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NEW YORK TIMES CO - Quarter Report: 2019 September (Form 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, 2019
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A Common Stock
 
NYT
 
New York Stock Exchange

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 every Interactive Data File required to be submitted 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 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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
 
If an emerging growth company, indicate by the check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  x
Number of shares of each class of the registrant’s common stock outstanding as of November 1, 2019 (exclusive of treasury shares): 
Class A Common Stock
165,235,217

shares
Class B Common Stock
803,404

shares
 




THE NEW YORK TIMES COMPANY
INDEX

 
 
 
 
 
PART I
 
 
 
Financial Information
 
Item
1
 
Financial Statements
 
 
 
 
Condensed Consolidated Balance Sheets as of September 29, 2019 (unaudited) and December 30, 2018
 
 
 
 
Condensed Consolidated Statements of Operations (unaudited) for the quarters and nine months ended September 29, 2019 and September 30, 2018
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the quarters and nine months ended September 29, 2019 and September 30, 2018
 
 
 
 
Condensed Consolidated Statements of Changes In Stockholder’s Equity (unaudited) for the quarters and nine months ended September 29, 2019 and September 30, 2018
 
 
 
 
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 29, 2019 and September 30, 2018
 
 
 
 
Notes to the Condensed Consolidated Financial Statements
 
Item
2
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item
3
 
Quantitative and Qualitative Disclosures about Market Risk
 
Item
4
 
Controls and Procedures
 
 
 
PART II
 
 
 
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, 2019


December 30, 2018

 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
283,795

 
$
241,504

Short-term marketable securities
 
376,863

 
371,301

Accounts receivable (net of allowances of $13,626 in 2019 and $13,249 in 2018)
 
167,081

 
222,464

Prepaid expenses
 
31,442

 
25,349

Other current assets
 
50,108

 
33,328

Total current assets
 
909,289

 
893,946

Other assets
 
 
 
 
Long-term marketable securities
 
217,265

 
213,558

Property, plant and equipment (less accumulated depreciation and amortization of $939,234 in 2019 and $911,845 in 2018)
 
627,059

 
638,846

Goodwill
 
137,256

 
140,282

Deferred income taxes
 
124,412

 
128,431

Miscellaneous assets
 
239,680

 
182,060

Total assets
 
$
2,254,961

 
$
2,197,123

 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, 2019

 
December 30, 2018

 
 
(Unaudited)
 
 
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
106,867

 
$
111,553

Accrued payroll and other related liabilities
 
99,055

 
104,543

Unexpired subscriptions revenue
 
86,748

 
84,044

Short-term debt and finance lease obligations
 
246,208

 
253,630

Accrued expenses and other
 
120,904

 
119,534

Total current liabilities
 
659,782

 
673,304

Other liabilities
 
 
 
 
Pension benefits obligation
 
333,312

 
362,940

Postretirement benefits obligation
 
37,651

 
40,391

Other
 
126,450

 
77,847

Total other liabilities
 
497,413

 
481,178

Stockholders’ equity
 
 
 
 
Common stock of $.10 par value:
 
 
 
 
Class A – authorized: 300,000,000 shares; issued: 2019 – 174,106,014; 2018 – 173,158,414 (including treasury shares: 2019 – 8,870,801; 2018 – 8,870,801)
 
17,411

 
17,316

Class B – convertible – authorized and issued shares: 2019 – 803,408; 2018 – 803,408
 
80

 
80

Additional paid-in capital
 
203,293

 
206,316

Retained earnings
 
1,552,788

 
1,506,004

Common stock held in treasury, at cost
 
(171,211
)
 
(171,211
)
Accumulated other comprehensive loss, net of income taxes:
 
 
 
 
Foreign currency translation adjustments
 
2,254

 
4,677

Funded status of benefit plans
 
(509,403
)
 
(520,308
)
Net unrealized gain/(loss) on available-for-sale securities
 
694

 
(2,093
)
Total accumulated other comprehensive loss, net of income taxes
 
(506,455
)
 
(517,724
)
Total New York Times Company stockholders’ equity
 
1,095,906

 
1,040,781

Noncontrolling interest
 
1,860

 
1,860

Total stockholders’ equity
 
1,097,766

 
1,042,641

Total liabilities and stockholders’ equity
 
$
2,254,961

 
$
2,197,123

 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, 2019


September 30, 2018

 
September 29, 2019

 
September 30, 2018

 
 
(13 weeks)
 
(39 weeks)
Revenues
 
 
 
 
 
 
 
 
Subscription
 
$
267,302

 
$
257,796

 
$
808,568

 
$
779,018

Advertising
 
113,531

 
121,677

 
359,380

 
366,525

Other
 
47,668

 
37,873

 
135,873

 
100,311

Total revenues
 
428,501

 
417,346

 
1,303,821

 
1,245,854

Operating costs
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
 
Wages and benefits
 
106,377

 
95,941

 
313,244

 
280,688

Raw materials
 
18,531

 
19,972

 
57,527

 
54,490

Other production costs
 
53,868

 
47,521

 
149,102

 
138,454

Total production costs
 
178,776

 
163,434

 
519,873

 
473,632

Selling, general and administrative costs
 
207,226

 
202,473

 
638,820

 
614,464

Depreciation and amortization
 
15,450

 
14,847

 
45,548

 
43,969

Total operating costs
 
401,452

 
380,754

 
1,204,241

 
1,132,065

Headquarters redesign and consolidation
 

 

 

 
3,140

Restructuring charge
 
4,008

 

 
4,008

 

Gain from pension liability adjustment
 
(2,045
)
 
(4,851
)
 
(2,045
)
 
(4,851
)
Operating profit
 
25,086

 
41,443

 
97,617

 
115,500

Other components of net periodic benefit costs
 
1,834

 
2,335

 
5,502

 
6,226

Loss from joint ventures
 

 
(16
)
 

 
(9
)
Interest expense and other, net
 
755

 
4,026

 
3,572

 
13,439

Income from continuing operations before income taxes
 
22,497

 
35,066

 
88,543

 
95,826

Income tax expense
 
6,070

 
10,092

 
16,789

 
25,342

Net income
 
16,427

 
24,974

 
71,754

 
70,484

Net loss attributable to the noncontrolling interest
 

 
2

 

 
1

Net income attributable to The New York Times Company common stockholders
 
$
16,427

 
$
24,976

 
$
71,754

 
$
70,485

Average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
166,148

 
165,064

 
165,976

 
164,742

Diluted
 
167,555

 
166,966

 
167,384

 
166,671

Basic earnings per share attributable to The New York Times Company common stockholders
 
$
0.10

 
$
0.15

 
$
0.43

 
$
0.43

Diluted earnings per share attributable to The New York Times Company common stockholders
 
$
0.10

 
$
0.15

 
$
0.43

 
$
0.42

Dividends declared per share
 
$
0.05

 
$
0.04

 
$
0.15

 
$
0.12

See Notes to Condensed Consolidated Financial Statements.




3



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
 
For the Quarters Ended
 
For the Nine Months Ended
 
 
September 29, 2019

 
September 30, 2018

 
September 29, 2019

 
September 30, 2018

 
 
(13 weeks)
 
(39 weeks)
Net income
 
$
16,427

 
$
24,974

 
$
71,754

 
$
70,484

Other comprehensive income, before tax:
 
 
 
 
 
 
 
 
Loss on foreign currency translation adjustments
 
(3,159
)
 
(567
)
 
(3,286
)
 
(2,923
)
Pension and postretirement benefits obligation
 
4,893

 
8,009

 
14,685

 
24,850

Net unrealized gain/(loss) on available-for-sale securities
 
284

 
314

 
3,773

 
(784
)
Other comprehensive income, before tax
 
2,018

 
7,756

 
15,172

 
21,143

Income tax expense
 
489

 
2,031

 
3,903

 
5,535

Other comprehensive income, net of tax
 
1,529

 
5,725

 
11,269

 
15,608

Comprehensive income
 
17,956

 
30,699

 
83,023

 
86,092

Comprehensive loss attributable to the noncontrolling interest
 

 
2

 

 
1

Comprehensive income attributable to The New York Times Company common stockholders
 
$
17,956

 
$
30,701

 
$
83,023

 
$
86,093

 See Notes to Condensed Consolidated Financial Statements.

4



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Quarters Ended September 29, 2019 and September 30, 2018
(Unaudited)
(In thousands, except share data)
 
 
Capital Stock -
Class A
and
Class B Common
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock
Held in
Treasury,
at Cost
Accumulated
Other
Comprehensive
Loss, Net of
Income
Taxes
Total
New York
Times
Company
Stockholders’
Equity
Non-
controlling
Interest
Total
Stock-
holders’
Equity
 
 
Balance, July 1, 2018
$
17,376

$
201,601

$
1,439,121

$
(171,211
)
$
(507,281
)
$
979,606

$
85

$
979,691

 
Net income


24,976



24,976

(2
)
24,974

 
Dividends


(6,634
)


(6,634
)

(6,634
)
 
Other comprehensive income




5,725

5,725


5,725

 
Issuance of shares:
 
 
 
 
 
 
 
 
 
Stock options – 34,000 Class A shares
3

120




123


123

 
Restricted stock units vested – 7,648 Class A shares
1

(92
)



(91
)

(91
)
 
Stock-based compensation

2,883




2,883


2,883

 
Balance, September 30, 2018
$
17,380

$
204,512

$
1,457,463

$
(171,211
)
$
(501,556
)
$
1,006,588

$
83

$
1,006,671

 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2019
$
17,488

$
200,356

$
1,544,694

$
(171,211
)
$
(507,984
)
$
1,083,343

$
1,860

$
1,085,203

 
Net income


16,427



16,427


16,427

 
Dividends


(8,333
)


(8,333
)

(8,333
)
 
Other comprehensive income




1,529

1,529


1,529

 
Issuance of shares:
 
 
 
 
 
 
 
 
 
Stock options – 3,000 Class A shares

33




33


33

 
Restricted stock units vested – 25,512 Class A shares
3

(3
)






 
Stock-based compensation

2,907




2,907


2,907

 
Balance, September 29, 2019
$
17,491

$
203,293

$
1,552,788

$
(171,211
)
$
(506,455
)
$
1,095,906

$
1,860

$
1,097,766























5





THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Nine Months Ended September 29, 2019 and September 30, 2018
(Unaudited)
(In thousands, except share data)
 
 
Capital Stock -
Class A
and
Class B Common
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock
Held in
Treasury,
at Cost
Accumulated
Other
Comprehensive
Loss, Net of
Income
Taxes
Total
New York
Times
Company
Stockholders’
Equity
Non-
controlling
Interest
Total
Stock-
holders’
Equity
 
 
Balance, December 31, 2017
$
17,108

$
164,275

$
1,310,136

$
(171,211
)
$
(423,029
)
$
897,279

$
84

$
897,363

 
Impact of adopting new accounting guidance


96,707


(94,135
)
2,572


2,572

 
Net income


70,485



70,485

(1
)
70,484

 
Dividends


(19,865
)


