The New York Times Company — 2015 Form 10-K
Business context and reporting period. The company is a global news and media business with one reportable segment. Its principal revenues come from circulation and advertising across print, web and mobile products. The fiscal year ended December 27, 2015 and comprised 52 weeks; the filing is an annual report, not a standalone Q4 filing. The quarterly figures below are for the 13 weeks ended December 27, 2015.
Financial results and liquidity
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $1.579 billion | $1.589 billion |
| Operating profit | $136.6 million | $91.9 million |
| Operating margin | 8.6% | 5.8% |
| Net income attributable to NYT common stockholders | $63.2 million | $33.3 million |
| Diluted EPS from continuing operations | $0.38 | $0.21 |
| Adjusted diluted EPS (non-GAAP) | $0.71 | $0.43 |
| Cash from operating activities | $175.3 million | $80.5 million |
| Cash, cash equivalents and marketable securities | $904.6 million | $981.2 million |
| Debt and capital lease obligations | $431.2 million | $650.1 million |
FY 2015 adjusted operating profit, a non-GAAP measure, was $289.0 million versus $256.3 million; adjusted operating margin was approximately 18.3% versus 16.1%. The company reported a $473.3 million excess of cash and marketable securities over debt and capital lease obligations. Current assets were 1.53 times current liabilities, down from 1.91.
Q4 snapshot: Revenue was $444.7 million, essentially unchanged from Q4 2014. Operating profit was $87.7 million versus $62.4 million, and net income attributable to common stockholders was $51.7 million versus $34.9 million.
Material changes versus the prior comparable period
- Revenue declined 0.6% for the year: circulation rose 1.0% to $845.5 million, other revenue rose 6.3% to $95.0 million, and advertising fell 3.6% to $638.7 million.
- Digital-only subscription, e-reader and replica-edition revenue increased 13.8% to $192.7 million. Paid digital-only subscribers reached approximately 1.094 million at year-end, up about 20%.
- Print advertising revenue declined 8.0%; digital advertising increased 8.2%. Print represented 69% of total advertising revenue in 2015.
- Operating costs declined 6.1% to $1.393 billion, reflecting lower severance, depreciation and amortization, raw-material costs, and distribution costs. Operating profit improved despite a higher pension settlement charge.
- Interest expense, net, declined 27.3% to $39.1 million. Operating cash flow rose to $175.3 million, while cash and marketable securities decreased, mainly due to debt repayment and share repurchases.
Outlook, management commentary, risks and unusual items
- Management gave no quantified revenue or earnings guidance. It said it planned to invest in digital revenue growth in 2016 while continuing cost management, product innovation and efforts to expand reader engagement.
- The company expected to repay approximately $189 million of 6.625% senior notes at maturity in December 2016 and said available cash, operating cash flow and other sources should cover financing needs for the next 12 months. It also expected approximately $8 million in qualified pension contributions in 2016.
- A change in the method for calculating benefit-plan service and interest costs was expected to reduce 2016 costs by approximately $19 million, assuming no interim remeasurement. This is a forward-looking estimate, not a 2015 result.
- FY 2015 included a $40.3 million pension settlement charge, $9.1 million of multiemployer pension withdrawal expense and $7.0 million of severance. Management’s adjusted measures exclude specified items; they are non-GAAP and should be considered alongside GAAP results.
- Qualified defined-benefit pension plans were underfunded by approximately $272.6 million; the broader reported pension and postretirement liability was $714.8 million. The estimated multiemployer withdrawal liability was approximately $124 million and may change as plans complete assessments.
- The company disputed a pension fund’s approximately $34 million partial-withdrawal assessment; arbitration was pending. The company had paid $11.6 million under the demand letters and had not recorded a loss contingency, saying a loss was not considered probable.
- Key business risks include ongoing declines in print advertising and print circulation, lower digital-advertising rates and margins, competition for subscribers and audience, fixed costs, labor negotiations, pension funding volatility, and cybersecurity and privacy risks. The 6.625% notes contain covenants that restrict certain transactions, including dividends.
- The company paid $0.16 per share in dividends for 2015 and said it expected comparable dividends to continue, subject to financial conditions and debt restrictions. It repurchased $69.3 million of shares during 2015.
Most important facts for investors to verify
- Whether digital subscription growth can continue to offset print circulation declines and whether digital advertising gains can compensate for falling print advertising.
- The assumptions and future cash-funding implications behind pension obligations, including the multiemployer withdrawal liability and the disputed fund assessment.
- The company’s ability to repay the 6.625% notes at December 2016 maturity while sustaining planned investment, dividends and repurchases.
- How much of the operating-profit and EPS improvement reflects durable cost reductions versus pension, severance and other adjustments; review GAAP results alongside the company’s non-GAAP reconciliations.