NYT 9.29.2013 10-Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2013
Commission file number 1-5837
THE NEW YORK TIMES COMPANY
(Exact name of registrant as specified in its charter)
 
NEW YORK
 
13-1102020
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
620 EIGHTH AVENUE, NEW YORK, NEW YORK
(Address of principal executive offices)
10018
(Zip Code)
Registrant’s telephone number, including area code 212-556-1234
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   x     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
 
Accelerated filer  o
 
Non-accelerated filer  o 
 
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   o     No  x
Number of shares of each class of the registrant’s common stock outstanding as of November 1, 2013 (exclusive of treasury shares): 
Class A Common Stock
  
 
148,943,075

  shares
Class B Common Stock
  
 
818,061

  shares
 






THE NEW YORK TIMES COMPANY
INDEX

 
 
ITEM NO.
 
 
 
 
 
Financial Information
 
Item
 
Financial Statements
 
 
 
 
Condensed Consolidated Balance Sheets as of September 29, 2013 (unaudited) and December 30, 2012
 
 
 
 
Condensed Consolidated Statements of Operations (unaudited) for the quarter and nine months ended September 29, 2013 and September 23, 2012
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income/(Loss) (unaudited) for the quarter and nine months ended September 29, 2013 and September 23, 2012
 
 
 
 
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 29, 2013 and September 23, 2012
 
 
 
 
Notes to the Condensed Consolidated Financial Statements
 
Item
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item
 
Quantitative and Qualitative Disclosures about Market Risk
 
Item
 
Controls and Procedures
 
 
 
 
 
 
Other Information
 
Item
1
 
Legal Proceedings
 
Item
1A
 
Risk Factors
 
Item
2
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item
6
 
Exhibits
 





PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
September 29,
2013
 
December 30,
2012
 
(Unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
390,008

 
$
820,490

Short-term marketable securities
382,795

 
134,820

Accounts receivable (net of allowances of $15,153 in 2013 and $15,452 in 2012)
164,282

 
197,589

Inventories:
 
 
 
Newsprint and magazine paper
7,184

 
5,609

Other inventory
1,318

 
1,728

Total inventories
8,502

 
7,337

Deferred income taxes
58,214

 
58,214

Other current assets
46,522

 
42,067

Assets held for sale
97,640

 
137,050

Total current assets
1,147,963

 
1,397,567

Other assets
 
 
 
Long-term marketable securities
165,378

 
4,444

Investments in joint ventures
36,171

 
40,872

Property, plant and equipment (less accumulated depreciation and amortization of $852,526 in 2013 and $807,976 in 2012)
721,171

 
773,469

Goodwill
124,524

 
122,691

Deferred income taxes
267,933

 
280,523

Miscellaneous assets
165,130

 
166,214

Total assets
$
2,628,270

 
$
2,785,780

See Notes to Condensed Consolidated Financial Statements.


1



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS-(Continued)
(In thousands, except share and per share data)
 
September 29,
2013
 
December 30,
2012
 
(Unaudited)
 
 
Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
83,980

 
$
88,990

Accrued payroll and other related liabilities
70,651

 
86,772

Unexpired subscriptions
58,006

 
57,336

Accrued expenses and other
121,284

 
118,753

Accrued income taxes
131

 
38,932

Liabilities held for sale
30,963

 
32,373

Total current liabilities
365,015

 
423,156

Other liabilities
 
 
 
Long-term debt and capital lease obligations
682,983

 
696,752

Pension benefits obligation
642,612

 
737,889

Postretirement benefits obligation
106,290

 
110,347

Other
145,289

 
152,000

Total other liabilities
1,577,174

 
1,696,988

Stockholders’ equity
 
 
 
Common stock of $.10 par value:
 
 
 
Class A – authorized 300,000,000 shares; issued: 2013 – 151,038,187; 2012 – 150,270,975 (including treasury shares: 2013 – 2,253,155; 2012 – 2,483,537)
15,109

 
15,027

Class B – convertible – authorized and issued shares: 2013 – 818,061; 2012 – 818,385 (including treasury shares: 2013 – none; 2012 – none)
82

 
82

Additional paid-in capital
30,355

 
25,610

Retained earnings
1,223,945

 
1,230,450

Common stock held in treasury, at cost
(88,062
)
 
(96,278
)
Accumulated other comprehensive loss, net of income taxes:
 
 
 
Foreign currency translation adjustments
12,107

 
11,327

Unrealized gain/(loss) on available-for-sale security
114

 
(431
)
Funded status of benefit plans
(510,576
)
 
(523,462
)
Total accumulated other comprehensive loss, net of income taxes
(498,355
)
 
(512,566
)
Total New York Times Company stockholders’ equity
683,074

 
662,325

Noncontrolling interest
3,007

 
3,311

Total stockholders’ equity
686,081

 
665,636

Total liabilities and stockholders’ equity
$
2,628,270

 
$
2,785,780

See Notes to Condensed Consolidated Financial Statements.


2



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 
 
For the Quarters Ended
 
For the Nine Months Ended
 
 
September 29,
2013
 
September 23,
2012
 
September 29,
2013
 
September 23,
2012
 
 
(13 weeks)
 
(39 weeks)
Revenues
 
 
 
 
 
 
 
 
Circulation
 
$
204,156

 
$
194,739

 
$
616,603

 
$
578,914

Advertising
 
138,018

 
140,880

 
454,595

 
485,368

Other
 
19,564

 
19,718

 
62,172

 
62,945

Total revenues
 
361,738

 
355,337

 
1,133,370

 
1,127,227

Operating costs
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
 
Raw materials
 
21,064

 
24,343

 
66,913

 
75,963

Wages and benefits
 
82,387

 
80,696

 
247,199

 
242,742

Other
 
49,144

 
52,331

 
148,286

 
155,173

Total production costs
 
152,595

 
157,370

 
462,398

 
473,878

Selling, general and administrative costs
 
169,824

 
169,459

 
519,610

 
524,611

Depreciation and amortization
 
20,293

 
19,594

 
57,981

 
60,488

Total operating costs
 
342,712

 
346,423

 
1,039,989

 
1,058,977

Pension withdrawal expense
 
6,171

 

 
6,171

 

Operating profit
 
12,855

 
8,914

 
87,210

 
68,250

Gain on sale of investment
 

 

 

 
55,645

Impairment of investments
 

 
600

 

 
5,500

(Loss)/income from joint ventures
 
(123
)
 
1,010

 
(3,398
)
 
2,089

Interest expense, net
 
15,454

 
15,490

 
44,169

 
46,406

(Loss)/income from continuing operations before income taxes
 
(2,722
)
 
(6,166
)
 
39,643

 
74,078

Income tax expense/(benefit)
 
2,578

 
(3,187
)
 
21,473

 
28,446

(Loss)/income from continuing operations
 
(5,300
)
 
(2,979
)
 
