The New York Times Company
) posted fourth-quarter 2012 earnings of 32 cents a share that
beat the Zacks Consensus Estimate by a penny but fell 17.9% from
39 cents delivered in the year-ago quarter. The current economic
situation does not seem promising for publishing companies, which
are bearing the brunt of waning advertising demand, and this
Zacks Rank #3 (Hold) stock is no exception. The company cited
that higher effective tax rate also weighed upon the bottom
Including one-time items, quarterly earnings came in at $1.14,
substantially up from 39 cents a share in the prior-year quarter
on the back of the sale of assets.
The quarter also reflects favorable response to the digital
subscription packages, and increase in circulation and digital
advertising revenues. But, these failed to offset the diminishing
print advertising revenue.
Publishing companies have been divesting assets that have no
direct relation to the core operations. The New York Times
Company on Sep 24 completed the sale of About Group, which it
acquired in 2005, to
) for a consideration of $300 million. In October, the company
sold its stake in Indeed.com, a job portal, for approximately
Another example of shedding assets by the company is the sale
of Regional Media Group in Dec 2011, which was once a part of
News Media Group. Recently,
The Washington Post Company
) entered into a deal to sell its daily and Sunday newspaper,
, to Black Press Ltd. and its subsidiary Sound Publishing.
The New York Times Company now reports through one reportable
segment, News Media Group, which includes The New York Times
Media Group and New England Media Group. The company's top line
rose 5.2% to $575.8 million, and came ahead of the Zacks
Consensus Estimate of $572 million attributable to a rise in
circulation and other revenues. The New York Times Media Group
revenue jumped 5.7% to $468.1 million and New England Media Group
revenue climbed 3.1% to $107.7 million.
The ongoing slouch in the advertising market continues to
weigh upon The New York Times Company, the publisher of
The New York Times
International Herald Tribune
The Boston Globe
and 15 other daily newspapers. Total advertising revenue slid
3.1% to $280 million in the quarter. However, excluding the extra
week in the quarter, advertising revenue dropped 8.3%, a marginal
improvement over the decline of 8.9% in the third quarter.
The New York Times Company's print advertising declined 5.6%
during the quarter, however, excluding the extra week, it tumbled
10.2%. Digital advertising revenue for New York Times' Digital
business, which includes NYTimes.com, Boston.com and
BostonGlobe.com, grew 5.1% to $69 million, and now accounts for
24.7% of total advertising revenue, up from 22.7% in the
prior-year quarter. Excluding the extra week, digital advertising
revenue slid 1.7%.
The company experienced a fall in all major advertising
categories. Both national and retail advertising dipped 3.4% and
2.9%, respectively, during the quarter. Total classified
advertising dropped 3.4%. Within classified, real estate and
help-wanted advertising fell 10.9% and 4% respectively. However,
automotive advertising grew 9.4%.
The diversified media conglomerate hinted that total
advertising revenue trends in the first quarter of 2013 would be
somewhat similar to the fourth quarter of 2012.
What came as a respite during the quarter was a rise in
circulation revenue. It climbed 16.1% to $257.8 million.
Management now expects total circulation revenue to jump in the
mid-single digits in the first quarter of 2013, gaining from
digital subscription initiatives and increase in print
circulation price at
The New York Times
Total adjusted operating profit edged down 1.8% to $124.5
million, whereas adjusted operating margin contracted 160 basis
points to 21.6%.
Other Financial Aspects
The company ended fourth quarter with cash and short-term
investments of about $955 million, which increased over $340
million sequentially on account of the divestment of About Group
and the sale of stake in Indeed.com. Total debt and capital lease
obligations was approximately $697.1 million. The company revoked
its revolving credit facility of $125 million.
The New York Times Company incurred capital expenditures of
approximately $6 million during the quarter. Management now
anticipates capital expenditures between $40 million and $50
million in 2012.
The company's advertising volume came under pressure as
advertisers shied away from making any upfront commitments in an
economy which is showing an uneven recovery. The publishing
industry has long been grappling with sinking advertising
revenue. This comes in the wake of a longer-term secular decline
as more readers choose free online news, thereby making the
print-advertising model increasingly irrelevant.
To curb shrinking advertising revenue and seek new revenue
avenues, the publishing companies contemplated charging readers
for online content.
Despite hiccups in the economy, what still promises a
guaranteed revenue generation avenue is The New York Times
Company's pricing system for NYTimes.com, which was launched on
Mar 28, 2011. The company notified that the number of paid
digital subscribers for
The New York Times
International Herald Tribune
reached 640,000 at the end of the quarter, reflecting a jump of
about 13% since the end of the third quarter.
The company also launched a pay and read model for
BostonGlobe.com. The number of paid digital subscribers reached
28,000 at the end of the quarter, representing an increase of 8%
since the end of the previous quarter.
The increase in the subscriber base was due to the company's
decision to limit the number of free articles that can be read by
online traffic visiting the website of its flagship newspaper.
Online visitors cannot access more than 10 free articles per
month, which is exactly half of what the pay-and-read model
offered when the system was launched.
Another media conglomerate,
) has also moved towards an online subscription-based model for
general news content. News International, a subsidiary of News
Corporation, began charging readers for online content for
The Times of London
Sunday Times of London
effective Jun 2010.
The New York Times Company remains committed to streamline its
cost structure, strengthen its balance sheet, and rebalance its
portfolio. However, we remain apprehensive about risks that the
company faces due to its high dependence on advertising
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