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 SeptemberJune 27, 20202021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
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 10018
(Address and zip code of principal executive offices)
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 OctoberJuly 30, 20202021 (exclusive of treasury shares):
| | | | | | | | |
Class A Common Stock | 166,435,299167,091,902 | | shares |
Class B Common Stock | 781,724 | | shares |
THE NEW YORK TIMES COMPANY
INDEX
| | | | | | | | | | | |
PART I | PART I | | | | Financial Information | | | PART I | | | | Financial Information | | |
Item | Item | 1 | | Financial Statements | | | Item | 1 | | Financial Statements | | |
| | | | Condensed Consolidated Balance Sheets as of September 27, 2020 (unaudited) and December 29, 2019 | | | | | | Condensed Consolidated Balance Sheets as of June 27, 2021 (unaudited) and December 27, 2020 | | |
| | | | Condensed Consolidated Statements of Operations (unaudited) for the quarters and nine months ended September 27, 2020 and September 29, 2019 | | | | | | Condensed Consolidated Statements of Operations (unaudited) for the quarters and six months ended June 27, 2021 and June 28, 2020 | | |
| | | | Condensed Consolidated Statements of Comprehensive Income (unaudited) for the quarters and nine months ended September 27, 2020 and September 29, 2019 | | | | | | Condensed Consolidated Statements of Comprehensive Income (unaudited) for the quarters and six months ended June 27, 2021 and June 28, 2020 | | |
| | | | Condensed Consolidated Statements of Changes In Stockholders’ Equity (unaudited) for the quarters and nine months ended September 27, 2020 and September 29, 2019 | | | | | | Condensed Consolidated Statements of Changes In Stockholders’ Equity (unaudited) for the quarters and six months ended June 27, 2021 and June 28, 2020 | | |
| | | | Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 27, 2020 and September 29, 2019 | | | | | | Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 27, 2021 and June 28, 2020 | | |
| | | | Notes to the Condensed Consolidated Financial Statements | | | | | | Notes to the Condensed Consolidated Financial Statements | | |
Item | Item | 2 | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | Item | 2 | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | |
Item | Item | 3 | | Quantitative and Qualitative Disclosures about Market Risk | | | Item | 3 | | Quantitative and Qualitative Disclosures about Market Risk | | |
Item | Item | 4 | | Controls and Procedures | | | Item | 4 | | Controls and Procedures | | |
| PART II | PART II | | | | Other Information | | | PART II | | | | Other Information | | |
Item | Item | 1 | | Legal Proceedings | | | Item | 1 | | Legal Proceedings | | |
Item | Item | 1A | | Risk Factors | | | Item | 1A | | Risk Factors | | |
Item | Item | 2 | | Unregistered Sales of Equity Securities and Use of Proceeds | | | Item | 2 | | Unregistered Sales of Equity Securities and Use of Proceeds | | |
Item | Item | 6 | | Exhibits | | | 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 27, 2020 | | December 29, 2019 | | June 27, 2021 | | December 27, 2020 |
| | (Unaudited) | | | | (Unaudited) | | |
Assets | Assets | | Assets | |
Current assets | Current assets | | Current assets | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 215,763 | | | $ | 230,431 | | Cash and cash equivalents | | $ | 320,871 | | | $ | 286,079 | |