18,170

 
45,632

(Loss)/income from discontinued operations, net of income taxes
 
(18,987
)
 
5,703

 
(18,995
)
 
(88,007
)
Net (loss)/income
 
(24,287
)
 
2,724

 
(825
)
 
(42,375
)
Net loss attributable to the noncontrolling interest
 
61

 
21

 
304

 
101

Net (loss)/income attributable to The New York Times Company common stockholders
 
$
(24,226
)
 
$
2,745

 
$
(521
)

$
(42,274
)
Amounts attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
 
(Loss)/income from continuing operations
 
$
(5,239
)
 
$
(2,958
)
 
$
18,474

 
$
45,733

(Loss)/income from discontinued operations, net of income taxes
 
(18,987
)
 
5,703

 
(18,995
)
 
(88,007
)
Net (loss)/income
 
$
(24,226
)
 
$
2,745

 
$
(521
)
 
$
(42,274
)
Average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
150,033

 
148,254

 
149,724

 
148,042

Diluted
 
150,033

 
148,254

 
156,460

 
151,762

Basic earnings/(loss) per share attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
 
(Loss)/income from continuing operations
 
$
(0.03
)
 
$
(0.02
)
 
$
0.12

 
$
0.31

(Loss)/income from discontinued operations, net of income taxes
 
(0.13
)
 
0.04

 
(0.13
)
 
(0.59
)
Net (loss)/income
 
$
(0.16
)
 
$
0.02

 
$
(0.01
)
 
$
(0.28
)
Diluted earnings/(loss) per share attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
 
(Loss)/income from continuing operations
 
$
(0.03
)
 
$
(0.02
)
 
$
0.12

 
$
0.30

(Loss)/income from discontinued operations, net of income taxes
 
(0.13
)
 
0.04

 
(0.12
)
 
(0.58
)
Net (loss)/income
 
$
(0.16
)
 
$
0.02

 
$

 
$
(0.28
)
Dividends declared per share
 
$
0.04

 
$

 
$
0.04

 
$

See Notes to Condensed Consolidated Financial Statements.

3



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
(In thousands)
 
 
For the Quarters Ended
 
For the Nine Months Ended
 
 
September 29,
2013
 
September 23,
2012
 
September 29,
2013
 
September 23,
2012
 
 
(13 weeks)
 
(39 weeks)
Net (loss)/income
 
$
(24,287
)
 
$
2,724

 
$
(825
)
 
$
(42,375
)
Other comprehensive income/(loss), before tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
3,261

 
3,251

 
1,497

 
(1,148
)
Unrealized derivative gain on cash-flow hedge of equity method investment
 

 

 

 
1,143

Unrealized gain/(loss) on available-for-sale security
 
1,022

 
(2,338
)
 
908

 
1,251

Pension and postretirement benefits obligation
 
6,597

 
5,817

 
21,454

 
1,356

Other comprehensive income, before tax
 
10,880

 
6,730

 
23,859

 
2,602

Income tax expense
 
4,196

 
2,539

 
9,648

 
732

Other comprehensive income, net of tax
 
6,684

 
4,191

 
14,211

 
1,870

Comprehensive (loss)/income
 
(17,603
)
 
6,915

 
13,386

 
(40,505
)
Comprehensive loss attributable to the noncontrolling interest
 
61

 
21

 
304

 
101

Comprehensive (loss)/income attributable to The New York Times Company common stockholders
 
$
(17,542
)
 
$
6,936

 
$
13,690

 
$
(40,404
)
See Notes to Condensed Consolidated Financial Statements.


4



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
For the Nine Months Ended
 
September 29,
2013
 
September 23,
2012
 
(39 weeks)
Cash flows from operating activities
 
 
 
Net loss
$
(825
)
 
$
(42,375
)
Adjustments to reconcile net income/(loss) to net cash (used in)/provided by operating activities:
 
 
 
Impairment of assets
34,300

 
194,732

Pension withdrawal expense
14,168

 

Gain on sale of investment

 
(55,645
)
Impairment of investments

 
5,500

Loss on sale of Regional Media Group

 
4,717

Depreciation and amortization
64,799

 
82,538

Stock-based compensation expense
6,905

 
5,618

Undistributed loss of equity method investments
5,004

 
2,418

Long-term retirement benefit obligations
(92,311
)
 
(33,650
)
Deferred income taxes
4,124

 
(63,404
)
Other–net
20,550

 
8,862

Changes in operating assets and liabilities–net of dispositions:
 
 
 
Accounts receivable–net
40,261

 
49,218

Inventories
(56
)
 
3,311

Other current assets
4,871

 
(1,575
)
Accounts payable and other liabilities
(92,070
)
 
(39,635
)
Unexpired subscriptions
350

 
3,639

Net cash provided by operating activities
10,070

 
124,269

Cash flows from investing activities
 
 
 
Purchases of marketable securities
(697,572
)
 
(439,700
)
Maturities of marketable securities
283,150

 
264,806

Capital expenditures
(11,660
)
 
(29,978
)
Change in restricted cash
2,000

 
3,287

(Purchase of)/proceeds from investments–net
(499
)
 
96,431

Proceeds from sale of Regional Media Group

 
140,044

Net cash (used in)/provided by investing activities
(424,581
)
 
34,890

Cash flows from financing activities
 
 
 
Long-term obligations:
 
 
 
Repayment of debt and capital lease obligations
(19,825
)
 
(432
)
Capital shares:
 
 
 
Issuances from stock option exercises
3,623

 
536

Net cash (used in)/provided by financing activities
(16,202
)
 
104

(Decrease)/increase in cash and cash equivalents
(430,713
)
 
159,263

Effect of exchange rate changes on cash and cash equivalents
231

 
(40
)
Cash and cash equivalents at the beginning of the year
820,490

 
175,151

Cash and cash equivalents at the end of the quarter
$
390,008

 
$
334,374

See Notes to Condensed Consolidated Financial Statements.

5

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1. BASIS OF PRESENTATION

In the opinion of The New York Times Company’s (the “Company”) management, the Condensed Consolidated Financial Statements present fairly the financial position of the Company as of September 29, 2013 and December 30, 2012, and the results of operations and cash flows of the Company for the periods ended September 29, 2013 and September 23, 2012. The Company and its consolidated subsidiaries are referred to collectively as “we,” “us” or “our.” All adjustments necessary for a fair presentation have been included and are of a normal and recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by accounting principles generally accepted in the United States of America have been condensed or omitted from these interim financial statements. These financial statements, therefore, should be read in conjunction with the Consolidated Financial Statements and related Notes included in our Annual Report on Form 10-K for the year ended December 30, 2012. Due to the seasonal nature of our business, operating results for the interim periods are not necessarily indicative of a full year’s operations. The fiscal periods included herein comprise 13 weeks for the third-quarter periods and 39 weeks for the nine-month periods.