(19,865
)

(19,865
)
 
Other comprehensive income




15,608

15,608


15,608

 
Issuance of shares:
 
 
 
 
 
 
 
 
 
Stock options – 2,219,201 Class A shares
222

40,428




40,650


40,650

 
Restricted stock units vested – 230,822 Class A shares
23

(3,168
)



(3,145
)

(3,145
)
 
Performance-based awards – 271,841 Class A shares
27

(5,930
)



(5,903
)

(5,903
)
 
Stock-based compensation

8,907




8,907


8,907

 
Balance, September 30, 2018
$
17,380

$
204,512

$
1,457,463

$
(171,211
)
$
(501,556
)
$
1,006,588

$
83

$
1,006,671

 
 
 
 
 
 
 
 
 
 
 
Balance, December 30, 2018
$
17,396

$
206,316

$
1,506,004

$
(171,211
)
$
(517,724
)
$
1,040,781

$
1,860

$
1,042,641

 
Net income


71,754



71,754


71,754

 
Dividends


(24,970
)


(24,970
)

(24,970
)
 
Other comprehensive income




11,269

11,269


11,269

 
Issuance of shares:
 
 
 
 
 
 
 
 
 
Stock options – 282,510 Class A shares
28

2,970




2,998


2,998

 
Restricted stock units vested – 246,599 Class A shares
25

(3,750
)



(3,725
)

(3,725
)
 
Performance-based awards – 418,491 Class A shares
42

(11,966
)



(11,924
)

(11,924
)
 
Stock-based compensation

9,723




9,723


9,723

 
Balance, September 29, 2019
$
17,491

$
203,293

$
1,552,788

$
(171,211
)
$
(506,455
)
$
1,095,906

$
1,860

$
1,097,766





6



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 
For the Nine Months Ended
 
 
September 29, 2019

 
September 30, 2018

 
 
(39 weeks)
Cash flows from operating activities
 
 
 
 
Net income
 
$
71,754

 
$
70,484

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
45,548

 
43,969

Stock-based compensation expense
 
9,723

 
9,969

Long-term retirement benefit obligations
 
(17,648
)
 
(19,769
)
Fair market value adjustment on life insurance products
 
(2,215
)
 
(823
)
Other-net
 
(3,350
)
 
1,183

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable-net
 
55,383

 
27,024

Other assets
 
(17,401
)
 
6,226

Accounts payable, accrued payroll and other liabilities
 
(22,898
)
 
(28,702
)
Unexpired subscriptions
 
2,704

 
6,815

Net cash provided by operating activities
 
121,600

 
116,376

Cash flows from investing activities
 
 
 
 
Purchases of marketable securities
 
(466,108
)
 
(386,842
)
Maturities of marketable securities
 
458,810

 
346,601

Capital expenditures
 
(33,101
)
 
(61,983
)
Other-net
 
3,141

 
(1,585
)
Net cash used in investing activities
 
(37,258
)
 
(103,809
)
Cash flows from financing activities
 
 
 
 
Long-term obligations:
 
 
 
 
Repayment of debt and finance lease obligations
 
(7,220
)
 
(414
)
Dividends paid
 
(23,269
)
 
(19,761
)
Capital shares:
 
 
 
 
Proceeds from stock option exercises
 
2,998

 
40,650

Share-based compensation tax withholding
 
(15,648
)
 
(9,048
)
Net cash (used in)/provided by financing activities
 
(43,139
)
 
11,427

Net increase in cash, cash equivalents and restricted cash
 
41,203

 
23,994

Effect of exchange rate changes on cash
 
(202
)
 
(540
)
Cash, cash equivalents and restricted cash at the beginning of the period
 
259,799

 
200,936

Cash, cash equivalents and restricted cash at the end of the period
 
$
300,800

 
$
224,390


 See Notes to Condensed Consolidated Financial Statements.



7


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


NOTE 1. BASIS OF PRESENTATION
In the opinion of management of The New York Times Company (the “Company”), the Condensed Consolidated Financial Statements present fairly the financial position of the Company as of September 29, 2019, and December 30, 2018, and the results of operations, changes in stockholder’s equity and cash flows of the Company for the periods ended September 29, 2019, and September 30, 2018. 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 (“GAAP”) 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, 2018. 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.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements. Actual results could differ from these estimates.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Except as described herein, as of September 29, 2019, our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the year ended December 30, 2018, have not changed materially.
Recently Adopted Accounting Pronouncements
Accounting Standard Update(s)
Topic
Effective Period
Summary
2016-02
2018-10
2018-11
2018-20
2019-01
Leases
Fiscal years beginning after December 30, 2018. Early adoption is permitted.
The Financial Accounting Standards Board (the “FASB”) issued authoritative guidance on accounting for leases and disclosure of key information about leasing arrangements. The guidance requires lessees to recognize the following for all operating and finance leases at such lease’s commencement date: (1) a lease liability, which is the obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset representing the lessee’s right to use, or control the use of, the underlying asset for the lease term. A lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities for short-term leases with a term of 12 months or less. The guidance does not fundamentally change lessor accounting; however, some changes have been made to align that guidance with the lessee guidance and other areas within GAAP.
The Company adopted this Accounting Standard Update (“ASU”) on December 31, 2018, utilizing the modified retrospective approach with optional transition relief. Prior periods have not been retrospectively adjusted and we recorded approximately $36 million of right-of-use asset and $42 million of lease liability in our Condensed Consolidated Balance Sheet. The difference between the right-of-use asset and lease liability was due to deferred rent relating to periods prior to December 31, 2018. We have elected the practical expedients under ASU 2016-02 and have not reassessed any of the following: (1) whether any expired or existing contracts are or contain a lease, (2) the classification of any existing leases prior to the adoption of ASU 2016-02 or (3) initial direct costs for any existing leases. The Company has elected not to apply the recognition requirements in ASU 2016-02 to leases with durations of 12 months or less. Lease payments for leases with durations of 12 months or less are recorded in the statement of operations on a straight-line basis over the term of the lease. In addition, we elected the practical expedient not to separate the lease and non-lease components in the contract for our office space and equipment leases and for office space we lease to third parties.


8


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

Recently Issued and Not Yet Adopted Accounting Pronouncements
Accounting Standard Update(s)
Topic
Effective Period
Summary
2018-15
Intangibles—Goodwill and Other—Internal-Use Software
Fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted.
The FASB issued authoritative guidance that clarifies the accounting for implementation costs in cloud computing arrangements. The standard provides that implementation costs be evaluated for capitalization using the same criteria as that used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement. We do not believe the adoption of this guidance will have a material impact on our condensed consolidated financial statements.
2018-14
Compensation—Retirement Benefits—Defined Benefit Plans—General
Fiscal years ending after December 15, 2020. Early adoption is permitted.
The FASB issued authoritative guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. We are currently in the process of evaluating the impact of this guidance on our disclosures.
2018-13
Fair Value Measurement (Topic 820) Disclosure Framework
Fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted.
The FASB issued authoritative guidance that modifies the disclosure requirements on fair value measurements. The amendments of disclosures related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We are currently in the process of evaluating the impact of this guidance on our disclosures.
2016-13
2018-19
2019-04

Financial Instruments—Credit Losses
Fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
The FASB issued authoritative guidance that amends guidance on reporting credit losses for assets, including trade receivables, available-for-sale marketable securities and any other financial assets not excluded from the scope that have the contractual right to receive cash. For trade receivables, ASU 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting standards, and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the gross trade receivables balance to present the net amount expected to be collected. For available-for-sale marketable securities, credit losses should be measured in a manner similar to current generally accepted accounting standards; however, ASU 2016-13 will require that credit losses be presented as an allowance rather than as a write-down. We are currently in the process of evaluating the impact of this guidance on our condensed consolidated financial statements.

The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.
NOTE 3. REVENUE
We generate revenues principally from subscriptions and advertising. Subscription revenues consist of revenues from subscriptions to our print and digital products (which include our news product, as well as our Crossword and Cooking products) and single-copy and bulk sales of our print products. 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.
Advertising revenues are derived from the sale of our advertising products and services on our print and digital platforms. These revenues are primarily determined by the volume, rate and mix of advertisements. Display advertising revenue is principally from advertisers promoting products, services or brands. Display advertising also includes branded content on The Times’s platforms. Other advertising primarily represents, for our print products, classified advertising revenue. Digital other advertising revenue primarily includes creative services fees; advertising revenue from our podcasts; and advertising revenue generated by Wirecutter, our product review and recommendation website.

9


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

Other revenues primarily consist of revenues from licensing, commercial printing, the leasing of floors in the Company Headquarters, affiliate referrals (revenue generated by offering direct links to merchants in exchange for a portion of the sale price), television (primarily from our television series, “The Weekly”), NYT Live (our live events business) and retail commerce.
Subscription, advertising and other revenues were as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
September 29, 2019

 
September 30, 2018

Subscription
 
$
267,302

 
$
257,796

 
$
808,568

 
$
779,018

Advertising
 
113,531

 
121,677

 
359,380

 
366,525

Other (1)
 
47,668

 
37,873

 
135,873

 
100,311

Total
 
$
428,501

 
$
417,346

 
$
1,303,821

 
$
1,245,854

(1) Other revenue includes building rental revenue, which is not under the scope of Revenue from Contracts with Customers (Topic 606). Building rental revenue was approximately $8 million and $7 million for the third quarters of 2019 and 2018, respectively, and approximately $23 million and $17 million for the first nine months of 2019 and 2018, respectively.
The following table summarizes digital-only subscription revenues, which are a component of subscription revenues above, for the third quarters and first nine months of 2019 and 2018:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
September 29, 2019

 
September 30, 2018

Digital-only subscription revenues:
 
 
 
 
 
 
 
 
News product subscription revenues(1)
 
$
107,009

 
$
95,568

 
$
313,785

 
$
279,693

Other product subscription revenues(2)
 
8,855

 
5,639

 
24,573

 
15,669

Total digital-only subscription revenues
 
$
115,864

 
$
101,207

 
$
338,358

 
$
295,362

(1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Crossword and Cooking products are also included in this category.
(2) Includes revenues from standalone subscriptions to the Company’s Crossword and Cooking products.

