.
Other revenues decreased 10.0% in the first quarter of 2021, compared with the
same prior-year period, primarily as a result of fewer television episodes as
well as lower revenues from live events, commercial printing and building rental
revenue. These declines were partially offset by higher Wirecutter affiliate
referral revenues.
Building rental revenue from the leasing of floors in the Company Headquarters
totaled $6.2 million and $7.8 million in the first quarters of 2021 and 2020,
respectively.
                                       24
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Operating Costs
Operating costs were as follows:
                                                              For the Quarters Ended
(In thousands)                                           March 28, 2021           March 29, 2020                  % Change
Operating costs:
Cost of revenue (excluding depreciation and
amortization)                                      $      250,997             $       243,484                       3.1  %
Sales and marketing                                        60,153                      73,784                     (18.5) %
Product development                                        38,943                      31,002                      25.6  %
General and administrative                                 56,577                      52,861                       7.0  %
Depreciation and amortization                              14,717                      15,185                      (3.1) %
Total operating costs                              $      421,387             $       416,316                       1.2  %


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, which include all
cloud and cloud-related costs as well as compensation for employees that enhance
and maintain our platforms.
Cost of revenue increased in the first quarter of 2021 by $7.5 million compared
with the first quarter of 2020, largely due to higher journalism costs of $9.2
million, higher subscriber servicing costs of $4.7 million, and higher digital
content delivery costs of $3.9 million. The increases were partially offset by
lower print production and distribution costs of $9.2 million. The increase in
journalism costs was largely driven by growth in the number of employees in the
newsroom, Games, Cooking and audio, costs in connection with audio content and a
higher incentive compensation accrual. This cost growth was partially offset by
lower content creation costs as a result of fewer television episodes and lower
travel and entertainment costs (due largely to the Covid-19 pandemic). The
increase in subscriber servicing costs was primarily due to higher credit card
processing fees and third-party commissions due to increased subscriptions.
Digital content delivery costs increased due to a growth in the number of
employees and higher cloud storage costs. The decrease in print production and
distribution costs was largely due to lower newsprint consumption and pricing,
as well as lower outside printing and distribution 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 in the first quarter of 2021 decreased by $13.6
million compared with the first quarter of 2020, primarily due to lower
subscription-related media expenses and advertising sales costs.
Media expenses, a component of sales and marketing costs that represents the
cost to promote our subscription business, decreased to $35.9 million in the
first quarter of 2021 from $45.4 million in the first quarter of 2020 as the
Company reduced its marketing spend.
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.
Product development costs in the first quarter of 2021 increased by $7.9 million
compared with the first quarter of 2020, largely due to growth in the number of
digital product development employees in connection with digital subscription
strategic initiatives as well as a higher incentive compensation accrual.
General and Administrative Costs
General and administrative costs includes general management, corporate
enterprise technology, building operations, unallocated overhead costs,
severance and multiemployer pension plan withdrawal costs.
General and administrative costs in the first quarter of 2021 increased by $3.7
million compared with the first quarter of 2020, primarily due to a higher
incentive compensation accrual and growth in the number of employees.

                                       25
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Depreciation and Amortization
Depreciation and amortization costs in the first quarter of 2021 remained
relatively flat compared with the same prior-year period.
Other Items
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for
additional information regarding other items.
NON-OPERATING ITEMS
Other Components of Net Periodic Benefit Costs
See Note 9 of the Notes to the Condensed Consolidated Financial Statements for
information regarding other components of net periodic benefit costs.
Interest Income and other, net
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for
information regarding interest income/(expense) and other, net.
Income Taxes
See Note 10 of the Notes to the Condensed Consolidated Financial Statements for
information regarding income taxes.
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, multiemployer
pension plan withdrawal costs and special items (or adjusted operating profit);
and
•operating costs before depreciation, amortization, severance and multiemployer
pension plan withdrawal costs (or adjusted operating costs).
There were no special items in the first quarter of 2021.
The special item in the first quarter of 2020 consisted of:
•a $10.1 million gain ($7.4 million after tax or $.04 per share) related to a
non-marketable equity investment transaction. The gain is comprised of $2.5
million realized gain due to the partial sale of the investment and a $7.6
million unrealized gain due to the mark to market of the remaining investment,
and is included in Interest income and other, net in our Condensed Consolidated
Statements of Operations.
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
the Company's period-to-period performance because it eliminates items that the
Company does not consider to be indicative of earnings from ongoing operating
activities. Adjusted operating profit is useful in evaluating the ongoing
performance of the Company's 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 multiemployer pension plan withdrawal costs. Total
operating costs, excluding these items, provide investors with helpful
supplemental information on the Company's underlying operating costs that is
used by management in its financial and operational decision-making.
Management considers special items, which may include impairment charges,
pension settlement charges and other items that arise from time to time, to be
outside the ordinary course of our operations. Management believes that
excluding these items provides a better understanding of the underlying trends
in the Company's operating performance and allows more accurate comparisons of
the Company's operating results to historical performance. In addition,
management excludes
                                       26
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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.
Included in our non-GAAP financial measures are non-operating retirement costs
which 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.
Reconciliations of these non-GAAP financial measures to the most directly
comparable GAAP measures are set out in the tables below.
Reconciliation of diluted earnings per share from continuing operations excluding severance, non-operating retirement costs
and special items (or adjusted diluted earnings per share from continuing operations)
                                                                  For the Quarters Ended
                                                           March 28, 2021           March 29, 2020                  % Change
Diluted earnings per share from continuing
operations                                              $         0.24          $          0.20                      20.0  %