For comparability, certain prior-year amounts have been reclassified to conform with the 2013 presentation. Specifically, the reclassifications relate to discontinued operations in the third quarter of 2013 (see Note 11) and prior period pension adjustments associated with an error in the actuarial valuation of accrued benefits as disclosed in our quarterly report on Form 10-Q for the quarter ended June 30, 2013.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 29, 2013, our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the year ended December 30, 2012, have not changed. In the first quarter of 2013, we added a significant accounting policy related to our investments in marketable securities.

Marketable securities

We have investments in marketable debt and equity securities. We determine the appropriate classification of our investments at the date of purchase and reevaluate the classifications at the balance sheet date. Marketable debt securities with maturities of 12 months or less are classified as short-term. Marketable debt securities with maturities greater than 12 months are classified as long-term. We have the intent and ability to hold our marketable debt securities until maturity; therefore they are accounted for as held-to-maturity and stated at amortized cost. Our marketable equity security is accounted for as available-for-sale and stated at fair value. Changes in the fair value of our available-for-sale security are recognized as unrealized gains or losses, net of taxes, as a component of accumulated other comprehensive income/(loss) (“AOCI”).

Recently adopted accounting pronouncement

At the beginning of our 2013 fiscal year, we adopted new guidance for the presentation of amounts reclassified from AOCI. The guidance specifically required, either on the face of the financial statements or in the notes, presentation of significant amounts reclassified from AOCI by component for the respective line items of net income. We adopted the new guidance and present the reclassifications in the notes to the financial statements. See Note 13 for additional information regarding amounts reclassified from AOCI.

Recently issued accounting pronouncement

In July 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-11 which prescribes that a liability related to an unrecognized tax benefit to be offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations in which a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of a jurisdiction or the tax law of a jurisdiction does not require it, and the Company does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This guidance becomes effective for the Company

6



on January 1, 2014 and will be applied on a prospective basis. We do not anticipate the adoption of this guidance will have a material impact on our financial statements.
NOTE 3. MARKETABLE SECURITIES
  
Our marketable debt and equity securities consisted of the following:

(In thousands)
 
September 29,
2013
 
December 30,
2012
Short-term marketable securities
 
 
 
 
Marketable debt securities
 
 
 
 
U.S Treasury securities
 
$
143,524

 
$
124,831

Corporate debt securities
 
79,331

 

U.S. agency securities
 
51,145

 

Municipal securities
 
45,495

 

Certificates of deposit
 
32,523

 

Commercial paper
 
30,777

 
9,989

Total short-term marketable securities
 
$
382,795

 
$
134,820

Long-term marketable securities
 
 
 
 
Marketable debt securities
 
 
 
 
Corporate debt securities
 
$
100,129

 
$

U.S. agency securities
 
53,537

 

Municipal securities
 
7,018

 

Total
 
160,684

 

Marketable equity security
 
 
 
 
Available-for-sale security
 
4,694

 
4,444

Total long-term marketable securities
 
$
165,378

 
$
4,444


Marketable debt securities

As of September 29, 2013, our marketable debt securities had remaining maturities of about 1 month to 36 months.

Marketable equity security

Our investment in the common stock of Brightcove, Inc. is accounted for as available-for-sale and stated at fair value. Changes in the fair value of our available-for-sale security are recognized as unrealized gains or losses within “Long-term marketable securities” and “Accumulated other comprehensive loss, net of income taxes” in our Condensed Consolidated Balance Sheets and “Unrealized gain/(loss) on available-for-sale security” in our Condensed Consolidated Statements of Comprehensive Income/(Loss). During the quarter ended September 29, 2013, we recognized an unrealized gain of $1.0 million ($0.6 million, net of tax).

See Note 8 for additional information regarding the fair value of our marketable securities.

7

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

NOTE 4. GOODWILL

The following table displays the carrying amount of goodwill as of September 29, 2013, and December 30, 2012:
(In thousands)
 
Total Company
Balance as of December 26, 2011
 
 
Goodwill
 
$
927,909

Accumulated impairment losses
 
(805,218
)
Balance as of December 30, 2012
 
122,691

Goodwill transferred to held for sale (1)
 

Foreign currency translation
 
1,833

Balance as of September 29, 2013
 
$
124,524

(1) See Note 11 for additional information regarding the assets and liabilities held for sale for the New England Media Group.

The foreign currency translation line item reflects changes in goodwill resulting from fluctuating exchange rates related to the consolidation of the International Herald Tribune.
NOTE 5. INVESTMENTS

Equity Method Investments/Joint Ventures

As of September 29, 2013, our investments in joint ventures consisted of equity ownership interests in the following entities:

Company
 
Approximate %
Ownership
Donohue Malbaie Inc.
 
49
%
Madison Paper Industries
 
40
%

In the first quarter of 2013, we recorded a nominal charge for the impairment of our investment in quadrantONE LLC as a result of its February 2013 announcement of the wind down of its operations.

Cost Method Investments
Gain on Sale of Investment

In the first quarter of 2012, we sold 100 of our units in Fenway Sports Group for an aggregate price of $30.0 million (pre-tax gain of $17.8 million) and in the second quarter of 2012, we completed the sale of our remaining 210 units for an aggregate price of $63.0 million (pre-tax gain of $37.8 million). These sales resulted in a pre-tax gain of $55.6 million in the first six months of 2012. Effective with the first quarter 2012 sale, given our reduced ownership level and lack of influence on the operations of Fenway Sports Group, we changed the accounting for this investment from the equity method to the cost method. Therefore, starting in the first quarter of 2012, we no longer recognized our proportionate share of the operating results of Fenway Sports Group in joint venture results in our Condensed Consolidated Statements of Operations.
Impairment of Investments
In the first nine months of 2012, we recorded a non-cash impairment charge of $5.5 million to reduce the carrying value of certain investments to fair value. The impairment charge was primarily related to our investment in Ongo Inc., a consumer service for reading and sharing digital news and information from multiple publishers.

8

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

NOTE 6. DEBT OBLIGATIONS
As of September 29, 2013, our current indebtedness included senior notes and the repurchase option related to a sale-leaseback of a portion of our New York headquarters. Our total debt and capital lease obligations consisted of the following:
(In thousands)
 
Coupon Rate
 
September 29,
2013
 
December 30,
2012
Senior notes due 2015
 
5.0
%
 
$
244,048

 
$
244,022

Senior notes due 2016
 
6.625
%
 
204,924

 
221,523

Option to repurchase ownership interest in headquarters building in 2019
 
 
 
227,300

 
224,510

Total debt
 
 
 
676,272

 
690,055

Short-term capital lease obligations(1)
 
 
 
47

 
123

Long-term capital lease obligations
 
 
 
6,711

 
6,697

Total capital lease obligations
 
 
 
6,758

 
6,820

Total debt and capital lease obligations
 
 
 