Advertising revenues (print and digital) by category were as follows:
 
 
For the Quarters Ended
 
 
September 29, 2019
 
September 30, 2018
(In thousands)
 
Print
 
Digital
 
Total
 
Print
 
Digital
 
Total
Advertising revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Display
 
$
51,702

 
$
36,202

 
$
87,904

 
$
57,245

 
$
43,730

 
$
100,975

Other
 
7,176

 
18,451

 
25,627

 
6,676

 
14,026

 
20,702

Total advertising
 
$
58,878

 
$
54,653

 
$
113,531

 
$
63,921

 
$
57,756

 
$
121,677


 
 
For the Nine Months Ended
 
 
September 29, 2019
 
September 30, 2018
(In thousands)
 
Print
 
Digital
 
Total
 
Print
 
Digital
 
Total
Advertising revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Display
 
$
169,903

 
$
121,147

 
$
291,050

 
$
188,853

 
$
123,870

 
$
312,723

Other
 
21,255

 
47,075

 
68,330

 
22,182

 
31,620

 
53,802

Total advertising
 
$
191,158

 
$
168,222

 
$
359,380

 
$
211,035

 
$
155,490

 
$
366,525


10


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

Performance Obligations
We have remaining performance obligations related to digital archive licensing and certain advertising contracts. As of September 29, 2019, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately $95 million. The Company will recognize this revenue as control of the performance obligation is transferred to the customer. We expect that approximately $7 million, $25 million and $63 million will be recognized in the remainder of 2019, 2020 and thereafter, respectively.
These remaining performance obligations exclude contracts that have an original expected duration of one year or less.
Contract Assets
As of September 29, 2019, and December 30, 2018, the Company had $3.7 million and $2.5 million, respectively, in contract assets recorded in Other current assets in the Condensed Consolidated Balance Sheets. The contract asset is reclassified to Accounts receivable when the customer is invoiced based on the contractual billing schedule. The increase in the contract assets balance of $1.2 million for the nine months ended September 29, 2019, is primarily driven by new contract assets of $1.9 million offset by $0.7 million of consideration that was reclassified to Accounts receivable when invoiced based on the contractual billing schedules for the nine months ended September 29, 2019.
NOTE 4. MARKETABLE SECURITIES
The Company accounts for its marketable securities as available for sale (“AFS”). The Company recorded $0.9 million and $2.8 million of net unrealized gains and net unrealized losses, respectively, in Accumulated other comprehensive income (“AOCI”) as of September 29, 2019, and December 30, 2018, respectively.
The following tables present the amortized cost, gross unrealized gains and losses, and fair market value of our AFS debt securities as of September 29, 2019, and December 30, 2018:
 
 
September 29, 2019
(In thousands)
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair Value
Short-term AFS securities
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
123,224

 
$
46

 
$
(47
)
 
$
123,223

Corporate debt securities
 
109,792

 
263

 
(36
)
 
110,019

Commercial paper
 
69,298

 

 

 
69,298

U.S. governmental agency securities
 
60,515

 
15

 
(17
)
 
60,513

Certificates of deposit
 
13,810

 

 

 
13,810

Total short-term AFS securities
 
$
376,639

 
$
324

 
$
(100
)
 
$
376,863

Long-term AFS securities
 
 
 
 
 
 
 

Corporate debt securities
 
$
93,989

 
$
696

 
$
(22
)
 
$
94,663

U.S. Treasury securities
 
71,313

 
121

 
(67
)
 
71,367

U.S. governmental agency securities
 
51,258

 
27

 
(50
)
 
51,235

Total long-term AFS securities
 
$
216,560

 
$
844

 
$
(139
)
 
$
217,265



11


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

 
 
December 30, 2018
(In thousands)
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair Value
Short-term AFS securities
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
107,717

 
$

 
$
(232
)
 
$
107,485

Corporate debt securities
 
140,631

 
1

 
(464
)
 
140,168

Commercial paper
 
8,177

 

 

 
8,177

U.S. governmental agency securities
 
92,628

 

 
(654
)
 
91,974

Certificates of deposit
 
23,497

 

 

 
23,497

Total short-term AFS securities
 
$
372,650

 
$
1

 
$
(1,350
)
 
$
371,301

Long-term AFS securities
 
 
 
 
 
 
 
 
Corporate debt securities
 
$
130,612

 
$
44

 
$
(1,032
)
 
$
129,624

U.S. Treasury securities
 
47,079

 
5

 
(347
)
 
46,737

U.S. governmental agency securities
 
37,362

 
3

 
(168
)
 
37,197

Total long-term AFS securities
 
$
215,053

 
$
52

 
$
(1,547
)
 
$
213,558


The following tables represent the AFS securities as of September 29, 2019, and December 30, 2018, that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
 
 
September 29, 2019
 
 
Less than 12 Months
 
12 Months or Greater
 
Total
(In thousands)
 
Fair Value
 
Gross unrealized losses
 
Fair Value
 
Gross unrealized losses
 
Fair Value
 
Gross unrealized losses
Short-term AFS securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
14,863

 
$
(7
)
 
$
23,113

 
$
(40
)
 
$
37,976

 
$
(47
)
Corporate debt securities
 
12,678

 
(3
)
 
36,975

 
(33
)
 
49,653

 
(36
)
U.S. governmental agency securities
 
4,998

 

 
23,188

 
(17
)
 
28,186

 
(17
)
Total short-term AFS securities
 
$
32,539

 
$
(10
)
 
$
83,276

 
$
(90
)
 
$
115,815

 
$
(100
)
Long-term AFS securities
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
$
11,008

 
$
(15
)
 
$
8,004

 
$
(7
)
 
$
19,012

 
$
(22
)
U.S. Treasury securities
 
35,727

 
(67
)
 

 

 
35,727

 
(67
)
U.S. governmental agency securities
 
41,958

 
(50
)
 

 

 
41,958

 
(50
)
Total long-term AFS securities
 
$
88,693

 
$
(132
)
 
$
8,004

 
$
(7
)
 
$
96,697

 
$
(139
)

12


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

 
 
December 30, 2018
 
 
Less than 12 Months
 
12 Months or Greater
 
Total
(In thousands)
 
Fair Value
 
Gross unrealized losses
 
Fair Value
 
Gross unrealized losses
 
Fair Value
 
Gross unrealized losses
Short-term AFS securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
70,830

 
$
(31
)
 
$
28,207

 
$
(201
)
 
$
99,037

 
$
(232
)
Corporate debt securities
 
76,886

 
(115
)
 
61,459

 
(349
)
 
138,345

 
(464
)
U.S. governmental agency securities
 
11,664

 
(4
)
 
80,311

 
(650
)
 
91,975

 
(654
)
Total short-term AFS securities
 
$
159,380

 
$
(150
)
 
$
169,977

 
$
(1,200
)
 
$
329,357

 
$
(1,350
)
Long-term AFS securities
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
 
$
81,655

 
$
(570
)
 
$
27,265

 
$
(462
)
 
$
108,920

 
$
(1,032
)
U.S. governmental agency securities
 
21,579

 
(36
)
 
11,868

 
(132
)
 
33,447

 
(168
)
U.S. Treasury securities
 
20,479

 
(29
)
 
23,762

 
(318
)
 
44,241

 
(347
)
Total long-term AFS securities
 
$
123,713

 
$
(635
)
 
$
62,895

 
$
(912
)
 
$
186,608

 
$
(1,547
)

We conduct an other-than-temporary impairment (“OTTI”) analysis on a quarterly basis or more often if a potential loss-triggering event occurs. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and whether we intend to sell. We also consider whether (i) it is more likely than not that we will be required to sell the debt securities before recovery of their amortized cost basis and (ii) the amortized cost basis cannot be recovered as a result of credit losses.
As of September 29, 2019, we did not intend to sell and it was not likely that we would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. Unrealized losses related to these investments are primarily due to interest rate fluctuations as opposed to changes in credit quality. Therefore, as of September 29, 2019, we have recognized no OTTI loss.
As of September 29, 2019, our short-term and long-term marketable securities had remaining maturities of less than 1 month to 12 months and 13 months to 34 months, respectively. See Note 9 for more information regarding the fair value of our marketable securities.
NOTE 5. GOODWILL AND INTANGIBLES
The changes in the carrying amount of goodwill as of September 29, 2019, and since December 30, 2018, were as follows:
(In thousands)
 
Total Company
Balance as of December 30, 2018
 
$
140,282

Foreign currency translation
 
(3,026
)
Balance as of September 29, 2019
 
$
137,256



The foreign currency translation line item reflects changes in goodwill resulting from fluctuating exchange rates related to the consolidation of certain international subsidiaries.
The aggregate carrying amount of intangible assets of $3.3 million is included in Miscellaneous assets in our Condensed Consolidated Balance Sheets as of September 29, 2019.

13


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

NOTE 6. INVESTMENTS
Equity Method Investments
Our investments in joint ventures consists of a 40% equity ownership interest in Madison Paper Industries (“Madison”), a partnership that previously operated a supercalendered paper mill in Maine. The Company and UPM-Kymmene Corporation (“UPM”), a Finnish paper manufacturing company, are partners through subsidiary companies in Madison. The Company’s 40% ownership of Madison is through an 80%-owned consolidated subsidiary that owns 50% of Madison. UPM owns 60% of Madison, including a 10% interest through a 20% noncontrolling interest in the consolidated subsidiary of the Company.
In 2016, the paper mill closed. During the fourth quarter of 2018, we received a $12.5 million cash distribution in connection with the pending liquidation of Madison. We received no distributions from Madison during the first nine months of 2019 and 2018, respectively. We expect to receive a final cash distribution in the range of $5 million to $8 million.
As of September 29, 2019, and December 30, 2018, the value of our investments in joint ventures was zero. Our proportionate share of the operating results of our investment for the quarters ended September 29, 2019, and September 30, 2018, was de minimis and was recorded in Loss from joint ventures in our Condensed Consolidated Statements of Operations.
Non-Marketable Equity Securities
Our non-marketable equity securities are investments in privately held companies/funds without readily determinable market values. Realized gains and losses on non-marketable securities sold or impaired are recognized in Interest expense and other, net.
As of September 29, 2019, and December 30, 2018, non-marketable equity securities included in Miscellaneous assets in our Condensed Consolidated Balance Sheets had a carrying value of $13.3 million and $13.7 million, respectively. During the first quarter of 2019, we recorded a gain of $1.9 million from fair value adjustment related to the sale of one of our investments in Interest expense and other, net in our Condensed Consolidated Statements of Operations.
NOTE 7. DEBT OBLIGATIONS
Our indebtedness consisted of the repurchase option related to the sale-leaseback of a portion of our New York headquarters building located at 620 Eighth Avenue, New York, New York (the “Company Headquarters”). Our total debt and finance lease obligations consisted of the following:
(In thousands)
 
September 29, 2019

 
December 30, 2018

Option to repurchase ownership interest in headquarters building in 2019:
 
 
 
 
Principal amount (1)
 
$
245,339

 
$
250,000

Less unamortized (premium)/discount based on imputed interest rate of 12.0% in 2019 and 13.0% in 2018
 
(869
)
 
3,202

Net option to repurchase ownership interest in headquarters building in 2019
 
246,208

 
246,798

Finance lease obligation (2)
 

 
6,832

Total short-term debt and finance lease obligations
 
$
246,208

 
$
253,630


(1) The reduction in principal amount reflects a $4.7 million credit to the repurchase price as the result of a change in the closing date to December 2019. This credit is accounted for as a reduction in interest expense.
(2) On August 1, 2019, we purchased the previously leased land at our College Point, N.Y., printing and distribution facility, which resulted in the settlement of our finance lease obligation.
See Note 9 for more information regarding the fair value of our debt and Note 15 for more information regarding finance lease obligation.