Add:


Non-operating retirement costs:
Multiemployer pension plan withdrawal costs                       0.01                     0.01                         -
Other components of net periodic benefit costs                    0.02                     0.01                            *

Special item:


Gain from non-marketable equity security                             -                    (0.06)                           *
Income tax expense of adjustments                                (0.01)                    0.01                            *
Adjusted diluted earnings per share from
continuing operations(1)                                $         0.26          $          0.17                      52.9  %


(1)Amounts may not add due to rounding.
* Represents a change equal to or in excess of 100% or not meaningful
Reconciliation of operating profit before depreciation & amortization, severance, multiemployer pension plan withdrawal
costs and special items (or adjusted operating profit)
                                                              For the Quarters Ended
(In thousands)                                            March 28, 2021           March 29, 2020                  % Change
Operating profit                                  $       51,658               $        27,320                      89.1  %
Add:
Depreciation & amortization                               14,717                        15,185                      (3.1) %
Severance                                                    406                           370                       9.7  %
Multiemployer pension plan withdrawal costs                1,326                         1,423                      (6.8) %

Adjusted operating profit                         $       68,107               $        44,298                      53.7  %

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

                                                             For the Quarters Ended
(In thousands)                                          March 28, 2021           March 29, 2020                  % Change
Operating costs                                   $      421,387             $       416,316                       1.2  %
Less:
Depreciation & amortization                               14,717                      15,185                      (3.1) %
Severance                                                    406                         370                       9.7
Multiemployer pension plan withdrawal costs                1,326                       1,423                      (6.8) %
Adjusted operating costs                          $      404,938             $       399,338                       1.4  %


                                       27
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LIQUIDITY AND CAPITAL RESOURCES
We believe our cash balance and cash provided by operations, in combination with
other sources of cash, will be sufficient to meet our financing needs over the
next twelve months. Although there is uncertainty related to the anticipated
continued effect of the Covid-19 pandemic on our business (as referenced above
and in "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year
ended December 27, 2020), given the strength of our balance sheet and based on
the information currently available to us, we do not expect the impact of the
pandemic to have a material impact on our liquidity position. As of March 28,
2021, we had cash, cash equivalents and short- and long-term marketable
securities of $890.7 million. Our cash and marketable securities balances
between the end of 2020 and March 28, 2021, increased, primarily due to cash
proceeds from operating activities, partially offset by share-based compensation
tax withholding, dividend payments and capital expenditures.
We have paid quarterly dividends on the Class A and Class B Common Stock each
quarter since late 2013. In February 2021, the Board of Directors approved an
increase in the quarterly dividend to $0.07 per share, which was paid in April
2021. We currently expect to continue to pay comparable cash dividends in the
future, although changes in our dividends will be considered by our Board of
Directors in light of our earnings, capital requirements, financial condition
and other factors considered relevant.
Capital Resources
Sources and Uses of Cash
Cash flows provided by/(used in) by category were as follows:
                                   For the Quarters Ended
(In thousands)                 March 28, 2021       March 29, 2020      % Change
Operating activities       $     32,929          $        38,851        (15.2) %
Investing activities       $    (26,208)         $       (33,423)       (21.6) %
Financing activities       $    (18,108)         $       (18,845)        (3.9) %