Short-term marketable securities | Short-term marketable securities | | 308,734 | | | 201,785 | | Short-term marketable securities | | 338,455 | | | 309,080 | |
Accounts receivable (net of allowances of $14,153 in 2020 and $14,358 in 2019) | | 125,337 | | | 213,402 | | |
Accounts receivable (net of allowances of $12,269 in 2021 and $13,797 in 2020) | | Accounts receivable (net of allowances of $12,269 in 2021 and $13,797 in 2020) | | 153,540 | | | 183,692 | |
Prepaid expenses | Prepaid expenses | | 32,087 | | | 29,089 | | Prepaid expenses | | 36,262 | | | 29,487 | |
Other current assets | Other current assets | | 39,063 | | | 42,124 | | Other current assets | | 32,110 | | | 27,497 | |
Total current assets | Total current assets | | 720,984 | | | 716,831 | | Total current assets | | 881,238 | | | 835,835 | |
Other assets | Other assets | | | | | Other assets | | | | |
Long-term marketable securities | Long-term marketable securities | | 275,649 | | | 251,696 | | Long-term marketable securities | | 287,265 | | | 286,831 | |
Property, plant and equipment (less accumulated depreciation and amortization of $916,109 in 2020 and $950,881 in 2019) | | 604,283 | | | 627,121 | | |
Property, plant and equipment (less accumulated depreciation and amortization of $891,635 in 2021 and $886,149 in 2020) | | Property, plant and equipment (less accumulated depreciation and amortization of $891,635 in 2021 and $886,149 in 2020) | | 582,331 | | | 594,516 | |
Goodwill | Goodwill | | 168,700 | | | 138,674 | | Goodwill | | 170,156 | | | 171,657 | |
Deferred income taxes | Deferred income taxes | | 109,197 | | | 115,229 | | Deferred income taxes | | 96,869 | | | 99,518 | |
Miscellaneous assets | Miscellaneous assets | | 260,728 | | | 239,587 | | Miscellaneous assets | | 330,148 | | | 319,332 | |
Total assets | Total assets | | $ | 2,139,541 | | | $ | 2,089,138 | | Total assets | | $ | 2,348,007 | | | $ | 2,307,689 | |
See Notes to Condensed Consolidated Financial Statements.
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS-(Continued)
(In thousands, except share and per share data)
| | | September 27, 2020 | | December 29, 2019 | | June 27, 2021 | | December 27, 2020 |
| | (Unaudited) | | | | (Unaudited) | | |
Liabilities and stockholders’ equity | Liabilities and stockholders’ equity | | Liabilities and stockholders’ equity | |
Current liabilities | Current liabilities | | Current liabilities | |
Accounts payable | Accounts payable | | $ | 97,749 | | | $ | 116,571 | | Accounts payable | | $ | 94,480 | | | $ | 123,157 | |
Accrued payroll and other related liabilities | Accrued payroll and other related liabilities | | 94,101 | | | 108,865 | | Accrued payroll and other related liabilities | | 101,637 | | | 121,159 | |
Unexpired subscriptions revenue | Unexpired subscriptions revenue | | 100,149 | | | 88,419 | | Unexpired subscriptions revenue | | 114,740 | | | 105,346 | |
| Accrued expenses and other | Accrued expenses and other | | 133,929 | | | 123,840 | | Accrued expenses and other | | 135,660 | | | 137,086 | |
Total current liabilities | Total current liabilities | | 425,928 | | | 437,695 | | Total current liabilities | | 446,517 | | | 486,748 | |
Other liabilities | Other liabilities | | | | | Other liabilities | | | | |
| Pension benefits obligation | Pension benefits obligation | | 286,355 | | | 313,655 | | Pension benefits obligation | | 317,543 | | | 326,555 | |
Postretirement benefits obligation | Postretirement benefits obligation | | 34,455 | | | 37,688 | | Postretirement benefits obligation | | 35,712 | | | 38,690 | |
