The New York Times Company — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 30, 2018 (52 weeks); fiscal 2017 had 53 weeks. The company operates one reportable segment, generating revenue mainly from subscriptions and advertising. Figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions where appropriate.
Business context and results
The company’s subscription-first strategy centers on paid digital news and lifestyle products alongside its print newspaper, advertising, and related businesses. It reported approximately 4.3 million paid subscriptions at year-end, including 3.36 million digital-only subscriptions.
| Metric | FY 2018 | FY 2017 | Change / context |
|---|---|---|---|
| Revenue | $1,748.6 million | $1,675.6 million | +4.4% reported; +6.2% excluding estimated impact of 2017’s extra week |
| Subscription revenue | $1,042.6 million | $1,008.4 million | +3.4% reported; +5.3% excluding extra week |
| Digital-only subscription revenue | $400.6 million | $340.3 million | +17.7% reported; +20.2% excluding extra week |
| Advertising revenue | $558.3 million | $558.5 million | Essentially flat reported; +1.7% excluding extra week |
| Other revenue | $147.8 million | $108.7 million | +36.0%, led by commercial printing, Wirecutter referrals, and building rentals |
| Operating profit | $190.2 million | $176.6 million | +7.7%; operating margin 10.9%, versus 10.5% |
| Adjusted operating profit (non-GAAP) | $262.6 million | $274.8 million | -4.4% |
| Net income attributable to NYT common stockholders | $125.7 million | $4.3 million | GAAP diluted EPS was $0.75 versus $0.03; 2017 included a large tax charge |
| Adjusted diluted EPS (non-GAAP) | $0.81 | $0.76 | +6.6% |
| Cash provided by operating activities | $157.1 million | $86.7 million | +81.2%, mainly reflecting lower pension contributions |
| Cash capital expenditures | $77.5 million | $84.8 million | Operating cash flow less cash capex was approximately $79.6 million |
Liquidity, debt, and balance sheet
- Cash, cash equivalents, and marketable securities totaled $826.4 million at year-end, including $54.2 million of securities collateralizing letters of credit.
- Total debt and capital lease obligations were $253.6 million; liquid funds exceeded these obligations by $572.8 million. The $250 million headquarters repurchase option was classified as current, with the obligation carried at $246.8 million net of discount.
- Current assets were $893.9 million and current liabilities were $673.3 million; the current ratio was 1.33, down from 1.80 in 2017.
- Capital expenditures were $77.5 million in cash payments. The company reported no material off-balance-sheet arrangements.
Material changes and Q4
- Digital-only subscriptions rose 27.1% to 3.36 million; news subscriptions increased 21.6% and standalone Crossword and Cooking subscriptions increased 56.7%.
- Print subscription revenue fell approximately 4%; home-delivery subscriptions declined approximately 6%, partly offset by a 6% increase in home-delivery prices.
- Print advertising revenue declined 6.5%, while digital advertising revenue grew 8.6%. Digital advertising growth came from direct sales and creative services, partly offset by lower programmatic revenue.
- Operating costs increased 4.4%, including higher promotion and marketing spending, labor, commercial-printing costs, and raw-material costs. Marketing expense rose to $156.3 million from $118.6 million.
- Fourth-quarter 2018 revenue was $502.7 million, operating profit $74.7 million, and net income attributable to common stockholders $55.2 million. The comparable 2017 quarter included 14 weeks, versus 13 weeks in 2018, and a $68.7 million tax charge; quarterly comparisons are therefore affected by both period length and unusual tax items.
Outlook, risks, and unusual items
- Outlook: Management said it expected to continue substantial investment in journalism, digital products, audience engagement, and brand marketing in 2019. It provided no specific revenue or earnings guidance in the supplied filing text.
- Liquidity and planned uses: Management expected available liquidity and operating cash flow to meet financing needs over the next 12 months. The company gave notice of its intent to exercise the $250 million headquarters repurchase option in Q4 2019, expecting to fund it from existing cash and marketable securities. It also expected approximately $9 million of 2019 qualified pension contributions and a further $5 million to $8 million Madison liquidation distribution.
- Capital returns: The board raised the quarterly dividend from $0.04 to $0.05 per share in February 2019. The existing share-repurchase authorization had $16.2 million remaining; no shares were repurchased in Q4 2018.
- Retirement obligations: Qualified defined-benefit plans were underfunded by approximately $81 million. The company also disclosed $223 million of non-qualified pension obligations and approximately $97 million of multiemployer pension withdrawal liabilities. Actual future contributions and withdrawal assessments may differ from estimates.
- Unusual items: 2018 included $15.3 million of non-operating retirement costs, a $6.7 million severance charge, $4.5 million of headquarters redesign costs, a $11.3 million Madison-related gain, and a $4.9 million multiemployer pension liability adjustment. Adjusted results are non-GAAP and exclude specified items.
- Key risks: intense competition for readers and advertising; continued print circulation and advertising declines; dependence on digital subscription growth; digital advertising pricing and platform dependence; fixed costs and union labor constraints; pension and multiemployer plan exposure; cybersecurity and privacy risks; newsprint supply and cost volatility; and litigation and regulatory uncertainty.
- Contingencies: In a dispute over a partial multiemployer pension withdrawal, the company had recorded a $3.2 million liability; management said potential additional loss could range from zero to approximately $11 million. Other pending legal matters could materially affect an individual period, although management did not expect their ultimate resolution to materially affect financial position.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Important facts for investors to verify
- Whether digital subscriber growth and higher digital subscription revenue can continue to offset declining print subscriptions and print advertising.
- How sustainable reported profitability is: GAAP operating profit increased, but adjusted operating profit declined, and the filing cites higher marketing and operating costs.
- The timing, financing, and balance-sheet impact of the planned $250 million headquarters repurchase, including the associated sale-leaseback financing terms.
- Actual pension funding requirements, investment performance, and the final amount of multiemployer withdrawal liabilities and related litigation exposure.
- Whether the 2019 dividend increase and planned investments remain consistent with cash generation and the company’s stated liquidity priorities.