The New York Times Company Reports Preliminary Third-Quarter Results

Business Wire, Oct 23, 2008

NEW YORK -- The New York Times Company announced today a preliminary third-quarter loss per share from continuing operations of $.01, including $.07 per share for severance costs, compared with $.10 earnings per share (EPS) in the third quarter last year, which included $.02 per share for severance costs.

Preliminary third-quarter operating profit decreased to $10.0 million from $28.1 million in the third quarter of 2007, while preliminary operating profit excluding depreciation and amortization decreased to $43.9 million from $79.9 million in the third quarter last year.

Preliminary results do not include an anticipated non-cash charge for impairment of goodwill and long-lived assets. Due to the continued softening of business conditions driven by the secular forces affecting the newspaper industry, the Company is testing the assets of its New England Media Group for impairment in the 2008 third quarter. While the results have not yet been finalized, the Company currently estimates a non-cash impairment charge of $100 to $150 million. The Company will record the charge in its financial statements when it files its third-quarter Form 10-Q with the Securities and Exchange Commission. The charge will affect EPS for the third quarter but will not affect the Company's operating cash flow.

"The impairment charge reflects the decrease in print advertising revenues stemming from the secular changes in the media industry," said Janet L. Robinson, president and CEO. "It does not, however, affect our cash flow or our long-term strategy of becoming an increasingly digital organization.

"The decline in print advertising revenues this quarter accelerated as the economy slowed. The U.S. presidential election and the turmoil in the world's financial markets have again demonstrated the need for the high-quality journalism we provide in print and online. The continued strength of our brands is evident in our ability to raise home-delivery and newsstand prices, which resulted in an increase in our circulation revenues. It is also reflected in the strong growth in traffic to our Web sites, which increased 15 percent in September. Online advertising grew 10.2 percent in the quarter, in part due to the introduction of new ad formats. In total, our online revenues now account for 12.4 percent of the Company's revenues.

"As we continued our drive to reduce expenses, operating costs decreased 6.8 percent compared with the same quarter last year, despite a more than 20 percent increase in the price of newsprint. Given the adverse economic conditions, we will continue our strict cost discipline.

"In this difficult environment, we are reviewing our uses of cash. We have reduced our estimate for capital expenditures in 2008. Next year we expect they will decline from their 2008 level and be approximately $80 million. In addition, our Board of Directors plans to review our dividend policy before the end of this year to determine what is most prudent in light of the overall market conditions.

"As part of our analysis of our uses of cash, we are evaluating future financing arrangements. Based on the conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature. Going forward, we plan to continue to explore opportunities to reduce our debt levels.

"As we move into the fourth quarter, our visibility on advertising revenues is limited. To date in October, print advertising revenue declines are similar to those in September but we are seeing slowing in digital advertising revenues, mainly because of less display advertising. We remain committed to executing our strategy of developing new revenue streams for both our print and online products, reducing costs, making full use of our R & D capability and rebalancing our portfolio of businesses."

Third-Quarter Results

Comparisons

All comparisons are for the third quarter of 2008 to the third quarter of 2007. The results of the Broadcast Media Group, which was sold in the second quarter of 2007, are reported within discontinued operations. Net income from discontinued operations of $8.6 million ($.06 per share) in the third quarter of 2008 was due to a reduction in income taxes on the gain on the sale, and the net loss from discontinued operations of $0.7 million ($.01 per share) in the third quarter of 2007 was due to post-closing adjustments to the gain.

This release includes non-GAAP financial measures, and the exhibits include a discussion of management's use of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.

Revenues

Total revenues decreased 8.9 percent to $687.0 million from $754.4 million. Advertising revenues decreased 14.4 percent; circulation revenues increased 1.0 percent; and other revenues declined 4.2 percent. Revenues decreased mainly due to lower print advertising.

Operating Costs

Operating costs decreased 6.8 percent to $677.1 million from $726.3 million. Depreciation and amortization decreased 34.6 percent to $33.9 million from $51.8 million last year, when accelerated depreciation totaled $11.7 million ($6.7 million after tax, or $.05 per share) for assets at the Edison, N.J., printing plant, which the Company closed earlier this year. There was no accelerated depreciation in the third quarter of 2008.