$
683,030

 
$
696,875

(1) Included in “Accrued expenses and other” in our Condensed Consolidated Balance Sheets.
See Note 8 for information regarding the fair value of our long-term debt.
During the third quarter of 2013, we repurchased $12.4 million principal amount of our 6.625% senior unsecured notes due December 15, 2016 (“6.625% Notes”) and recorded a $1.5 million pre-tax charge in connection with the repurchase. During the first nine months of 2013, we repurchased $17.4 million principal amount of our 6.625% Notes and recorded a $2.1 million pre-tax charge in connection with the repurchases.
“Interest expense, net” in our Condensed Consolidated Statements of Operations was as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 29,
2013
 
September 23,
2012
 
September 29,
2013
 
September 23,
2012
Cash interest expense
 
$
14,494

 
$
14,453

 
$
41,635

 
$
43,249

Non-cash amortization of discount on debt
 
1,355

 
1,129

 
3,622

 
3,386

Capitalized interest
 

 

 

 
(14
)
Interest income
 
(395
)
 
(92
)
 
(1,088
)
 
(215
)
Total interest expense, net
 
$
15,454

 
$
15,490

 
$
44,169

 
$
46,406


NOTE 7. OTHER

Severance Costs

We recognized severance costs of $0.6 million in the third quarter of 2013 and $8.3 million in the first nine months of 2013. These costs are recorded in “Selling, general and administrative costs” in our Condensed Consolidated Statements of Operations. As of September 29, 2013, we had a severance liability of $9.5 million included in “Accrued expenses and other” in our Condensed Consolidated Balance Sheets.



9

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

NOTE 8. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received upon the sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The transaction would be in the principal or most advantageous market for the asset or liability, based on assumptions that a market participant would use in pricing the asset or liability.
The fair value hierarchy consists of three levels:
Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3 – unobservable inputs for the asset or liability.
Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of September 29, 2013, and December 30, 2012:
(In thousands)
 
September 29, 2013
 
Total
 
Level 1
 
Level 2

Level 3
Assets
 
 
 
 
 
 
 
 
Available-for-sale security
 
$
4,694

 
$
4,694

 
$

 
$

Liabilities
 
 
 
 
 
 
 
 
Deferred compensation
 
$
48,497

 
$
48,497

 
$

 
$

(In thousands)
 
December 30, 2012
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
Available-for-sale security
 
$
4,444

 
$
4,444

 
$

 
$

Liabilities
 
 
 
 
 
 
 
 
Deferred compensation
 
$
52,882

 
$
52,882

 
$

 
$

The available-for-sale security, included in “Long-term marketable securities” in our Condensed Consolidated Balance Sheets, consists of our investment in the common stock of Brightcove, Inc. (see Note 3). The fair value is based on quoted prices in active markets for identical assets.
The deferred compensation liability, included in “Other liabilities – other” in our Condensed Consolidated Balance Sheets, consists of deferrals under our deferred executive compensation plan, which enables 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, which are based on quoted prices in active markets for identical assets.
Assets Measured and Recorded at Fair Value on a Non-Recurring Basis
Certain non-financial assets, such as goodwill, other intangible assets, property, plant and equipment and certain investments, that were part of operations that have been classified as discontinued operations are only recorded at fair value if an impairment charge is recognized. The following table presents non-financial assets that were measured and recorded at fair value on a non-recurring basis and the impairment losses recorded during 2013 on those assets:
(In thousands)
 
Carrying Value
 
Fair Value Measured and Recorded Using
 
Impairment Losses
 
September 29, 2013
 
Level 1
 
Level 2
 
Level 3
 
2013
Property, plant and equipment (1)
 
$
55,056

 
$

 
$

 
$
55,056

 
$
34,300


10

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

(1)
Impairment losses related to the New England Media Group are included within “(Loss)/income from discontinued operations, net of income taxes” in the Condensed Consolidated Statements of Operations for the quarter and nine months ended September 29, 2013. See Note 11 for additional information.
Included in impairment of assets in 2013 is the impairment of fixed assets held for sale that related to the New England Media Group. During the third quarter of 2013, we estimated the fair value less cost to sell of the group held for sale, using unobservable inputs (Level 3). We recorded a $34.3 million non-cash charge in the third quarter of 2013 for fixed assets at the New England Media Group to reduce the carrying value of fixed assets to their fair value less cost to sell.
Financial Instruments Disclosed, But Not Recorded, at Fair Value
Our marketable debt securities, which include U.S. Treasury securities, corporate debt securities, U.S. government agency securities, municipal securities, certificates of deposit and commercial paper, are recorded at amortized cost (see Note 3). As of September 29, 2013 and December 30, 2012, the amortized cost approximated fair value. We classified these investments as Level 2 since the fair value estimates are based on market observable inputs for investments with similar terms and maturities.
The carrying value of our long-term debt was approximately $676 million as of September 29, 2013 and $690 million as of December 30, 2012. The fair value of our long-term debt was approximately $814 million as of September 29, 2013 and $840 million as of December 30, 2012. We estimate the fair value of our debt utilizing market quotations for debt that have quoted prices in active markets. Since our debt does not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2).
NOTE 9. PENSION AND OTHER POSTRETIREMENT BENEFITS

Pension

Single-Employer Plans

We sponsor several single-employer defined benefit pensions, the majority of which have been frozen; and participate in joint Company and Guild-sponsored plans covering employees of The New York Times Newspaper Guild, including The New York Times Newspaper Guild pension plan, which was frozen, and a new defined benefit pension plan, subject to the approval of the Internal Revenue Service. The components of net periodic pension (income)/cost were as follows:
 
 
For the Quarters Ended
 
 
September 29, 2013
 
September 23, 2012
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All Plans
Service cost
 
$
2,323

 
$
256

 
$
2,579

 
$
2,894

 
$
377

 
$
3,271

Interest cost
 
19,284

 
2,643

 
21,927

 
23,592

 
3,122

 
26,714

Expected return on plan assets
 
(31,063
)
 

 
(31,063
)
 
(29,614
)
 

 
(29,614
)
Amortization of prior service (credit)/cost
 
(486
)
 

 
(486
)
 
201

 

 
201

Recognized actuarial loss
 
8,442

 
1,312

 
9,754

 
7,229

 
1,122

 
8,351

Net periodic pension (income)/cost
 
$
(1,500
)
 
$
4,211

 
$
2,711

 
$
4,302

 
$
4,621

 
$
8,923



11

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

 
 
For the Nine Months Ended
 
 
September 29, 2013
 
September 23, 2012
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All Plans
Service cost
 
$
6,968

 
$
768

 
$
7,736

 
$
8,794

 
$
1,131

 
$
9,925

Interest cost
 
57,858

 
7,929

 
65,787

 
70,832

 
9,366

 
80,198

Expected return on plan assets
 
(93,188
)
 

 
(93,188
)
 
(88,805
)
 

 
(88,805
)
Amortization of prior service (credit)/cost
 
(1,459
)
 

 
(1,459
)
 
603

 

 
603

Recognized actuarial loss
 
25,327

 
3,935

 
29,262

 
21,681

 
3,367

 
25,048

Net periodic pension (income)/cost
 
$
(4,494
)
 
$
12,632

 
$
8,138

 
$
13,105

 
$
13,864

 
$
26,969


In the first nine months of 2013, we made pension contributions of approximately $71 million to certain qualified pension plans. Approximately $65 million of our year-to-date 2013 contributions was made to The New York Times Newspaper Guild pension plan, of which $28 million was estimated to be necessary to satisfy minimum funding requirements in 2013 or contractually required. Including the first nine months of contributions, we expect to make total contributions of approximately $75 million in 2013 to our qualified pension plans.