14


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

Interest expense and other, net, as shown in the accompanying Condensed Consolidated Statements of Operations was as follows:
 
 
For the Quarters Ended
 
For the Nine Months Ended
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
September 29, 2019

 
September 30, 2018

Interest expense
 
$
7,118

 
$
7,061

 
$
21,314

 
$
21,078

Amortization of debt costs and (premium)/discount on debt
 
(1,278
)
 
839

 
(590
)
 
2,528

Capitalized interest
 
(7
)
 
(38
)
 
(59
)
 
(412
)
Interest income and other expense, net (1)
 
(5,078
)
 
(3,836
)
 
(17,093
)
 
(9,755
)
Total interest expense and other, net
 
$
755

 
$
4,026

 
$
3,572

 
$
13,439


(1) The nine months ended September 29, 2019, include a fair value adjustment of $1.9 million related to the sale of a non-marketable equity security.
Notice of Intent to Exercise Repurchase Option Under Lease Agreement
On January 30, 2018, the Company provided notice to an affiliate of W.P. Carey & Co. LLC of the Company’s intention to exercise in the fourth quarter of 2019 its option under the Lease Agreement, dated March 6, 2009, by and between the parties (the “Lease”) to repurchase a portion of the Company’s leasehold condominium interest in the Company Headquarters.
The Company has accounted for the transaction as a financing transaction and accounted for the rental payments as interest expense. The difference between the purchase option price and the net sale proceeds from the transaction is being amortized over the 10-year period of 2009-2019 through interest expense.
The Lease was part of a transaction in 2009 under which the Company sold and simultaneously leased back approximately 750,000 rentable square feet, in the Company Headquarters (the “Condo Interest”). The sale price for the Condo Interest was approximately $225 million. In December 2019, we expect to repurchase the Condo Interest for $245.3 million.
Revolving Credit Facility
In September 2019, the Company entered into a $250.0 million five-year unsecured revolving credit facility (the “Credit Facility”). Certain of the Company’s domestic subsidiaries have guaranteed the Company’s obligations under the Credit Facility. Borrowings under the Credit Facility bear interest at specified rates based on our utilization and consolidated leverage ratio. The Credit Facility contains various customary affirmative and negative covenants. In addition, the Company is obligated to pay a quarterly unused commitment fee of 0.20%.
As of September 29, 2019, there were no outstanding borrowings under the Credit Facility and the Company was not aware of any instances of non-compliance with the financial covenants contained in the documents governing the Credit Facility.
NOTE 8. OTHER
Capitalized Computer Software Costs
Amortization of capitalized computer software costs included in Depreciation and amortization in our Condensed Consolidated Statements of Operations were $4.4 million and $4.1 million in the third quarters of 2019 and 2018, respectively, and $13.1 million and $11.4 million in the first nine months of 2019 and 2018, respectively.
Headquarters Redesign and Consolidation
In 2017 and 2018, we redesigned our Company Headquarters, consolidated our space within a smaller number of floors and leased the additional floors to third parties. As the project was substantially completed as of December 30, 2018, we did not incur significant expenses related to these measures in the third quarter and in the first nine months of 2019. We did not incur significant expenses in the third quarter of 2018 and incurred $3.1 million of total expenses in the first nine months of 2018 related to these measures. We capitalized a de minimis amount and approximately $3 million in the third quarters of 2019 and 2018, respectively, and less than $1 million and $14 million in the first nine months of 2019 and 2018, related to these measures.
Marketing Expenses
Marketing expense to promote our brand and products and grow our subscriber base was $38.4 million and $40.4 million in the third quarters of 2019 and 2018, respectively, and $122.5 million and $107.6 million in the first nine months of 2019 and 2018, respectively.

15


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

Restricted Cash
A reconciliation of cash, cash equivalents and restricted cash as of September 29, 2019, and December 30, 2018, from the Condensed Consolidated Balance Sheets to the Condensed Consolidated Statements of Cash Flows is as follows:
(In thousands)
 
September 29, 2019

 
December 30, 2018

Reconciliation of cash, cash equivalents and restricted cash
 
 
 
 
Cash and cash equivalents
 
$
283,795

 
$
241,504

Restricted cash included within other current assets
 
613

 
642

Restricted cash included within miscellaneous assets
 
16,392

 
17,653

Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows
 
$
300,800

 
$
259,799


Substantially all of the amount included in restricted cash is set aside to collateralize workers’ compensation obligations.
Restructuring Charge
We recognized a restructuring charge of $4.0 million in the third quarter of 2019, which included impairment and severance charges related to the closure of our digital marketing agency, HelloSociety, LLC. These costs are recorded in Restructuring charge in our Condensed Consolidated Statements of Operations.
Severance Costs
We recognized severance costs of $0.3 million in each of the third quarters of 2019 and 2018, and $2.4 million and $4.9 million in the first nine months of 2019 and 2018, respectively, related to workforce reductions. These costs are recorded in Selling, general and administrative costs in our Condensed Consolidated Statements of Operations.
We had a severance liability of $8.1 million and $8.3 million included in Accrued expenses and other in our Condensed Consolidated Balance Sheets as of September 29, 2019, and December 30, 2018, respectively. The September 29, 2019 balance includes severance liabilities related to the restructuring charge recorded in our Condensed Consolidated Statements of Operations. We anticipate most of the payments will be made within the next twelve months.
NOTE 9. 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.

16


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

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of September 29, 2019, and December 30, 2018:
(In thousands)
 
September 29, 2019
 
December 30, 2018
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term AFS securities (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
123,223

 
$

 
$
123,223

 
$

 
$
107,485

 
$

 
$
107,485

 
$

Corporate debt securities
 
110,019

 

 
110,019

 

 
140,168

 

 
140,168

 

Commercial paper
 
69,298

 

 
69,298

 

 
8,177

 

 
8,177

 

U.S. governmental agency securities
 
60,513

 

 
60,513

 

 
91,974

 

 
91,974

 

Certificates of deposit
 
13,810

 

 
13,810

 

 
23,497

 

 
23,497

 

Total short-term AFS securities
 
$
376,863

 
$

 
$
376,863

 
$

 
$
371,301

 
$

 
$
371,301

 
$

Long-term AFS securities (1)
 

 

 

 

 

 

 

 

Corporate debt securities
 
$
94,663

 
$

 
$
94,663

 
$

 
$
129,624

 
$

 
$
129,624

 
$

U.S. Treasury securities
 
71,367

 

 
71,367

 

 
46,737

 

 
46,737

 

U.S. governmental agency securities
 
51,235

 

 
51,235

 

 
37,197

 

 
37,197

 

Total long-term AFS securities
 
$
217,265

 
$

 
$
217,265

 
$

 
$
213,558

 
$

 
$
213,558

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation (2)(3)
 
$
22,326

 
$
22,326

 
$

 
$

 
$
23,211

 
$
23,211

 
$

 
$


(1) We classified these investments as Level 2 since the fair value is based on market observable inputs for investments with similar terms and maturities.
(2) The deferred compensation liability, included in Other liabilities—other in our Condensed Consolidated Balance Sheets, consists of deferrals under The New York Times Company Deferred Executive Compensation Plan (the “DEC”), which previously enabled 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 and on quoted prices in active markets for identical assets. Participation in the DEC was frozen effective December 31, 2015.
(3) The Company invests deferred compensation assets in life insurance products. Our investments in life insurance products are included in Miscellaneous assets in our Condensed Consolidated Balance Sheets, and were $43.4 million as of September 29, 2019, and $38.1 million as of December 30, 2018. The fair value of these assets is measured using the net asset value per share (or its equivalent) and has not been classified in the fair value hierarchy.
Financial Instruments Disclosed, But Not Reported, at Fair Value
The carrying value of our debt was approximately $246 million as of September 29, 2019, and approximately $247 million as of December 30, 2018. The fair value of our debt was approximately $246 million and $260 million as of September 29, 2019, and December 30, 2018, respectively. 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 10. PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension
Single-Employer Plans
We historically sponsored several frozen single-employer defined benefit pension plans. Effective January 1, 2018, the Company became the sole sponsor of the frozen Newspaper Guild of New York - The New York Times Pension Plan (the “Guild-Times Plan”). Previously, the NewsGuild of New York (the “Guild”) and the Company were joint trustees of The Guild-

17


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

Times Plan. Effective December 31, 2018, the Guild-Times Plan and the Retirement Annuity Plan For Craft Employees of The New York Times Companies (the “RAP”) were merged into The New York Times Companies Pension Plan.
The Company and the Guild jointly sponsor the Guild-Times Adjustable Pension Plan (the “APP”), which continues to accrue active benefits.
The components of net periodic pension cost were as follows:
 
 
For the Quarters Ended
 
 
September 29, 2019
 
September 30, 2018
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
Service cost
 
$
1,278

 
$

 
$
1,278

 
$
2,393

 
$

 
$
2,393

Interest cost
 
14,708

 
2,089

 
16,797

 
13,207

 
1,848

 
15,055

Expected return on plan assets
 
(20,258
)
 

 
(20,258
)
 
(20,591
)
 

 
(20,591
)
Amortization of actuarial loss
 
4,635

 
1,094

 
5,729

 
6,680

 
1,294

 
7,974

Amortization of prior service credit
 
(487
)
 

 
(487
)
 
(487
)
 

 
(487
)
Other
 

 

 

 

 
421

 
421

Net periodic pension (income)/cost (1)
 
$
(124
)
 
$
3,183

 
$
3,059

 
$
1,202

 
$
3,563

 
$
4,765


 
 
For the Nine Months Ended
 
 
September 29, 2019
 
September 30, 2018
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
Service cost
 
$
3,835

 
$

 
$
3,835

 
$
7,593

 
$

 
$
7,593

Interest cost
 
44,125

 
6,265

 
50,390

 
39,564

 
5,543

 
45,107

Expected return on plan assets
 
(60,775
)
 

 
(60,775
)
 
(61,736
)
 

 
(61,736
)
Amortization of actuarial loss
 
13,905

 
3,282

 
17,187

 
20,122

 
3,882

 
24,004

Amortization of prior service credit
 
(1,459
)
 

 
(1,459
)
 
(1,459
)
 

 
(1,459
)
Other
 

 

 

 

 
421

 
421

Net periodic pension (income)/cost (1)
 
$
(369
)
 
$
9,547

 
$
9,178

 
$
4,084

 
$
9,846

 
$
13,930

(1) The service cost component of net periodic pension cost is recognized in Total operating costs, while the other components are included in Other components of net periodic benefit costs in our Condensed Consolidated Statements of Operations, below Operating profit.
During the first nine months of 2019 and 2018, we made pension contributions of $6.3 million and $6.2 million, respectively, to the APP. We expect contributions in 2019 to total approximately $9 million to satisfy funding requirements.
Multiemployer Plans
During the third quarter of 2019 and 2018 we recorded a gain of $2.0 million and $4.9 million, respectively, from multiemployer pension liability adjustments, which were recorded in Gain from pension liability adjustment in our Condensed Consolidated Statements of Operations. See Note 16 for more information.