Other | Other | | 135,549 | | | 126,237 | | Other | | 129,448 | | | 127,585 | |
Total other liabilities | Total other liabilities | | 456,359 | | | 477,580 | | Total other liabilities | | 482,703 | | | 492,830 | |
Stockholders’ equity | Stockholders’ equity | | | | | Stockholders’ equity | | | | |
Common stock of $.10 par value: | Common stock of $.10 par value: | | Common stock of $.10 par value: | |
Class A – authorized: 300,000,000 shares; issued: 2020 – 175,215,600; 2019 – 174,242,668 (including treasury shares: 2020 – 8,870,801; 2019 – 8,870,801) | | 17,521 | | | 17,424 | | |
Class B – convertible – authorized and issued shares: 2020 – 781,724; 2019 – 803,404 | | 78 | | | 80 | | |
Class A – authorized: 300,000,000 shares; issued: 2021 – 175,962,272; 2020 – 175,308,672 (including treasury shares: 2021 – 8,870,801; 2020 – 8,870,801) | | Class A – authorized: 300,000,000 shares; issued: 2021 – 175,962,272; 2020 – 175,308,672 (including treasury shares: 2021 – 8,870,801; 2020 – 8,870,801) | | 17,596 | | | 17,531 | |
Class B – convertible – authorized and issued shares: 2021 – 781,724; 2020 – 781,724 | | Class B – convertible – authorized and issued shares: 2021 – 781,724; 2020 – 781,724 | | 78 | | | 78 | |
Additional paid-in capital | Additional paid-in capital | | 212,291 | | | 208,028 | | Additional paid-in capital | | 217,565 | | | 216,714 | |
Retained earnings | Retained earnings | | 1,672,633 | | | 1,612,658 | | Retained earnings | | 1,756,198 | | | 1,672,586 | |
Common stock held in treasury, at cost | Common stock held in treasury, at cost | | (171,211) | | | (171,211) | | Common stock held in treasury, at cost | | (171,211) | | | (171,211) | |
Accumulated other comprehensive loss, net of income taxes: | Accumulated other comprehensive loss, net of income taxes: | | Accumulated other comprehensive loss, net of income taxes: | |
Foreign currency translation adjustments | Foreign currency translation adjustments | | 5,710 | | | 3,438 | | Foreign currency translation adjustments | | 7,092 | | | 8,386 | |
Funded status of benefit plans | Funded status of benefit plans | | (485,087) | | | (498,986) | | Funded status of benefit plans | | (412,315) | | | (421,698) | |
Net unrealized gain on available-for-sale securities | Net unrealized gain on available-for-sale securities | | 3,459 | | | 572 | | Net unrealized gain on available-for-sale securities | | 1,779 | | | 3,131 | |
Total accumulated other comprehensive loss, net of income taxes | Total accumulated other comprehensive loss, net of income taxes | | (475,918) | | | (494,976) | | Total accumulated other comprehensive loss, net of income taxes | | (403,444) | | | (410,181) | |
Total New York Times Company stockholders’ equity | Total New York Times Company stockholders’ equity | | 1,255,394 | | | 1,172,003 | | Total New York Times Company stockholders’ equity | | 1,416,782 | | | 1,325,517 | |
Noncontrolling interest | Noncontrolling interest | | 1,860 | | | 1,860 | | Noncontrolling interest | | 2,005 | | | 2,594 | |
Total stockholders’ equity | Total stockholders’ equity | | 1,257,254 | | | 1,173,863 | | Total stockholders’ equity | | 1,418,787 | | | 1,328,111 | |
Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | | $ | 2,139,541 | | | $ | 2,089,138 | | Total liabilities and stockholders’ equity | | $ | 2,348,007 | | | $ | 2,307,689 | |
See Notes to Condensed Consolidated Financial Statements.