Multiemployer Plans

In the third quarter of 2013, we recorded a $6.2 million charge related to a partial withdrawal obligation under a multiemployer pension plan.

Other Postretirement Benefits

The components of net periodic postretirement benefit income were as follows:

 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 29,
2013
 
September 23,
2012
 
September 29,
2013
 
September 23,
2012
Service cost
 
$
285

 
$
239

 
$
855

 
$
717

Interest cost
 
1,009

 
1,246

 
3,027

 
3,738

Amortization of prior service credit
 
(3,693
)
 
(3,778
)
 
(11,078
)
 
(11,334
)
Recognized actuarial loss
 
1,022

 
832

 
3,066

 
2,496

Net periodic postretirement benefit income
 
$
(1,377
)
 
$
(1,461
)
 
$
(4,130
)
 
$
(4,383
)

In the first quarter of 2012, we sold the Regional Media Group (see Note 11). The sale significantly reduced the expected years of future service for current employees, resulting in a remeasurement and curtailment of a postretirement benefit plan. We recognized a curtailment gain of $27.2 million in the first quarter of 2012. The curtailment gain is included in the gain on the sale within “(Loss)/income from discontinued operations, net of income taxes” in the Condensed Consolidated Statements of Operations.

NOTE 10. INCOME TAXES

We had an income tax expense of $2.6 million on a pre-tax loss of $2.7 million in the third quarter of 2013 and income tax expense of $21.5 million (effective tax rate of 54.2%) in the first nine months of 2013. Included in the tax expense for the third quarter of 2013 is a charge of $1.5 million related to the remeasurement of deferred tax assets in connection with the sale of the New England Media Group.
    
The Company had an income tax benefit of $3.2 million (effective tax rate of 51.7%) in the third quarter of 2012 and income tax expense of $28.4 million (effective tax rate of 38.4%) in the first nine months of 2012.


12

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

It is reasonably possible that certain income tax examinations may be concluded, or statutes of limitation may lapse, during the next 12 months, which could result in a decrease in unrecognized tax benefits of approximately $16 million that would, if recognized, impact the effective tax rate.

NOTE 11. DISCONTINUED OPERATIONS

New England Media Group

On August 3, 2013, we entered into an agreement to sell the New England Media Group, consisting of The Boston Globe, BostonGlobe.com, Boston.com, the T&G, Telegram.com and related businesses, to an acquisition company. On October 24, 2013, we completed the sale of substantially all of the assets and operating liabilities of the New England Media Group. See Note 16 for additional information regarding this sale. The results of operations of the New England Media Group have been classified as discontinued operations for all periods presented and certain assets and liabilities are classified as held for sale for all periods presented.

As a result, we triggered complete or partial withdrawal obligations under several multiemployer pension plans. Accordingly, we recorded a pension withdrawal expense estimated to be approximately $8 million in the third quarter of 2013. The actual liability will not be known until each plan completes a final assessment of the withdrawal liability and issues a demand to us.

The carrying value of goodwill and intangible assets associated with the New England Media Group had been previously written down to zero. During the third quarter of 2013, we estimated the fair value less cost to sell of the group, which resulted in a $34.3 million impairment charge for fixed assets at the New England Media Group.

About Group

On September 24, 2012, we completed the sale of the About Group, consisting of About.com, ConsumerSearch.com, CalorieCount.com and related businesses, to IAC/InterActiveCorp for $300.0 million in cash, plus a net working capital adjustment of approximately $17 million. In 2012, the sale resulted in a pre-tax gain of $96.7 million ($61.9 million after-tax). The results of operations of the About Group, which had previously been presented as a reportable segment, have been classified as discontinued operations for all periods presented in 2012.

Regional Media Group

On January 6, 2012, we completed the sale of the Regional Media Group, consisting of 16 regional newspapers, other print publications and related businesses, to Halifax Media Holdings LLC for approximately $140 million in cash. The net after-tax proceeds from the sale, including a tax benefit, were approximately $150 million. In 2012, the sale resulted in an after-tax gain of $23.6 million (including post-closing adjustments recorded in the second and fourth quarters of 2012 totaling $6.6 million). The results of operations of the Regional Media Group have been classified as discontinued operations for all periods presented in 2012.

The results of operations for the New England Media Group, the About Group and the Regional Media Group presented as discontinued operations are summarized below.

13

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

 
 
For the Quarters Ended
 
 
September 29, 2013
 
September 23, 2012
(In thousands)
 
New England Media Group
 
About Group
 
Regional Media Group
 
Total
 
New England Media Group
 
About Group
 
Regional Media Group
 
Total
Revenues
 
$
89,073

 
$

 
$

 
$
89,073

 
$
93,691

 
$
25,616

 
$

 
$
119,307

Total operating costs
 
85,157

 

 

 
85,157

 
93,233

 
16,687

 

 
109,920

Pension withdrawal expense(1)
 
7,997

 

 

 
7,997

 

 

 

 

Impairment of assets
 
34,300

 

 

 
34,300

 

 

 

 

(Loss)/income from joint ventures
 
(82
)
 

 

 
(82
)
 
17

 

 

 
17

Interest expense, net
 
3

 

 

 
3

 
7

 

 

 
7

Pre-tax (loss)/income
 
(38,466
)
 

 

 
(38,466
)
 
468

 
8,929

 

 
9,397

Income tax (benefit)/expense
 
(19,479
)
 

 

 
(19,479
)
 
791

 
2,903

 

 
3,694

(Loss)/income from discontinued operations, net of income taxes
 
$
(18,987
)
 
$

 
$

 
$
(18,987
)
 
$
(323
)
 
$
6,026

 
$

 
$
5,703

(1)
The pension withdrawal expense related to estimated charges for complete or partial withdrawal obligations under multiemployer pension plans triggered by the sale of the New England Media Group.
 