18


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

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, 2019

 
September 30, 2018

 
September 29, 2019

 
September 30, 2018

Service cost
 
$
6

 
$
8

 
$
20

 
$
18

Interest cost
 
402

 
370

 
1,202

 
1,108

Amortization of actuarial loss
 
843

 
1,183

 
2,531

 
3,551

Amortization of prior service credit
 
(1,192
)
 
(1,590
)
 
(3,574
)
 
(4,772
)
Net periodic postretirement benefit cost/(income) (1)
 
$
59

 
$
(29
)
 
$
179

 
$
(95
)

(1) The service cost component of net periodic postretirement benefit cost is recognized in Total operating costs, while the other components are included in Other components of net periodic benefit costs in our Condensed Consolidated Statements of Operations, below Operating profit.
NOTE 11. INCOME TAXES
The Company had income tax expense of $6.1 million and $16.8 million in the third quarter and first nine months of 2019, respectively. The Company had income tax expense of $10.1 million and $25.3 million in the third quarter and first nine months of 2018, respectively. The Company’s effective tax rates from continuing operations were 27.0% and 19.0% for the third quarter and first nine months of 2019, respectively. The Company received a tax benefit in the first quarter of 2019 from stock price appreciation on stock-based awards that settled in the quarter, resulting in a lower than statutory tax rate for the first nine months of 2019. The Company’s effective tax rates from continuing operations were 28.8% and 26.4% for the third quarter and first nine months of 2018, respectively.
NOTE 12. EARNINGS PER SHARE
We compute earnings per share using a two-class method, which is an earnings allocation method used when a company’s capital structure includes either two or more classes of common stock or common stock and participating securities. This method determines earnings per share based on dividends declared on common stock and participating securities (i.e., distributed earnings), as well as participation rights of participating securities in any undistributed earnings.
Earnings per share is computed using both basic shares and diluted shares. The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. Our stock options, stock-settled long-term performance awards and restricted stock units could have a significant impact on diluted shares. The difference between basic and diluted shares of approximately 1.4 million and 1.9 million as of the third quarters and first nine months of 2019 and 2018, respectively, resulted primarily from the dilutive effect of certain stock options, restricted stock units and performance awards.
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 result in an anti-dilutive effect on per share amounts.
There were no anti-dilutive stock options, stock-settled long-term performance awards or restricted stock units excluded from the computation of diluted earnings per share in the third quarters and first nine months of 2019 and 2018, respectively.
NOTE 13. SUPPLEMENTAL STOCKHOLDERS’ EQUITY INFORMATION
In 2015, the Board of Directors authorized up to $101.1 million of repurchases of shares of the Company’s Class A Common Stock. As of September 29, 2019, repurchases under this authorization totaled $84.9 million (excluding commissions) and $16.2 million remained under this authorization. The Company did not repurchase any shares during the first nine months of 2019. All purchases were made pursuant to our publicly announced share repurchase program. Our Board of Directors has authorized us to purchase shares under this authorization from time to time, subject to market conditions and other factors. There is no expiration date with respect to this authorization.

19


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

The following table summarizes the changes in AOCI by component as of September 29, 2019:
(In thousands)
 
Foreign Currency Translation Adjustments
 
Funded Status of Benefit Plans
 
Net Unrealized (Loss)/Gain on Available-For-Sale Securities
 
Total Accumulated Other Comprehensive Loss
Balance as of December 30, 2018
 
$
4,677

 
$
(520,308
)
 
$
(2,093
)
 
$
(517,724
)
Other comprehensive (loss)/income before reclassifications, before tax
 
(3,286
)
 

 
3,773

 
487

Amounts reclassified from accumulated other comprehensive loss, before tax
 

 
14,685

 

 
14,685

Income tax (benefit)/expense
 
(863
)
 
3,780

 
986

 
3,903

Net current-period other comprehensive (loss)/income, net of tax
 
(2,423
)
 
10,905

 
2,787

 
11,269

Balance as of September 29, 2019
 
$
2,254

 
$
(509,403
)
 
$
694

 
$
(506,455
)

The following table summarizes the reclassifications from AOCI for the nine months ended September 29, 2019:
(In thousands)

Detail about accumulated other comprehensive loss components
 
 Amounts reclassified from accumulated other comprehensive loss
 
Affects line item in the statement where net income is presented
Funded status of benefit plans:
 
 
 
 
Amortization of prior service credit(1)
 
$
(5,033
)
 
Other components of net periodic benefit costs
Amortization of actuarial loss(1)
 
19,718

 
Other components of net periodic benefit costs
Total reclassification, before tax(2)
 
14,685

 
 
Income tax expense
 
3,780

 
Income tax expense
Total reclassification, net of tax
 
$
10,905

 
 
(1) These AOCI components are included in the computation of net periodic benefit cost for pension and other postretirement benefits. See Note 10 for more information.
(2) There were no reclassifications relating to noncontrolling interest for the nine months ended September 29, 2019.
NOTE 14. SEGMENT INFORMATION
The Company identifies a business as an operating segment if: (i) it engages in business activities from which it may earn revenues and incur expenses; (ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (who is the Company’s President and Chief Executive Officer) to make decisions about resources to be allocated to the segment and assess its performance; and (iii) it has available discrete financial information. The Company has determined that it has one reportable segment. Therefore, all required segment information can be found in the Condensed Consolidated Financial Statements.
NOTE 15. LEASES
Lessee activities
Operating leases
We have operating leases for office space and equipment. We determine if an arrangement is a lease at inception. Certain office space leases provide for rent adjustments relating to changes in real estate taxes and other operating costs. Options to extend the term of operating leases are not recognized as part of the right-of-use asset until we are reasonably certain that the option will be exercised. We may terminate our leases with the notice required under the lease and upon the payment of a termination fee, if required. Our leases do not include substantial variable payments based on index or rate. After the adoption of ASU 2016-02 in 2019, for all leases, a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, are recognized in the Condensed Consolidated Balance Sheet as of September 29, 2019, as described below.
Our leases do not provide a readily determinable implicit discount rate. Therefore, we estimate our incremental borrowing rate to discount the lease payments based on the information available at lease commencement.

20


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

We recognize a single lease cost on a straight-line basis over the term of the lease and we classify all cash payments within operating activities in the statement of cash flows. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
We evaluate right-of-use assets for impairment consistent with our property, plant and equipment policy disclosure included in our Annual Report on Form 10-K for the year ended December 30, 2018.
On July 2, 2019, we entered into a lease agreement for office space in Long Island City, N.Y. (the “LIC Lease”), which commenced in July and ends in 2035. The present value of lease liabilities associated with the LIC Lease at the commencement date was $22 million.
The table below presents the lease-related assets and liabilities recorded on the balance sheet:
(In thousands)
 
Classification in the Condensed Consolidated Balance Sheet
 
September 29, 2019

Operating lease right-of-use assets
 
Miscellaneous assets
 
$
54,909

Current operating lease liabilities
 
Accrued expenses and other
 
$
7,733

Noncurrent operating lease liabilities
 
Other
 
56,156

Total operating lease liabilities
 
 
 
$
63,889


The total lease cost for operating leases included in Selling, general and administrative costs in our Condensed Consolidated Statement of Operations was as follows:
 
 
For the Quarter Ended

 
For the Nine Months Ended

(In thousands)
 
September 29, 2019
Operating lease cost
 
$
2,763

 
$
7,310

Short term and variable lease cost
 
442

 
1,454

Total lease cost
 
$
3,205

 
$
8,764

The table below presents additional information regarding operating leases:
(In thousands, except lease term and discount rate)
 
September 29, 2019

Cash paid for amounts included in the measurement of operating lease liabilities
 
$
6,818

Right-of-use assets obtained in exchange for operating lease liabilities(1)
 
$
60,988

Weighted-average remaining lease term
 
9.9 years

Weighted-average discount rate
 
4.65
%
(1) Amounts for the nine months ended September 29, 2019, include the transition adjustment resulting from the adoption of ASU 2016-02 as discussed in Note 2.
Maturities of lease liabilities on an annual basis for the Company's operating leases as of September 29, 2019, were as follows:
(In thousands)
 
Amount

2019 (3 months ending December 29, 2019)
 
$
2,284

2020
 
9,808

2021
 
9,026

2022
 
8,577

2023
 
7,970

Later Years
 
41,899

Total lease payments
 
$
79,564

Less: Interest
 
(15,675
)
Present value of lease liabilities
 
$
63,889




21


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

Finance lease    
We had a finance lease in connection with the land at our College Point, N.Y., printing and distribution facility. Interest on the lease liability was recorded in Interest expense and other, net in our Condensed Consolidated Statement of Operations. Repayments of the principal portion of our lease liability are recorded in financing activities and payments of interest on our lease liability are recorded in operating activities in the statement of cash flows for our finance lease. On August 1, 2019, using existing cash, we purchased the assets under the finance lease for $6.9 million, which resulted in the settlement of our finance lease obligation. See Note 7 for more information.
Lessor activities
Our leases to third parties predominantly relate to office space in the Company Headquarters. We determine if an arrangement is a lease at inception. Office space leases are operating leases and generally include options to extend the term of the lease. Our leases do not include variable payments based on index or rate. We do not separate the lease and non-lease components in a contract. The non-lease components predominantly include charges for utilities usage and other operating expenses estimated based on the proportionate share of the rental space of each lease.
For our office space operating leases, we recognize rental revenue on a straight-line basis over the term of the lease and we classify all cash payments within operating activities in the statement of cash flows.
Residual value risk is not a primary risk resulting from our office space operating leases because of the long-lived nature of the underlying real estate assets which generally hold their value or appreciate in the long term.
We evaluate assets leased to third parties for impairment consistent with our property, plant and equipment policy disclosure included in our Annual Report on Form 10-K for the year ended December 30, 2018.
As of September 29, 2019, the cost and accumulated depreciation related to the Company Headquarters included in Property, plant and equipment in our Condensed Consolidated Balance Sheet was approximately $508 million and $200 million, respectively. Office space leased to third parties represents approximately 39% of rentable square feet of the Company Headquarters.
We generate building rental revenue from the floors in the Company Headquarters that we lease to third parties. The building rental revenue was as follows:
 
 
For the Quarter Ended

 
For the Nine Months Ended

(In thousands)
 
September 29, 2019
Building rental revenue (1)
 
$
7,887

 
$
22,962

(1) Building rental revenue includes approximately $3.0 million and $8.8 million of sublease income for the quarter and nine months ended September 29, 2019, respectively.
Maturities of lease payments to be received on an annual basis for the Company's office space operating leases as of September 29, 2019, were as follows:
(In thousands)
 