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, pension and other benefits, raw materials, marketing
expenses and income taxes.
Net cash provided by operating activities decreased in the first quarter of 2021
compared with the same prior-year period primarily due to lower cash collections
from accounts receivable, increase in other assets and lower cash payments
received from prepaid subscriptions, partially offset by lower cash payments
made to settle accounts payable, accrued payroll and other liabilities.
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 the first quarter of 2021 was primarily
related to $21.8 million in net purchases of marketable securities and $6.4
million in capital expenditures payments.
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 finance lease
obligations and share-based compensation tax withholding.
Net cash used in financing activities in the first quarter of 2021 was primarily
related to share-based compensation tax withholding payments of $10.5 million
and dividend payments of $10.1 million.
                                       28
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Restricted Cash
We were required to maintain $15.0 million of restricted cash as of March 28,
2021, and $15.9 million as of December 27, 2020, substantially all of which is
set aside to collateralize workers' compensation obligations.
Capital Expenditures
Capital expenditures totaled approximately $7 million and $12 million in the
first quarter of 2021 and 2020, respectively. Expenditures in the first quarter
of 2021 were primarily driven by improvements at our Company Headquarters and at
our College Point, N.Y., printing and distribution facility, and investments in
technology. Capital expenditures decreased in 2021 as the build-out of
additional office space in Long Island City, N.Y., was completed in 2020. The
cash payments related to capital expenditures totaled approximately $6 million
and $15 million in the first quarter of 2021 and 2020, respectively.
Third-Party Financing
In September 2019, we entered into a $250 million five-year unsecured credit
facility (the "Credit Facility"). Certain of our domestic subsidiaries have
guaranteed our obligations under the Credit Facility. As of March 28, 2021,
there were no outstanding borrowings under the Credit Facility and the Company
was in compliance with the financial covenants contained in the Credit Facility.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are detailed in our Annual Report on Form 10-K
for the year ended December 27, 2020. Other than as described in Note 2 of the
Notes to the Condensed Consolidated Financial Statements, as of March 28, 2021,
our critical accounting policies have not changed from December 27, 2020.
CONTRACTUAL OBLIGATIONS & OFF-BALANCE SHEET ARRANGEMENTS
Our contractual obligations and off-balance sheet arrangements are detailed in
our Annual Report on Form 10-K for the year ended December 27, 2020. As of
March 28, 2021, our contractual obligations and off-balance sheet arrangements
have not changed materially from December 27, 2020.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the section titled "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Terms such as "aim," "anticipate," "believe,"
"confidence," "contemplate," "continue," "conviction," "could," "drive,"
"estimate," "expect," "forecast," "future," "goal," "guidance," "intend,"
"likely," "may," "might," "objective," "opportunity," "optimistic," "outlook,"
"plan," "position," "potential," "predict," "project," "seek," "should,"
"strategy," "target," "will," "would" or similar statements or variations of
such words and other similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such terms. Forward-looking statements are based upon our current expectations,
estimates and assumptions and involve risks and uncertainties that change over
time; actual results could differ materially from those predicted by such
forward-looking statements. These risks and uncertainties include, but are not
limited to: the impact of the Covid-19 pandemic; significant competition in all
aspects of our business; our ability to improve and scale our technical
infrastructure and respond and adapt to changes in technology and consumer
behavior; our ability to continue to retain and grow our subscriber base;
numerous factors that affect our advertising revenues, including economic
conditions, market dynamics, audience fragmentation, evolving digital
advertising trends and the evolution of our strategy; damage to our brand or
reputation; economic, geopolitical and other risks associated with the
international scope of our business and foreign operations; our ability to
attract and maintain a highly skilled and diverse workforce; adverse results
from litigation or governmental investigations; the risks and challenges
associated with investments we make in new and existing products and services;
risks associated with acquisitions, divestitures, investments and other
transactions; the effects of the fixed cost nature of significant portions of
our expenses; the effects of the size and volatility of our pension plan
obligations; liabilities that may result from our participation in multiemployer
pension plans; the impact of labor negotiations and agreements; increases in the
price of newsprint or significant disruptions in our newsprint supply chain or
newspaper printing and distribution channels; security breaches and other
network and information systems disruptions; our ability to comply with laws and
regulations, including with respect to privacy, data protection and consumer
marketing practices; payment processing risk; defects, delays or interruptions
in the cloud-based hosting services we utilize; our ability to protect our
intellectual property; claims of intellectual property infringement that we have
been, and may be in the future, be subject to; the effects of restrictions on
our operations as a result of the terms of our credit facility; our future
access to capital markets and other financing options; and the concentration of
control of our company due to our dual-class capital structure.
More information regarding these risks and uncertainties and other important
factors that could cause actual results to differ materially from those in the
forward-looking statements is set forth in "Item 1A - Risk Factors" in our
Annual Report
                                       29
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on Form 10-K for the year ended December 27, 2020 and "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
this Form 10-Q. Investors are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date they are made. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our Annual Report on Form 10-K for the year ended December 27, 2020, details our
disclosures about market risk. As of March 28, 2021, there were no material
changes in our market risks from December 27, 2020.
                                       30

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