 
For the Nine Months Ended
 
 
September 29, 2013
 
September 23, 2012
(In thousands)
 
New England Media Group
 
About Group
 
Regional Media Group
 
Total
 
New England Media Group
 
About Group
 
Regional Media Group
 
Total
Revenues
 
$
268,737

 
$

 
$

 
$
268,737

 
$
287,035

 
$
74,970

 
$
6,115

 
$
368,120

Total operating costs
 
262,079

 

 

 
262,079

 
288,360

 
51,140

 
8,017

 
347,517

Pension withdrawal expense(1)
 
7,997

 

 

 
7,997

 

 

 

 

Impairment of assets(2)
 
34,300

 

 

 
34,300

 

 
194,732

 

 
194,732

(Loss)/income from joint ventures
 
(205
)
 

 

 
(205
)
 
(12
)
 

 

 
(12
)
Interest expense, net
 
9

 

 

 
9

 
7

 

 

 
7

Pre-tax loss
 
(35,853
)
 

 

 
(35,853
)
 
(1,344
)
 
(170,902
)
 
(1,902
)
 
(174,148
)
Income tax expense/(benefit)
 
(16,858
)
 

 

 
(16,858
)
 
391

 
(60,065
)
 
(736
)
 
(60,410
)
Loss from discontinued operations, net of income taxes
 
(18,995
)
 

 

 
(18,995
)
 
(1,735
)
 
(110,837
)
 
(1,166
)
 
(113,738
)
Gain/(loss) on sale, net of income taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on sale
 

 

 

 

 

 

 
(4,717
)
 
(4,717
)
Income tax benefit(3)
 

 

 

 

 

 

 
(30,448
)
 
(30,448
)
Gain on sale, net of income taxes
 

 

 

 

 

 

 
25,731

 
25,731

(Loss)/income from discontinued operations, net of income taxes
 
$
(18,995
)
 
$

 
$

 
$
(18,995
)
 
$
(1,735
)
 
$
(110,837
)
 
$
24,565

 
$
(88,007
)
(1)
The pension withdrawal expense related to estimated charges for complete or partial withdrawal obligations under multiemployer pension plans triggered by the sale of the New England Media Group.

14

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

(2)
Included in the impairment of assets in 2012 is the impairment of goodwill that related to the About Group for the nine months ended September 23, 2012.
(3)
The income tax benefit for the Regional Media Group included a tax deduction for goodwill, which was previously non-deductible, triggered upon the sale of the Regional Media Group.
Included in impairment of assets in 2013 is the impairment of fixed assets held for sale that related to the New England Media Group. During the third quarter of 2013, we estimated the fair value less cost to sell of the group held for sale, using unobservable inputs (Level 3). We recorded a $34.3 million non-cash charge in the third quarter of 2013 for fixed assets at the New England Media Group to reduce the carrying value of fixed assets to their fair value less cost to sell.

Goodwill is not amortized but tested for impairment annually or in an interim period if certain circumstances indicate a possible impairment may exist. Our policy is to perform our annual goodwill impairment test in the fourth quarter of our fiscal year. However, due to certain impairment indicators at the About Group in the second quarter of 2012, we performed an interim impairment test. As of June 24, 2012, the interim impairment test resulted in a $194.7 million non-cash charge in the second quarter of 2012 for the impairment of goodwill at the About Group. The impairment charge reduced the carrying value of goodwill to its fair value.

The assets and liabilities classified as held for sale for the New England Media Group, the About Group and the Regional Media Group are summarized below.
    
 
 
September 29, 2013
 
December 30, 2012
(In thousands)
 
New England Media Group
 
About Group
 
Regional Media Group
 
Total
 
New England Media Group
 
About Group
 
Regional Media Group
 
Total
Accounts receivable, net
 
$
33,389

 
$

 
$

 
$
33,389

 
$
40,343

 
$

 
$

 
$
40,343

Inventories
 
1,970

 

 

 
1,970

 
3,078

 

 

 
3,078

Property, plant and equipment, net
 
55,056

 

 

 
55,056

 
86,917

 

 

 
86,917

Other assets
 
7,225

 

 

 
7,225

 
6,712

 

 

 
6,712

Total assets
 
97,640

 

 

 
97,640

 
137,050

 

 

 
137,050

Total liabilities
 
30,963

 

 

 
30,963

 
32,373

 

 

 
32,373

Net liabilities
 
$
66,677

 
$

 
$

 
$
66,677

 
$
104,677

 
$

 
$

 
$
104,677




15

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

NOTE 12. EARNINGS/(LOSS) PER SHARE

Basic and diluted earnings/(loss) per share have been computed as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands, except per share data)
 
September 29,
2013
 
September 23,
2012
 
September 29,
2013
 
September 23,
2012
Amounts attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
 
(Loss)/income from continuing operations
 
$
(5,239
)
 
$
(2,958
)
 
$
18,474

 
$
45,733

(Loss)/income from discontinued operations, net of income taxes
 
(18,987
)
 
5,703

 
(18,995
)
 
(88,007
)
Net (loss)/income
 
$
(24,226
)
 
$
2,745

 
$
(521
)
 
$
(42,274
)
Average number of common shares outstanding–Basic
 
150,033

 
148,254

 
149,724

 
148,042

Incremental shares for assumed exercise of securities
 

 

 
6,736

 
3,720

Average number of common shares outstanding–Diluted
 
150,033

 
148,254

 
156,460

 
151,762

Basic earnings/(loss) per share attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
 
(Loss)/income from continuing operations
 
$
(0.03
)
 
$
(0.02
)
 
$
0.12

 
$
0.31

(Loss)/income from discontinued operations, net of income taxes
 
(0.13
)
 
0.04

 
(0.13
)
 
(0.59
)
Net (loss)/income–Basic
 
$
(0.16
)
 
$
0.02

 
$
(0.01
)
 
$
(0.28
)
Diluted earnings/(loss) per share attributable to The New York Times Company common stockholders:
 
 
 
 
 
 
 
 
(Loss)/income from continuing operations
 
$
(0.03
)
 
$
(0.02
)
 
$
0.12

 
$
0.30

(Loss)/income from discontinued operations, net of income taxes
 
(0.13
)
 
0.04

 
(0.12
)
 
(0.58
)
Net (loss)/income–Diluted
 
$
(0.16
)
 
$
0.02

 
$

 
$
(0.28
)
The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. Our warrants, restricted stock units and stock options could have the most significant impact on diluted shares.
Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when a loss from continuing operations exists or when the exercise price exceeds the market value of our Class A Common Stock, because their inclusion would have an anti-dilutive effect on per share amounts.
The number of stock options that were excluded from the computation of diluted earnings per share, because they were anti-dilutive, was approximately 13 million in the third quarter of 2013 and 9 million in the first nine months of 2013, approximately 18 million in the third quarter of 2012 and approximately 16 million in the first nine months of 2012.