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 | | | For the Quarters Ended | | For the Six Months Ended |
| | September 27, 2020 | | September 29, 2019 | | September 27, 2020 | | September 29, 2019 | | June 27, 2021 | | June 28, 2020 | | June 27, 2021 | | June 28, 2020 |
| | (13 weeks) | | (39 weeks) | | (13 weeks) | | (26 weeks) |
Revenues | Revenues | | Revenues | |
Subscription | Subscription | | $ | 300,950 | | | $ | 267,302 | | | $ | 879,573 | | | $ | 808,568 | | Subscription | | $ | 339,217 | | | $ | 293,189 | | | $ | 668,301 | | | $ | 578,623 | |
Advertising | Advertising | | 79,253 | | | 113,531 | | | 253,150 | | | 359,380 | | Advertising | | 112,774 | | | 67,760 | | | 209,890 | | | 173,897 | |
Other | Other | | 46,692 | | | 47,668 | | | 141,558 | | | 135,873 | | Other | | 46,506 | | | 42,801 | | | 93,351 | | | 94,866 | |
Total revenues | Total revenues | | 426,895 | | | 428,501 | | | 1,274,281 | | | 1,303,821 | | Total revenues | | 498,497 | | | 403,750 | | | 971,542 | | | 847,386 | |
Operating costs | Operating costs | | Operating costs | |
Cost of revenue (excluding depreciation and amortization) | Cost of revenue (excluding depreciation and amortization) | | 235,900 | | | 245,100 | | | 709,719 | | | 729,654 | | Cost of revenue (excluding depreciation and amortization) | | 251,358 | | | 229,913 | | | 502,355 | | | 473,397 | |
Sales and marketing | Sales and marketing | | 50,627 | | | 64,218 | | | 164,040 | | | 201,327 | | Sales and marketing | | 53,555 | | | 39,605 | | | 113,708 | | | 113,389 | |
Product development | Product development | | 34,102 | | | 26,669 | | | 95,641 | | | 75,658 | | Product development | | 39,699 | | | 30,983 | | | 78,642 | | | 61,985 | |
General and administrative | General and administrative | | 51,118 | | | 50,015 | | | 162,791 | | | 152,054 | | General and administrative | | 62,283 | | | 58,812 | | | 118,860 | | | 111,673 | |
Depreciation and amortization | Depreciation and amortization | | 15,552 | | | 15,450 | | | 46,368 | | | 45,548 | | Depreciation and amortization | | 14,486 | | | 15,631 | | | 29,203 | | | 30,816 | |
Total operating costs | Total operating costs | | 387,299 | | | 401,452 | | | 1,178,559 | | | 1,204,241 | | Total operating costs | | 421,381 | | | 374,944 | | | 842,768 | | | 791,260 | |
| Restructuring charge | | 0 | | | 4,008 | | | 0 | | | 4,008 | | |
Gain from pension liability adjustment | | 0 | | | (2,045) | | | 0 | | | (2,045) | | |
| Lease termination charge | | Lease termination charge | | 3,831 | | | 0 | | | 3,831 | | | 0 | |
| Operating profit | Operating profit | | 39,596 | | | 25,086 | | | 95,722 | | | 97,617 | | Operating profit | | 73,285 | | | 28,806 | | | 124,943 | | | 56,126 | |
Other components of net periodic benefit costs | Other components of net periodic benefit costs | | 2,272 | | | 1,834 | | | 6,735 | | | 5,502 | | Other components of net periodic benefit costs | | 2,598 | | | 2,149 | | | 5,197 | | | 4,463 | |
| Interest income/(expense) and other, net | | 3,537 | | | (755) | | | 20,177 | | | (3,572) | | |
Interest income and other, net | | Interest income and other, net | | 1,873 | | | 2,786 | | | 3,384 | | | 16,640 | |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | | 40,861 | | | 22,497 | | | 109,164 | | | 88,543 | | Income from continuing operations before income taxes | | 72,560 | | | 29,443 | | | 123,130 | | | 68,303 | |
Income tax expense | Income tax expense | | 7,283 | | | 6,070 | | | 19,070 | | | 16,789 | | Income tax expense | | 18,243 | | | 5,781 | | | 27,704 | | | 11,787 | |
| Net income | Net income | | 33,578 | | | 16,427 | | | 90,094 | | | 71,754 | | Net income | | 54,317 | | | 23,662 | | | 95,426 | | | 56,516 | |
| Net income attributable to The New York Times Company common stockholders | Net income attributable to The New York Times Company common stockholders | | $ | 33,578 | | | $ | 16,427 | | | $ | 90,094 | | | $ | 71,754 | | Net income attributable to The New York Times Company common stockholders | | $ | 54,317 | | | $ | 23,662 | | | $ | 95,426 | | | $ | 56,516 | |