Amount

2019 (3 months ending December 29, 2019)
 
$
7,590

2020
 
32,242

2021
 
32,259

2022
 
32,254

2023
 
19,329

Later Years
 
142,162

Total building rental revenue from operating leases
 
$
265,836


NOTE 16. CONTINGENT LIABILITIES
Newspaper and Mail Deliverers–Publishers’ Pension Fund
In September 2013, the Newspaper and Mail Deliverers-Publishers’ Pension Fund (the “NMDU Fund”) assessed a partial withdrawal liability against the Company in the gross amount of approximately $26 million for the plan years ending May 31, 2012, and 2013 (the “Initial Assessment”), an amount that was increased to a gross amount of approximately $34 million in December 2014, when the NMDU Fund issued a revised partial withdrawal liability assessment for the plan year ending May

22


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

31, 2013 (the “Revised Assessment”). The NMDU Fund claimed that when City & Suburban Delivery Systems, Inc., a retail and newsstand distribution subsidiary of the Company and the largest contributor to the NMDU Fund, ceased operations in 2009, it triggered a decline of more than 70% in contribution base units in each of these two plan years.
The Company disagreed with both the NMDU Fund’s determination that a partial withdrawal occurred and the methodology by which it calculated the withdrawal liability, and the parties engaged in arbitration proceedings to resolve the matter. In June 2016, the arbitrator issued an interim award and opinion that supported the NMDU Fund’s determination that a partial withdrawal had occurred, and concluded that the methodology used to calculate the Initial Assessment was correct. However, the arbitrator also concluded that the NMDU Fund’s calculation of the Revised Assessment was incorrect. In July 2017, the arbitrator issued a final award and opinion reflecting the same conclusions, which both the Company and NMDU Fund challenged in federal district court. In March 2018, the court determined that a partial withdrawal had occurred, but supported the Company’s position that the NMDU Fund’s calculation of the withdrawal liability was improper. The Company appealed the court’s decision with respect to the determination that a partial withdrawal had occurred, and the NMDU Fund appealed the court’s decision with respect to the calculation of the withdrawal liability. Oral arguments were held in May 2019.
Due to requirements of the Employee Retirement Income Security Act of 1974 that sponsors make payments demanded by plans during arbitration and any resultant appeals, the Company had been making payments to the NMDU fund since September 2013 based on the NMDU Fund’s demand. As a result, through September 29, 2019, we have paid $21.6 million relating to the Initial Assessment since the receipt of the initial demand letter. We also paid $5.0 million related to the Revised Assessment, which was refunded in July 2016 based on the arbitrator’s ruling.
On September 16, 2019, the Company and the NMDU Fund reached an agreement to settle this matter. As a result of the settlement, the Company recognized a gain of approximately $2.0 million, and as of September 29, 2019, the Company had no contingent liability related to this matter. In addition, each party withdrew its appeal of the March 2018 court decision.
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. Although the Company cannot predict the outcome of these matters, it is possible that an unfavorable outcome in one or more matters could be material to the Company’s consolidated results of operations or cash flows for an individual reporting period. However, based on currently available information, management does not believe that the ultimate resolution of these matters, individually or in the aggregate, is likely to have a material effect on the Company’s financial position.
Letters of Credit Commitment
We have issued letters of credit totaling $42.4 million and $48.8 million as of September 29, 2019, and December 30, 2018, respectively, in connection with the leasing of floors in the Company Headquarters. We expect the letters of credit to expire subsequent to the repurchase of the Condo Interest in December 2019. Approximately $47 million and $54 million of marketable securities were designated as collateral for the letters of credit, as of September 29, 2019, and December 30, 2018, respectively.


23



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXECUTIVE OVERVIEW
We are a global media organization that includes our newspaper, print and digital products and related businesses. We have one reportable segment.
We generate revenues principally from subscriptions and advertising. Other revenues primarily consist of revenues from licensing, commercial printing, the leasing of floors in the Company Headquarters, affiliate referrals, television (primarily from our television series, “The Weekly”), NYT Live (our live events business) and retail commerce. 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” for more details.
Financial Highlights
For the third quarter of 2019, diluted earnings per share from continuing operations were $0.10, compared with $0.15 for the third quarter of 2018. 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 $0.12 and $0.15 for the third quarters of 2019 and 2018, respectively.
The Company had an operating profit of $25.1 million in the third quarter of 2019, compared with $41.4 million in the third quarter of 2018. The decrease was principally driven by higher costs and lower advertising revenue that more than offset higher digital-only subscription revenues 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) was $44.1 million and $53.7 million for the third quarters of 2019 and 2018, respectively, primarily as a result of the factors identified above.
Total revenues increased 2.7% to $428.5 million in the third quarter of 2019 from $417.3 million in the third quarter of 2018, primarily driven by an increase in digital-only subscription revenues and other revenues, partially offset by a decrease in advertising revenue.
Operating costs increased in the third quarter of 2019 to $401.5 million from $380.8 million in the third quarter of 2018, largely due to higher content costs, including growth in the number of newsroom employees and costs related to our television series, “The Weekly,” as well as growth in the number of product development employees, partially offset by lower print production and distribution costs. Operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or “adjusted operating costs,” a non-GAAP measure) increased in the third quarter of 2019 to $384.4 million from $363.7 million in the third quarter of 2018, primarily as a result of the factors identified above.

24



RESULTS OF OPERATIONS
The following table presents our consolidated financial results:
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

 
September 29, 2019

 
September 30, 2018

 
% Change

Revenues
 
 
 
 
 

 
 
 
 
 
 
Subscription
 
$
267,302

 
$
257,796

 
3.7
 %
 
$
808,568

 
$
779,018

 
3.8
 %
Advertising
 
113,531

 
121,677

 
(6.7
)%
 
359,380

 
366,525

 
(1.9
)%
Other
 
47,668

 
37,873

 
25.9
 %
 
135,873

 
100,311

 
35.5
 %
Total revenues
 
428,501

 
417,346

 
2.7
 %
 
1,303,821

 
1,245,854

 
4.7
 %
Operating costs
 
 
 
 
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 

 
 
 
 
 
 
Wages and benefits
 
106,377

 
95,941

 
10.9
 %
 
313,244

 
280,688

 
11.6
 %
Raw materials
 
18,531

 
19,972

 
(7.2
)%
 
57,527

 
54,490

 
5.6
 %
Other production costs
 
53,868

 
47,521

 
13.4
 %
 
149,102

 
138,454

 
7.7
 %
Total production costs
 
178,776

 
163,434

 
9.4
 %
 
519,873

 
473,632

 
9.8
 %
Selling, general and administrative costs
 
207,226

 
202,473

 
2.3
 %
 
638,820

 
614,464

 
4.0
 %
Depreciation and amortization
 
15,450

 
14,847

 
4.1
 %
 
45,548

 
43,969

 
3.6
 %
Total operating costs
 
401,452

 
380,754

 
5.4
 %
 
1,204,241

 
1,132,065

 
6.4
 %
Headquarters redesign and consolidation
 

 

 

 

 
3,140

 
*

Restructuring charge
 
4,008

 

 
*

 
4,008

 

 
*

Gain from pension liability adjustment
 
(2,045
)
 
(4,851
)
 
(57.8
)%
 
(2,045
)
 
(4,851
)
 
(57.8
)%
Operating profit
 
25,086

 
41,443

 
(39.5
)%
 
97,617

 
115,500

 
(15.5
)%
Other components of net periodic benefit costs
 
1,834

 
2,335

 
(21.5
)%
 
5,502

 
6,226

 
(11.6
)%
Loss from joint ventures
 

 
(16
)
 
*

 

 
(9
)
 
*

Interest expense and other, net
 
755

 
4,026

 
(81.2
)%
 
3,572

 
13,439

 
(73.4
)%
Income from continuing operations before income taxes
 
22,497

 
35,066

 
(35.8
)%
 
88,543

 
95,826

 
(7.6
)%
Income tax expense
 
6,070

 
10,092

 
(39.9
)%
 
16,789

 
25,342

 
(33.8
)%
Net income
 
16,427

 
24,974

 
(34.2
)%
 
71,754

 
70,484

 
1.8
 %
Net loss attributable to the noncontrolling interest
 

 
2

 
*

 

 
1

 
*

Net income attributable to The New York Times Company common stockholders
 
$
16,427

 
$
24,976

 
(34.2
)%
 
$
71,754

 
$
70,485

 
1.8
 %
* Represents a change equal to or in excess of 100% or not meaningful


25



Revenues
Subscription Revenues
Subscription revenues consist of revenues from subscriptions to our print and digital products (which include our news product, as well as our Crossword and Cooking products), and single-copy and bulk sales of our print products (which represent less than 10% of these revenues). Revenues from our digital-only news subscriptions include e-readers and replica editions. Our Cooking product first launched as a paid digital product in the third quarter of 2017. Subscription revenues are based on both the number of copies of the print newspaper sold and digital-only subscriptions, and the rates charged to the respective customers.
Subscription revenues increased 3.7% in the third quarter and 3.8% in the first nine months of 2019 compared with the same prior-year periods, primarily due to year-over-year growth of 31.0% in the number of subscriptions to the Company’s digital subscription products.
Paid digital-only subscriptions totaled approximately 4,053,000 at the end of the third quarter of 2019, a 958,000 increase compared with the end of the third quarter of 2018. News product subscriptions totaled approximately 3,197,000 at the end of the third quarter of 2019, a 656,000 increase compared with the end of the third quarter of 2018. Other product subscriptions totaled approximately 856,000 at the end of the third quarter of 2019, a 302,000 increase compared with the end of the third quarter of 2018.
The following table summarizes digital-only subscription revenues, which are a component of subscription revenues, for the third quarters and first nine months of 2019 and 2018:
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

 
September 29, 2019

 
September 30, 2018

 
% Change

Digital-only subscription revenues:
 
 
 
 
 
 
 
 
 
 
 
 
News product subscription revenues(1)
 
$
107,009

 
$
95,568

 
12.0
%
 
$
313,785

 
$
279,693

 
12.2
%
Other product subscription revenues(2)
 
8,855

 
5,639

 
57.0
%
 
24,573

 
15,669

 
56.8
%
Total digital-only subscription revenues
 
$
115,864

 
$
101,207

 
14.5
%
 
$
338,358

 
$
295,362

 
14.6
%
(1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Crossword and Cooking products are also included in this category.
(2) Includes revenues from standalone subscriptions to the Company’s Crossword and Cooking products.
The following table summarizes digital-only subscriptions as of the end of the third quarters of 2019 and 2018:
 
 
For the Quarters Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

Digital-only subscriptions:
 
 
 
 
 
 
News product subscriptions(1)
 
3,197

 
2,541

 
25.8
%
Other product subscriptions(2)
 
856

 
554

 
54.5
%
Total digital-only subscriptions
 
4,053

 
3,095

 
31.0
%
(1) Includes subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Crossword and Cooking products are also included in this category.
(2) Includes standalone subscriptions to the Company’s Crossword and Cooking products.