16

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

NOTE 13. SUPPLEMENTAL STOCKHOLDERS’ EQUITY INFORMATION

Stockholders’ equity is summarized as follows:
 
(In thousands)
 
Total New York Times Company Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance as of December 30, 2012
 
$
662,325

 
$
3,311

 
$
665,636

Net loss
 
(521
)
 
(304
)
 
(825
)
Other comprehensive income, net of tax
 
14,211

 

 
14,211

Effect of issuance of shares
 
5,767

 

 
5,767

Dividends declared
 
(5,985
)
 

 
(5,985
)
Stock-based compensation
 
7,277

 

 
7,277

Balance as of September 29, 2013
 
$
683,074

 
$
3,007

 
$
686,081

 
(In thousands)
 
Total New York Times Company Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance as of December 25, 2011
 
$
533,678

 
$
3,149

 
$
536,827

Net loss
 
(42,274
)
 
(101
)
 
(42,375
)
Other comprehensive income, net of tax
 
1,870

 

 
1,870

Effect of issuance of shares
 
2,094

 

 
2,094

Stock-based compensation
 
5,370

 

 
5,370

Balance as of September 23, 2012
 
$
500,738

 
$
3,048

 
$
503,786


The following table summarizes the changes in AOCI by component as of September 29, 2013:

(In thousands)
 
Foreign Currency Translation Adjustments
 
Unrealized Loss on Available-For-Sale Security
 
Funded Status of Benefit Plans
 
Total Accumulated Other Comprehensive Loss
Balance as of December 30, 2012
 
$
11,327

 
$
(431
)
 
$
(523,462
)
 
$
(512,566
)
Other comprehensive income before reclassifications, before tax
 
1,497

 
908

 
1,662

 
4,067

Amounts reclassified from accumulated other comprehensive loss, before tax
 

 

 
19,792

 
19,792

Income tax expense
 
717

 
363

 
8,568

 
9,648

Net current-period other comprehensive income, net of tax
 
780

 
545

 
12,886

 
14,211

Balance as of September 29, 2013
 
$
12,107

 
$
114

 
$
(510,576
)
 
$
(498,355
)



17

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)

The following table summarizes the reclassifications from AOCI for the periods ended September 29, 2013:
 
 
For the Quarter Ended September 29, 2013
 
For the Nine Months Ended September 29, 2013
(In thousands)
 
Amounts reclassified from accumulated other comprehensive loss
Detail about accumulated other comprehensive loss components
 
Funded status of benefit plans:
 
 
 
 
Amortization of prior service credit(1)
 
$
(4,179
)
 
(12,537
)
Recognized actuarial loss(1)
 
10,776

 
32,328

Total reclassification, before tax
 
6,597

 
19,791

Income tax expense
 
4,196

 
9,648

Total reclassification, net of tax
 
$
2,401

 
$
10,143

(1)
These items are included in the components of net periodic benefit cost for pension and other retirement benefits. See Note 9 for additional information.

NOTE 14. SEGMENT INFORMATION

We have one reportable segment. Therefore, all required segment information can be found in the condensed consolidated financial statements.
As of September 29, 2013, we had one operating segment: The New York Times Media Group, which includes The New York Times, the International New York Times, NYTimes.com, international.nytimes.com and related businesses. On August 3, 2013, we entered into an agreement to sell substantially all of the assets and operating liabilities of the New England Media Group. The New England Media Group, which includes the Globe, BostonGlobe.com, Boston.com, the T&G, Telegram.com and related businesses, has been classified as a discontinued operation for all periods presented. See Note 16 for further information on the sale of the New England Media Group.
Our operating segment generated revenues principally from circulation and advertising. Other revenues primarily consisted of revenues from news services/syndication, rental income and digital archives.
NOTE 15. CONTINGENT LIABILITIES

Restricted Cash

We were required to maintain $22.3 million of restricted cash as of September 29, 2013, and $24.3 million as of December 30, 2012, subject to certain collateral requirements, primarily for obligations under our workers’ compensation programs. Restricted cash is included in “Miscellaneous assets” in our Condensed Consolidated Balance Sheets.

Other
 
We are involved in various legal actions incidental to our business that are now pending against us. These actions are generally for amounts greatly in excess of the payments, if any, that may be required to be made. It is the opinion of management after reviewing these actions with our legal counsel that the ultimate liability that might result from these actions would not have a material adverse effect on our Consolidated Financial Statements.
On September 13, 2013, we received a notice and demand for payment in the amount of approximately $26.0 million from the Newspaper and Mail Deliverers - Publishers’ Pension Fund. We participate in the fund, which covers drivers employed by The New York Times. City & Suburban, a retail and newsstand distribution subsidiary and the largest contributor to the fund, ceased operations in 2009. The fund claims that The New York Times Company partially withdrew from the fund in the plan years ending May 31, 2013 and 2012, as a result of a more than 70% decline in contributions. We disagree with the plan determination and are disputing the claim vigorously. We do not believe that a loss is probable on this matter and have not recorded a loss contingency for the period ended September 29, 2013.


18

THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)


NOTE 16. SUBSEQUENT EVENT

On October 24, 2013, we completed the sale of substantially all of the assets and operating liabilities of the New England Media Group for approximately $70 million in cash, subject to customary adjustments. We expect the net after-tax proceeds from the sale, including a tax benefit, will be approximately $75 million.
We retained the pension assets and liabilities (including multiemployer pension liabilities) and postretirement obligations related to employees of the New England Media Group. The transaction will trigger an adjustment in the accounting for these obligations. In the fourth quarter of 2013, we will record an estimated pre-tax $50 million gain resulting from a remeasurement and curtailment of postretirement benefits, primarily retiree medical obligations. This gain is primarily related to an acceleration of prior service credits from plan amendments announced in prior years, and is due to a reduction in the expected years of future Company service for employees at the New England Media Group.

19



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a global media company that includes newspapers, digital businesses, investments in paper mills and other investments. Our current businesses include The New York Times (“The Times”), the International New York Times, NYTimes.com, international.nytimes.com and related businesses. We generate revenues principally from circulation and advertising. Other revenues primarily consist of revenues from news services/syndication, rental income and digital archives. Our main operating costs primarily consist of employee-related costs and raw materials, primarily newsprint.
Joint Ventures Our investments accounted for under the equity method are currently as follows:
a 49% interest in a Canadian newsprint company, Donohue Malbaie Inc.; and
a 40% interest in a partnership, Madison Paper Industries, operating a supercalendered paper mill in Maine.