Average number of common shares outstanding: | Average number of common shares outstanding: | | | | | | | | | Average number of common shares outstanding: | | | | | | | | |
Basic | Basic | | 167,075 | | | 166,148 | | | 166,842 | | | 165,976 | | Basic | | 168,012 | | | 166,869 | | | 167,828 | | | 166,725 | |
Diluted | Diluted | | 168,059 | | | 167,555 | | | 167,943 | | | 167,384 | | Diluted | | 168,346 | | | 168,083 | | | 168,312 | | | 167,968 | |
Basic earnings per share attributable to The New York Times Company common stockholders | Basic earnings per share attributable to The New York Times Company common stockholders | | $ | 0.20 | | | $ | 0.10 | | | $ | 0.54 | | | $ | 0.43 | | Basic earnings per share attributable to The New York Times Company common stockholders | | $ | 0.32 | | | $ | 0.14 | | | $ | 0.57 | | | $ | 0.34 | |
Diluted earnings per share attributable to The New York Times Company common stockholders | Diluted earnings per share attributable to The New York Times Company common stockholders | | $ | 0.20 | | | $ | 0.10 | | | $ | 0.54 | | | $ | 0.43 | | Diluted earnings per share attributable to The New York Times Company common stockholders | | $ | 0.32 | | | $ | 0.14 | | | $ | 0.57 | | | $ | 0.34 | |
Dividends declared per share | Dividends declared per share | | $ | 0.12 | | | $ | 0.05 | | | $ | 0.18 | | | $ | 0.15 | | Dividends declared per share | | $ | 0 | | | $ | 0 | | | $ | 0.07 | | | $ | 0.06 | |
See Notes to Condensed Consolidated Financial Statements.
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
| | | | For the Quarters Ended | | For the Nine Months Ended | | | For the Quarters Ended | | For the Six Months Ended |
| | September 27, 2020 | | September 29, 2019 | | September 27, 2020 | | September 29, 2019 | | June 27, 2021 | | June 28, 2020 | | June 27, 2021 | | June 28, 2020 |
| | (13 weeks) | | (39 weeks) | | (13 weeks) | | (26 weeks) |
Net income | Net income | | $ | 33,578 | | | $ | 16,427 | | | $ | 90,094 | | | $ | 71,754 | | Net income | | $ | 54,317 | | | $ | 23,662 | | | $ | 95,426 | | | $ | 56,516 | |
Other comprehensive income, before tax: | Other comprehensive income, before tax: | | Other comprehensive income, before tax: | |
Income/(loss) on foreign currency translation adjustments | | 2,730 | | | (3,159) | | | 3,095 | | | (3,286) | | |
Gain/(loss) on foreign currency translation adjustments | | Gain/(loss) on foreign currency translation adjustments | | 935 | | | 619 | | | (1,767) | | | 365 | |
Pension and postretirement benefits obligation | Pension and postretirement benefits obligation | | 6,354 | | | 4,893 | | | 18,982 | | | 14,685 | | Pension and postretirement benefits obligation | | 6,409 | | | 6,231 | | | 12,815 | | | 12,628 | |
Net unrealized (loss)/gain on available-for-sale securities | Net unrealized (loss)/gain on available-for-sale securities | | (854) | | | 284 | | | 3,936 | | | 3,773 | | Net unrealized (loss)/gain on available-for-sale securities | | (779) | | | 4,075 | | | (1,846) | | | 4,790 | |
Other comprehensive income, before tax | Other comprehensive income, before tax | | 8,230 | | | 2,018 | | | 26,013 | | | 15,172 | | Other comprehensive income, before tax | | 6,565 | | | 10,925 | | | 9,202 | | | 17,783 | |
Income tax expense | Income tax expense | | 2,192 | | | 489 | | | 6,955 | | | 3,903 | | Income tax expense | | 1,756 | | | 2,848 | | | 2,465 | | | 4,763 | |
Other comprehensive income, net of tax | Other comprehensive income, net of tax | | 6,038 | | | 1,529 | | | 19,058 | | | 11,269 | | Other comprehensive income, net of tax | | 4,809 | | | 8,077 | | | 6,737 | | | 13,020 | |
| Comprehensive income attributable to The New York Times Company common stockholders | Comprehensive income attributable to The New York Times Company common stockholders | | $ | 39,616 | | | $ | 17,956 | | | $ | 109,152 | | | $ | 83,023 | | Comprehensive income attributable to The New York Times Company common stockholders | | $ | 59,126 | | | $ | 31,739 | | | $ | 102,163 | | | $ | 69,536 | |
See Notes to Condensed Consolidated Financial Statements.