26



Advertising Revenues
Advertising revenues are derived from the sale of our advertising products and services on our print and digital platforms. These revenues are primarily determined by the volume, rate and mix of advertisements. Display advertising revenue is principally from advertisers promoting products, services or brands in print in the form of column-inch ads, and on our digital platforms in the form of banners, video, rich media and other interactive ads. Display advertising also includes branded content on The Times’s platforms. Other advertising primarily represents, for our print products, classified advertising revenue, including line-ads sold in the major categories of real estate, help wanted, automotive and other as well as revenue from preprinted advertising, also known as free-standing inserts. Digital other advertising revenue primarily includes creative services fees associated with, among other things, our digital marketing agencies and our branded content studio; advertising revenue from our podcasts; and advertising revenue generated by Wirecutter, our product review and recommendation website.
Advertising revenues (print and digital) by category were as follows:
 
 
For the Quarters Ended
 
 
 
 
 
 
 
 
September 29, 2019
 
September 30, 2018
 
% Change
(In thousands)
 
Print
 
Digital
 
Total
 
Print
 
Digital
 
Total
 
Print
 
Digital
 
Total
Advertising revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Display
 
$
51,702

 
$
36,202

 
$
87,904

 
$
57,245

 
$
43,730

 
$
100,975

 
(9.7
)%
 
(17.2
)%
 
(12.9
)%
Other
 
7,176

 
18,451

 
25,627

 
6,676

 
14,026

 
20,702

 
7.5
 %
 
31.5
 %
 
23.8
 %
Total advertising
 
$
58,878

 
$
54,653

 
$
113,531

 
$
63,921

 
$
57,756

 
$
121,677

 
(7.9
)%
 
(5.4
)%
 
(6.7
)%
 
 
For the Nine Months Ended
 
 
 
 
 
 
 
 
September 29, 2019
 
September 30, 2018
 
% Change
(In thousands)
 
Print
 
Digital
 
Total
 
Print
 
Digital
 
Total
 
Print
 
Digital
 
Total
Advertising revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Display
 
$
169,903

 
$
121,147

 
$
291,050

 
$
188,853

 
$
123,870

 
$
312,723

 
(10.0
)%
 
(2.2
)%
 
(6.9
)%
Other
 
21,255

 
47,075

 
68,330

 
22,182

 
31,620

 
53,802

 
(4.2
)%
 
48.9
 %
 
27.0
 %
Total advertising
 
$
191,158

 
$
168,222

 
$
359,380

 
$
211,035

 
$
155,490

 
$
366,525

 
(9.4
)%
 
8.2
 %
 
(1.9
)%
Print advertising revenues, which represented 51.9% of total advertising revenues for the third quarter of 2019 and 53.2% of total advertising revenues for the first nine months of 2019, declined 7.9% to $58.9 million in the third quarter of 2019 and 9.4% to $191.2 million in the first nine months of 2019, compared with $63.9 million and $211.0 million, respectively, in the same prior-year periods. The decline in print advertising revenues in the third quarter and in the first nine months of 2019 compared with the same periods in the prior year was driven by a continued decline in display advertising revenue. The decline in display advertising revenue in the third quarter of 2019 was primarily in the financial services, home furnishings and luxury categories, partially offset by growth in the advocacy category. The decline in display advertising revenue in the first nine months of 2019 was primarily in the financial services, luxury, media and retail categories, partially offset by growth in the advocacy category.
Digital advertising revenues, which represented 48.1% of total advertising revenues for the third quarter of 2019 and 46.8% of total advertising revenues for the first nine months of 2019, declined 5.4% to $54.7 million in the third quarter of 2019 and increased 8.2% to $168.2 million in the first nine months of 2019, compared with $57.8 million and $155.5 million, respectively, in the same prior-year periods. The decrease in digital advertising revenue for the third quarter of 2019 compared with the same period in the prior year primarily reflected lower revenue from direct-sold advertising on our core digital platforms, partially offset by growth in revenue from podcasts. The increase in digital advertising revenue for the first nine months of 2019 compared with the same period in the prior year primarily reflected growth in revenue from podcasts and creative services, partially offset by lower open market programmatic advertising revenue on our core digital platforms.
Other Revenues
Other revenues primarily consist of revenues from licensing, commercial printing, the leasing of floors in the Company Headquarters, affiliate referrals, television (primarily from our television series, “The Weekly”), NYT Live (our live events business) and retail commerce.
Other revenues increased 25.9% in the third quarter of 2019 and 35.5% in the first nine months of 2019, compared with the same prior-year periods. The increase in other revenues for the third quarter of 2019 compared with the same period in the

27



prior year is primarily a result of revenue earned from our television series, “The Weekly.” The increase in other revenues for the first nine months of 2019 compared with the same period in the prior year is primarily a result of growth in our commercial printing operations, revenue earned from “The Weekly,” and additional floors of rental revenue from the Company Headquarters.
Operating Costs
Operating costs were as follows:
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

 
September 29, 2019

 
September 30, 2018

 
% Change

Production costs:
 
 
 
 
 
 
 
 
 
 
 
 
Wages and benefits
 
$
106,377

 
$
95,941

 
10.9
 %
 
$
313,244

 
$
280,688

 
11.6
%
Raw materials
 
18,531

 
19,972

 
(7.2
)%
 
57,527

 
54,490

 
5.6
%
Other production costs
 
53,868

 
47,521

 
13.4
 %
 
149,102

 
138,454

 
7.7
%
Total production costs
 
178,776

 
163,434

 
9.4
 %
 
519,873

 
473,632

 
9.8
%
Selling, general and administrative costs
 
207,226

 
202,473

 
2.3
 %
 
638,820

 
614,464

 
4.0
%
Depreciation and amortization
 
15,450

 
14,847

 
4.1
 %
 
45,548

 
43,969

 
3.6
%
Total operating costs
 
$
401,452

 
$
380,754

 
5.4
 %
 
$
1,204,241

 
$
1,132,065

 
6.4
%
Production Costs
Production costs include items such as labor costs, raw materials and machinery and equipment expenses related to news gathering and production activity, as well as costs related to producing branded content.
Production costs increased in the third quarter of 2019 by $15.3 million compared with the third quarter of 2018, primarily driven by a $10.4 million increase in wage and benefits and a $6.3 million increase in other production costs, partially offset by a $1.4 million decrease in raw materials. The increase in wages and benefits was largely due to growth in the number of newsroom and product development employees. The increase in other production costs was primarily due to expenses incurred in connection with our television series,“The Weekly.” The decrease in raw materials was largely due to lower commercial printing costs and newsprint copies.
Production costs increased in the first nine months of 2019 by $46.2 million compared with the first nine months of 2018, primarily driven by a $32.6 million increase in wages and benefits, a $10.6 million increase in other production costs and a $3.0 million increase in raw materials. The increase in wages and benefits was largely due growth in the number of our newsroom, product development and commercial printing operations employees. The increase in other production costs was primarily due to expenses incurred in connection with our television series, “The Weekly.” The increase in raw materials was largely due to higher volume as a result of commercial printing operations and higher newsprint prices, partially offset by lower newsprint copies.
Selling, General and Administrative Costs
Selling, general and administrative costs include costs associated with the selling, marketing and distribution of products as well as administrative expenses.
Selling, general and administrative costs in the third quarter of 2019 increased by $4.8 million compared with the third quarter of 2018 driven primarily by a $7.3 million increase in wages and benefits to support growth initiatives, partially offset by $3.2 million in lower distribution costs.
Selling, general and administrative costs in the first nine months of 2019 increased by $24.4 million compared with the first nine months of 2018 driven primarily by a $16.8 million increase in wages and benefits to support growth initiatives, a $14.9 million increase in marketing expenses largely due to an increase in subscription acquisition and brand marketing costs, partially offset by a $4.8 million decrease in outside services costs and a $2.5 million decrease in severance.

28



Depreciation and Amortization
Depreciation and amortization costs in the third quarter and first nine months of 2019 increased $0.6 million and $1.6 million, respectively, compared with the same prior-year periods primarily due to building and software projects that were placed in service and started depreciating in the second half of 2018.
Other Items
See Note 8 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/(Income)
See Note 10 of the Notes to the Condensed Consolidated Financial Statements for information regarding other components of net periodic benefit costs/(income).
Joint Ventures
See Note 6 of the Notes to the Condensed Consolidated Financial Statements for information regarding our joint venture investments.
Interest Expense and other, Net
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for information regarding interest expense and other, net.
Income Taxes
See Note 11 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).
The special items in 2019 consisted of:
a $4.0 million charge ($3.0 million after tax or $.02 per share) related to restructuring charges, including impairment and severance charges related to the closure of our digital marketing agency, HelloSociety, LLC; and

a $2.0 million gain ($1.5 million after tax or $.01 per share) from a multiemployer pension plan liability adjustment.
The special items in 2018 consisted of:
a $4.9 million gain ($3.6 million after tax or $.02 per share) from a multiemployer pension plan liability adjustment; and
a $1.3 million charge ($0.9 million after tax or $.01 per share) in the second quarter and a $1.9 million charge ($1.4 million after tax or $.01 per share) in the first quarter in connection with the redesign and consolidation of space in the Company Headquarters.
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.

29



Non-operating retirement costs include:
interest cost, expected return on plan assets, amortization of actuarial gain and loss components and amortization of prior service credits of single-employer pension expense;
interest cost and amortization of actuarial gains and loss components and amortization of prior service credits of retirement medical expense; and
all multiemployer pension plan withdrawal costs.
These non-operating retirement costs are primarily tied to financial market performance including 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.
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 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.