During the third quarter and first nine months of 2013, total revenues increased 1.8% and 0.5%, respectively, compared with the same prior-year periods, driven primarily by growth in circulation revenues, partially offset by declines in advertising revenues.
Compared with the prior-year periods, circulation revenues increased 4.8% in the third quarter and 6.5% in the first nine months of 2013, mainly as digital subscription initiatives and the increase in print circulation prices at The Times in early 2013 offset a decline in print copies sold. Revenues from our digital-only subscription packages, e-readers and replica editions increased 29.0% in the third quarter of 2013 and 42.4% in the first nine months of 2013 compared with prior-year periods. We expect circulation revenues to increase in the low single digits in the fourth quarter of 2013 compared with the fourth quarter of 2012 (excluding the impact of the additional week in the fourth quarter of 2012), as we expect to see continued benefit from our digital subscription initiatives as well as from the 2013 print price increases at The Times.
Paid subscribers to digital-only subscription packages, e-readers and replica editions of The Times and the International Herald Tribune totaled approximately 727,000 as of the end of the third quarter of 2013, an increase of approximately 28,000 subscribers from the end of the second quarter of 2013 and an increase of more than 28% year-over-year from the end of the third quarter of 2012. We expect the number of net new additions of digital-only subscribers in the fourth quarter of 2013 to be approximately in line with the third quarter of 2013.
Compared with the prior-year period, total advertising revenues decreased 2.0% in the third quarter of 2013, as print and digital advertising revenues declined 1.6% and 3.4%, respectively. In the first nine months of 2013, advertising revenues decreased 6.3% compared with the same prior-year period, as print and digital advertising revenues declined 7.3% and 3.2%, respectively. While the decline in total advertising revenues continued to moderate in the third quarter relative to the second quarter of 2013 due to a sequential improvement in print advertising revenue trends, the advertising marketplace remained challenging. Advertising revenues continue to be affected by ongoing secular trends, economic factors and an increasingly complex and fragmented digital advertising marketplace, particularly as the abundance of available inventory and a shift toward advertising networks and exchanges, real-time bidding and other programmatic buying channels to buy audience at scale have led to downward pricing pressure. During the third quarter of 2013, total advertising revenues decreased 15.0% in July, and increased 0.2% in August and 6.7% in September, compared with the same prior-year periods in 2012. We expect advertising revenue trends to remain subject to significant month-to-month volatility and to decrease in the low single digits in the fourth quarter of 2013 compared with the fourth quarter of 2012 (excluding the impact of the additional week in the fourth quarter of 2012).
Operating costs decreased 1.1% in the third quarter of 2013 compared with the same period in 2012 primarily due to lower pension expense, raw materials expense, distribution costs and outside printing costs, offset in part by higher professional fees. Operating costs decreased 1.8% in the first nine months of 2013 compared with the same prior-year period primarily due to lower compensation and benefits costs, and raw materials expense, offset in part by higher professional fees. We will continue to be diligent in reducing expenses and managing legacy costs going forward, but will also remain prepared to invest where appropriate, especially in light of our strategic initiatives. We expect operating costs to increase in the low single digits in the fourth quarter of 2013 compared with the fourth quarter of 2012 (including the impact of the additional week in the fourth quarter of 2012), as investments around our strategic growth initiatives accelerate.
As of September 29, 2013, we had cash, cash equivalents and short- and long-term marketable securities of approximately $938 million and total debt and capital lease obligations of approximately $683 million. Accordingly, our cash, cash equivalents and marketable securities exceeded total debt and capital lease obligations by approximately $255 million. Our cash, cash equivalents and marketable securities decreased since the end of 2012, due in part to contributions of approximately $71 million to certain qualified pension plans and income tax payments of approximately $50 million during the first nine months of 2013, offset by cash from our current operations. We expect our cash position to improve with the proceeds

20



from the sale of the New England Media Group that was completed in the fourth quarter of 2013. See “Recent Developments” below.
In September 2013, we announced the initiation of a quarterly dividend in the fourth quarter of $0.04 per share on our Class A and Class B common stock. We believe this allows us to return capital to our stockholders while also maintaining the financial flexibility necessary to continue to invest in our transformation and growth initiatives. Given current conditions and the expectation of continued volatility in advertising revenue, as well as the early stage of our growth strategy, we believe it is in the best interests of the Company to maintain a conservative balance sheet and a prudent view of our cash flow going forward.
We do not plan to make any further contributions to our qualified pension plans in 2013 beyond mandatory requirements. Including the $71 million in contributions we made during the first nine months of 2013, we expect to make contributions of approximately $75 million in total to our qualified pension plans in 2013.
We expect the following on a pre-tax basis in 2013:
Results from joint ventures: loss of $2 to $4 million,
Depreciation and amortization: $75 to $80 million,
Interest expense, net: $55 to $60 million, and
Capital expenditures: $15 to $20 million.
RECENT DEVELOPMENTS
Strategic Initiatives
In April 2013, we announced plans for certain strategic initiatives, including the next phase in The Times’s digital subscription and paid products strategy, The Times’s international expansion under a new unified brand, and a renewed emphasis on both video production and brand extensions. We launched the International New York Times on October 15, 2013, and we plan to execute on the other strategic initiatives in 2014. We estimate that our strategic initiatives will negatively affect our operating profit by $10 million in the fourth quarter of 2013 and $15 to $20 million for the full year 2013 with a modest contribution to revenues while we make significant investments in the growth initiatives. Investments will largely be for product development and subscriber acquisitions, along with new capabilities in product management, customer management and distribution.
Sale of the New England Media Group
On October 24, 2013, we completed the sale of substantially all of the assets and operating liabilities of the New England Media Group, consisting of The Boston Globe, BostonGlobe.com, Boston.com, Worcester Telegram & Gazette, Telegram.com and related properties, for approximately $70 million in cash, subject to customary adjustments. We expect the net after-tax proceeds from the sale, including a tax benefit, will be approximately $75 million.
We retained the pension assets and liabilities (including multiemployer pension liabilities) and postretirement obligations related to employees of the New England Media Group. The transaction will trigger an adjustment in the accounting for these obligations. In the fourth quarter of 2013, we will record an estimated pre-tax $50 million gain resulting from a remeasurement and curtailment of postretirement benefits, primarily retiree medical obligations. This gain is primarily related to an acceleration of prior service credits from plan amendments announced in prior years, and is due to a reduction in the expected years of future Company service for employees at the New England Media Group.
In the third quarter of 2013, we recorded an impairment in the amount of $34.3 million to reflect assets held for sale at fair value less cost to sell. We triggered complete or partial withdrawal obligations under several multiemployer pension plans. Accordingly, we recorded a pension withdrawal expense estimated to be approximately $8 million on a pre-tax basis. The actual liability will not be known until each plan completes a final assessment of the withdrawal liability and issues a demand to us.
The results of operations of the New England Media Group have been classified as discontinued operations for all periods presented.
Pension Withdrawal Expense

In the third quarter of 2013, we recorded a $6.2 million charge related to a partial withdrawal obligation under a multiemployer pension plan.

21



RESULTS OF OPERATIONS

The following table presents our consolidated financial results.
 
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 29, 2013
 
September 23, 2012
 
% Change
 
September 29, 2013
 
September 23, 2012
 
% Change
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Circulation
 
$
204,156

 
$
194,739

 
4.8

 
$
616,603

 
$
578,914

 
6.5

Advertising
 
138,018

 
140,880

 
(2.0
)
 
454,595

 
485,368

 
(6.3
)
Other
 
19,564

 
19,718

 
(0.8
)
 
62,172

 
62,945

 
(1.2
)
Total revenues
 
361,738

 
355,337

 
1.8

 
1,133,370

 
1,127,227

 
0.5

Operating costs
 
 
 
 
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
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