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Quarters Ended SeptemberJune 27, 20202021 and September 29, 2019June 28, 2020
(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, 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 | |
| | | | | | | | |
Balance, June 28, 2020 | $ | 17,562 | | $ | 205,618 | | $ | 1,659,158 | | $ | (171,211) | | $ | (481,956) | | $ | 1,229,171 | | $ | 1,860 | | $ | 1,231,031 | |
| | | | | | | | |
Net income | — | | — | | 33,578 | | — | | — | | 33,578 | | — | | 33,578 | |
Dividends | — | | — | | (20,103) | | — | | — | | (20,103) | | — | | (20,103) | |
Other comprehensive income | — | | — | | — | | — | | 6,038 | | 6,038 | | — | | 6,038 | |
Issuance of shares: | | | | | | | | |
Stock options – 372,508 Class A shares | 37 | | 3,397 | | — | | — | | — | | 3,434 | | — | | 3,434 | |
Restricted stock units vested – 635 Class A shares | — | | (16) | | — | | — | | — | | (16) | | — | | (16) | |
| | | | | | | | |
Stock-based compensation | — | | 3,292 | | — | | — | | — | | 3,292 | | — | | 3,292 | |
| | | | | | | | |
Balance, September 27, 2020 | $ | 17,599 | | $ | 212,291 | | $ | 1,672,633 | | $ | (171,211) | | $ | (475,918) | | $ | 1,255,394 | | $ | 1,860 | | $ | 1,257,254 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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, March 29, 2020 | $ | 17,552 | | $ | 199,933 | | $ | 1,635,473 | | $ | (171,211) | | $ | (490,033) | | $ | 1,191,714 | | $ | 1,860 | | $ | 1,193,574 | |
| | | | | | | | |
Net income | — | | — | | 23,662 | | — | | — | | 23,662 | | — | | 23,662 | |
Dividends | — | | — | | 23 | | — | | — | | 23 | | — | | 23 | |
Other comprehensive income | — | | — | | — | | — | | 8,077 | | 8,077 | | — | | 8,077 | |
Issuance of shares: | | | | | | | | |
Stock options – 90,735 Class A shares | 9 | | 933 | | — | | — | | — | | 942 | | — | | 942 | |
Restricted stock units vested – 6,516 Class A shares | 1 | | (275) | | — | | — | | — | | (274) | | — | | (274) | |
| | | | | | | | |
Stock-based compensation | — | | 5,027 | | — | | — | | — | | 5,027 | | — | | 5,027 | |
| | | | | | | | |
Balance, June 28, 2020 | $ | 17,562 | | $ | 205,618 | | $ | 1,659,158 | | $ | (171,211) | | $ | (481,956) | | $ | 1,229,171 | | $ | 1,860 | | $ | 1,231,031 | |
| | | | | | | | |
Balance, March 28, 2021 | $ | 17,670 | | $ | 212,802 | | $ | 1,701,860 | | $ | (171,211) | | $ | (408,253) | | $ | 1,352,868 | | $ | 2,594 | | $ | 1,355,462 | |
| | | | | | | | |
Net income | — | | — | | 54,317 | | — | | — | | 54,317 | | — | | 54,317 | |
Dividends | — | | — | | 21 | | — | | — | | 21 | | — | | 21 | |
Other comprehensive income | — | | — | | — | | — | | 4,809 | | 4,809 | | — | | 4,809 | |
Issuance of shares: | | | | | | | | |
| | | | | | | | |
Restricted stock units vested – 45,280 Class A shares | 4 | | (390) | | — | | — | | — | | (386) | | — | | (386) | |
| | | | | | | | |
Stock-based compensation | — | | 5,153 | | — | | — | | — | | 5,153 | | — | | 5,153 | |