30



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
 
 
 
For the Nine Months Ended
 
 
 
 
September 29, 2019

 
September 30, 2018

 
% Change

 
September 29, 2019

 
September 30, 2018

 
% Change

Diluted earnings per share from continuing operations
 
$
0.10

 
$
0.15

 
(33.3
)%
 
$
0.43

 
$
0.42

 
2.4
%
Add:
 
 
 
 
 
 
 
 
 
 
 
 
Severance
 

 

 

 
0.01

 
0.03

 
(66.7
)%
Non-operating retirement costs:
 
 
 
 
 
 
 


 


 


Multiemployer pension plan withdrawal costs
 
0.01

 
0.01

 

 
0.03

 
0.03

 

Other components of net periodic benefit costs
 
0.01

 
0.02

 
(50.0
)%
 
0.03

 
0.04

 
(25.0
)%
Special item:
 
 
 
 
 
 
 
 
 
 
 
 
Headquarters redesign and consolidation
 

 

 

 

 
0.02

 
*

Restructuring charge
 
0.02

 

 
*

 
0.02

 

 
*

Gain from pension liability adjustment
 
(0.01
)
 
(0.03
)
 
(66.7
)%
 
(0.01
)
 
(0.03
)
 
(66.7
)%
Income tax expense of adjustments
 
(0.01
)
 

 
*

 
(0.02
)
 
(0.02
)
 
*

Adjusted diluted earnings per share from continuing operations(1)
 
$
0.12

 
$
0.15

 
(20.0
)%
 
$
0.49

 
$
0.49

 

(1)Amounts may not add due to rounding.
* Represents a change equal to or in excess of 100% or not meaningful

31



Reconciliation of operating profit before depreciation & amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit)
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

 
September 29, 2019

 
September 30, 2018

 
% Change

Operating profit
 
$
25,086

 
$
41,443

 
(39.5
)%
 
$
97,617

 
$
115,500

 
(15.5
)%
Add:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation & amortization
 
15,450

 
14,847

 
4.1
 %
 
45,548

 
43,969

 
3.6
 %
Severance
 
367

 
293

 
25.3
 %
 
2,441

 
4,926

 
(50.4
)%
Multiemployer pension plan withdrawal costs
 
1,204

 
1,943

 
(38.0
)%
 
4,454

 
5,838

 
(23.7
)%
Special items:
 
 
 
 
 
 
 
 
 
 
 
 
Headquarters redesign and consolidation
 

 

 

 

 
3,140

 
*

Restructuring charge
 
4,008

 

 
*

 
4,008

 

 
*

Gain from pension liability adjustment
 
(2,045
)
 
(4,851
)
 
(57.8
)%
 
(2,045
)
 
(4,851
)
 
(57.8
)%
Adjusted operating profit
 
$
44,070

 
$
53,675

 
(17.9
)%
 
$
152,023

 
$
168,522

 
(9.8
)%
* Represents a change equal to or in excess of 100% or not meaningful
Reconciliation of operating costs before depreciation & amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs)
 
 
For the Quarters Ended
 
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

 
September 29, 2019

 
September 30, 2018

 
% Change

Operating costs
 
$
401,452

 
$
380,754

 
5.4
 %
 
$
1,204,241

 
$
1,132,065

 
6.4
 %
Less:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation & amortization
 
15,450

 
14,847

 
4.1
 %
 
45,548

 
43,969

 
3.6
 %
Severance
 
367

 
293

 
25.3
 %
 
2,441

 
4,926

 
(50.4
)%
Multiemployer pension plan withdrawal costs
 
1,204

 
1,943

 
(38.0
)%
 
4,454

 
5,838

 
(23.7
)%
Adjusted operating costs
 
$
384,431

 
$
363,671

 
5.7
 %
 
$
1,151,798

 
$
1,077,332

 
6.9
 %



32



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. As of September 29, 2019, we had cash, cash equivalents and short- and long-term marketable securities of $877.9 million and total debt of $246.2 million. Accordingly, our cash, cash equivalents, and marketable securities exceeded total debt by $631.7 million. Our cash and investment balances have increased since the end of 2018, primarily due to cash proceeds from operating activities and lower capital expenditures, partially offset by share based compensation tax withholding and dividend payments.
We paid quarterly dividends of $0.04 per share on the Class A and Class B Common Stock from late 2013 through early 2019. In February 2019, the Board of Directors approved an increase in the quarterly dividend to $0.05 per share, which was paid in April 2019. In June and September 2019, the Board of Directors declared a quarterly dividend of $0.05 per share on the Class A and Class B Common Stock, which was paid in July and October 2019. 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.
In March 2009, we entered into an agreement to sell and simultaneously lease back the Condo Interest in the Company Headquarters. The sale price for the Condo Interest was $225.0 million less transaction costs, for net proceeds of approximately $211 million. In December 2019, we expect to repurchase the Condo Interest for $245.3 million and fund the purchase from our existing cash and marketable securities.
In addition, on August 1, 2019, using existing cash, we purchased the previously leased land at our College Point, N.Y., printing and distribution facility for $6.9 million.
In September 2019, the Company entered into a $250.0 million five-year revolving credit facility. Certain of the Company’s domestic subsidiaries have guaranteed the Company’s obligations under the credit facility. As of September 29, 2019, there were no outstanding borrowings under the credit facility.
We expect to receive a final cash distribution of approximately $5 million to $8 million related to the wind down of our Madison investment. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for more information on the Company’s investment in Madison.
Capital Resources
Sources and Uses of Cash
Cash flows provided by/(used in) by category were as follows:
 
 
For the Nine Months Ended
 
 
(In thousands)
 
September 29, 2019

 
September 30, 2018

 
% Change

Operating activities
 
$
121,600

 
$
116,376

 
4.5
 %
Investing activities
 
$
(37,258
)
 
$
(103,809
)
 
(64.1
)%
Financing activities
 
$
(43,139
)
 
$
11,427

 
*

* Represents a change equal to or in excess of 100% or not meaningful
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, interest and income taxes.
Net cash provided by operating activities increased in the first nine months of 2019 compared with the same prior-year period due to higher cash collections from customers, lower interest expense and lower incentive compensation payments, partially offset by higher cash tax payments and lower cash received from subscriptions.
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 nine months of 2019 was primarily related to approximately $33 million in capital expenditures payments and $7 million in net purchases of marketable securities.

33



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 nine months of 2019 was primarily related to dividend payments of $23.3 million, stock-based compensation tax withholding payments of $15.6 million and the purchase of previously leased land at our College Point, N.Y., printing and distribution facility for $6.9 million, partially offset by proceeds from stock option exercises of approximately $3 million.
Restricted Cash
We were required to maintain $17.0 million of restricted cash as of September 29, 2019, and $18.3 million as of December 30, 2018, substantially all of which is set aside to collateralize workers’ compensation obligations.
Capital Expenditures
Capital expenditures totaled approximately $33 million and $48 million in the first nine months of 2019 and 2018, respectively. The decrease in capital expenditures was primarily driven by higher expenditures in the first nine months of 2018 related to the redesign and consolidation of space in the Company Headquarters. The cash payments related to capital expenditures totaled approximately $33 million and $62 million in the first nine months of 2019 and 2018, respectively.
Third-Party Financing
As of September 29, 2019, our current indebtedness primarily consisted of the repurchase option related to a sale-leaseback of a portion of the Company Headquarters. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for information regarding our total debt and finance lease obligations. See Note 9 of the Notes to the Condensed Consolidated Financial Statements for information regarding the fair value of our short-term debt.
In September 2019, we entered into a $250.0 million five-year unsecured credit facility (the “Credit Facility”). Certain of our domestic subsidiaries have guaranteed our obligations under the Credit Facility. As of September 29, 2019, there were no outstanding borrowings under the Credit Facility.
The Credit Facility contains various customary affirmative and negative covenants, including certain financial covenants and various incurrence-based negative covenants described below.
The interest coverage ratio financial covenant provides that the Loan Parties (as defined in the Credit Facility) will be required to maintain on a trailing four-quarter basis a Consolidated Interest Coverage Ratio of not less than 3.00:1.00. Consolidated Interest Coverage Ratio is defined as the ratio of (i) Consolidated EBITDA (as defined by the credit agreement) to (ii) Consolidated Interest Charges (as defined by the credit agreement) for such period.
The leverage ratio financial covenant provides that the Loan Parties will be required to maintain on a trailing four-quarter basis a Consolidated Leverage Ratio of not more than 2.50:1.00. Consolidated Leverage Ratio is defined as the ratio of (i) Consolidated Funded Indebtedness (as defined by the credit agreement) (less the Encumbered Property Escrow Amount (as defined by the credit agreement)) to (ii) Consolidated EBITDA for such period.
In addition, the Credit Facility contains incurrence-based negative covenants that, subject to various exceptions, limit the ability of the Company or its subsidiaries to, among other things:
incur debt (directly or by third party guarantees);
grant liens;
pay dividends;
make investments;
make acquisitions or dispositions; and
prepay debt.

The Credit Facility generally permits the Company to continue to pay its regular quarterly dividend, and to make other restricted payments so long as it is in pro forma compliance with the financial covenants and no default has occurred or would result from such other restricted payment. In addition, the Company and its subsidiaries may (in addition to other customary exceptions and baskets), (i) incur indebtedness secured by liens on its headquarters building or its College Point, N.Y., printing and distribution facility, and (ii) incur indebtedness so long as the Company does not exceed, on a pro forma basis, a Consolidated Leverage Ratio of 2.25:1.00 and no default has occurred or would occur from such indebtedness incurrence.


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CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 30, 2018. Other than as described in Note 2 of the Notes to the Condensed Consolidated Financial Statements, as of September 29, 2019, our critical accounting policies have not changed from December 30, 2018.
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 30, 2018. As of September 29, 2019, our contractual obligations and off-balance sheet arrangements have not changed materially from December 30, 2018.
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 that relate to future events or our future financial performance. We may also make written and oral forward-looking statements in our Securities and Exchange Commission (“SEC”) filings and otherwise. We have tried, where possible, to identify such statements by using words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “could,” “project,” “plan” and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statements are and will be based upon our then-current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in any such statements. You should bear this in mind as you consider forward-looking statements. Factors that we think could, individually or in the aggregate, cause our actual results to differ materially from expected and historical results include those described in our Annual Report on Form 10-K for the year ended December 30, 2018, as well as other risks and factors identified from time to time in our SEC filings.    
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our Annual Report on Form 10-K for the year ended December 30, 2018, details our disclosures about market risk. As of September 29, 2019, there were no material changes in our market risks from December 30, 2018.

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Item 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of September 29, 2019. Based upon such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the quarter ended September 29, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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. See Note 16 of the Notes to the Condensed Consolidated Financial Statements for a description of certain matters, which is incorporated herein by reference. Although the Company cannot predict the outcome of these matters, it is possible that an unfavorable outcome in one or more matters could be material to the Company’s consolidated results of operations or cash flows for an individual reporting period. However, based on currently available information, management does not believe that the ultimate resolution of these matters, individually or in the aggregate, is likely to have a material effect on the Company’s financial position.
Item 1A. Risk Factors
There have been no material changes to our risk factors as set forth in “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 30, 2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer Purchases of Equity Securities
In 2015, the Board of Directors approved an authorization of $101.1 million to repurchase shares of the Company’s Class A Common Stock. As of September 29, 2019, repurchases under this authorization totaled $84.9 million (excluding commissions), and $16.2 million remained under this authorization. The Company did not repurchase any shares during the first nine months of 2019. All purchases were made pursuant to our publicly announced share repurchase program. Our Board of Directors has authorized us to purchase shares from time to time, subject to market conditions and other factors. There is no expiration date with respect to this authorization.

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Item 6. Exhibits
Exhibit No.
 
  
 
 
 
10.1
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
32.2
 
 
 
 
101.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 
 
 
101.SCH
 
Inline XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.DEF
 
Inline XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.LAB
 
Inline XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
101.PRE
 
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
 
 
 

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
THE NEW YORK TIMES COMPANY
 
 
(Registrant)
 
 
 
Date:
November 6, 2019
/s/ Roland A. Caputo
 
 
Roland A. Caputo
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)


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