Distributions | — | | — | | — | | — | | — | | — | | (589) | | (589) | |
| | | | | | | | |
Balance, June 27, 2021 | $ | 17,674 | | $ | 217,565 | | $ | 1,756,198 | | $ | (171,211) | | $ | (403,444) | | $ | 1,416,782 | | $ | 2,005 | | $ | 1,418,787 | |
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the NineSix Months Ended SeptemberJune 27, 20202021 and September 29, 2019June 28, 2020
(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 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 | |
| | | | | | | | |
Balance, December 29, 2019 | $ | 17,504 | | $ | 208,028 | | $ | 1,612,658 | | $ | (171,211) | | $ | (494,976) | | $ | 1,172,003 | | $ | 1,860 | | $ | 1,173,863 | |
| | | | | | | | |
Net income | — | | — | | 90,094 | | — | | — | | 90,094 | | — | | 90,094 | |
Dividends | — | | — | | (30,119) | | — | | — | | (30,119) | | — | | (30,119) | |
Other comprehensive income | — | | — | | — | | — | | 19,058 | | 19,058 | | — | | 19,058 | |
Issuance of shares: | | | | | | | | |
Stock options – 552,018 Class A shares | 55 | | 5,252 | | — | | — | | — | | 5,307 | | — | | 5,307 | |
Restricted stock units vested – 142,136 Class A shares | 14 | | (3,913) | | — | | — | | — | | (3,899) | | — | | (3,899) | |
Performance-based awards – 257,098 Class A shares | 26 | | (7,850) | | — | | — | | — | | (7,824) | | — | | (7,824) | |
Stock-based compensation | — | | 10,774 | | — | | — | | — | | 10,774 | | — | | 10,774 | |
Balance, September 27, 2020 | $ | 17,599 | | $ | 212,291 | | $ | 1,672,633 | | $ | (171,211) | | $ | (475,918) | | $ | 1,255,394 | | $ | 1,860 | | $ | 1,257,254 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 29, 2019 | $ | 17,504 | | $ | 208,028 | | $ | 1,612,658 | | $ | (171,211) | | $ | (494,976) | | $ | 1,172,003 | | $ | 1,860 | | $ | 1,173,863 | |
| | | | | | | | |
Net income | — | | — | | 56,516 | | — | | — | | 56,516 | | — | | 56,516 | |
Dividends | — | | — | | (10,016) | | — | | — | | (10,016) | | — | | (10,016) | |
Other comprehensive income | — | | — | | — | | — | | 13,020 | | 13,020 | | — | | 13,020 | |
Issuance of shares: | | | | | | — | | | — | |
Stock options – 179,510 Class A shares | 18 | | 1,855 | | — | | — | | — | | 1,873 | | — | | 1,873 | |
Restricted stock units vested – 141,501 Class A shares | 14 | | (3,897) | | — | | — | | — | | (3,883) | | — | | (3,883) | |
Performance-based awards – 257,098 Class A shares | 26 | | (7,850) | | — | | — | | — | | (7,824) | | — | | (7,824) | |
Stock-based compensation | — | | 7,482 | | — | | — | | — | | 7,482 | | — | | 7,482 | |
| | | | | | | | |
Balance, June 28, 2020 | $ | 17,562 | | $ | 205,618 | | $ | 1,659,158 | | $ | (171,211) | | $ | (481,956) | | $ | 1,229,171 | | $ | 1,860 | | $ | 1,231,031 | |
| | | | | | | | |
Balance, December 27, 2020 | $ | 17,609 | | $ | 216,714 | | $ | 1,672,586 | | $ | (171,211) | | $ | (410,181) | | $ | 1,325,517 | | $ | 2,594 | | $ | 1,328,111 | |
| | | | | | | | |
Net income | — | | — | | 95,426 | | — | | — | | 95,426 | | — | | 95,426 | |
Dividends | — | | — | | (11,814) | | — | | — | | (11,814) | | — | | (11,814) | |
Other comprehensive income | — | | — | | — | | — | | 6,737 | | 6,737 | | — | | 6,737 | |
Issuance of shares: | | | | | | | | |
Stock options – 323,360 Class A shares | 33 | | 2,414 | | — | | — | | — | | 2,447 | | — | | 2,447 | |
Restricted stock units vested – 187,987 Class A shares | 18 | | (4,954) | | — | | — | | — | | (4,936) | | — | | (4,936) | |
Performance-based awards – 142,253 Class A shares | 14 | | (5,947) | | — | | — | | — | | (5,933) | | — | | (5,933) | |
Stock-based compensation | — | | 9,338 | | — | | — | | — | | 9,338 | | — | | 9,338 | |
Distributions | — | | — | | — | | — | | — | | — | | (589) | | (589) | |
| | | | | | | | |
Balance, June 27, 2021 | $ | 17,674 | | $ | 217,565 | | $ | 1,756,198 | | $ | (171,211) | | $ | (403,444) | | $ | 1,416,782 | | $ | 2,005 | | $ | 1,418,787 | |
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| | | For the Nine Months Ended | | For the Six Months Ended |
| | September 27, 2020 | | September 29, 2019 | | June 27, 2021 | | June 28, 2020 |
| | (39 weeks) | | (26 weeks) |
Cash flows from operating activities | Cash flows from operating activities | | Cash flows from operating activities | |
Net income | Net income | | $ | 90,094 | | | $ | 71,754 | | Net income | | $ | 95,426 | | | $ | 56,516 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation and amortization | Depreciation and amortization | | 46,368 | | | 45,548 | | Depreciation and amortization | | 29,203 | | | 30,816 | |
Lease termination charge | | Lease termination charge | | 3,831 | | | 0 | |
Amortization of right of use asset | Amortization of right of use asset | | 6,446 | | | 5,462 | | Amortization of right of use asset | | 4,442 | | | 4,645 | |
Stock-based compensation expense | Stock-based compensation expense | | 10,744 | | | 9,723 | | Stock-based compensation expense | | 9,338 | | | 7,482 | |
Deferred income taxes | | (1,209) | | | 0 | | |
| Gain on non-marketable equity investment | Gain on non-marketable equity investment | | (10,074) | | | (1,886) | | Gain on non-marketable equity investment | | 0 | | | (10,074) | |
| Long-term retirement benefit obligations | Long-term retirement benefit obligations | | (11,635) | | | (17,648) | | Long-term retirement benefit obligations | | (8,866) | | | (8,524) | |
| Fair market value adjustment on life insurance products | | (638) | | | (2,215) | | |
Other-net | | (3,658) | | | (6,926) | | |
| Other – net | | Other – net | | (289) | | | 475 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable-net | | 88,065 | | | 55,383 | | |
Accounts receivable – net | | Accounts receivable – net | | 30,152 | | | 91,310 | |
Other assets | Other assets | | 3,816 | | | (17,401) | | Other assets | | (8,027) | | | (1,292) | |
Accounts payable, accrued payroll and other liabilities | Accounts payable, accrued payroll and other liabilities | | (23,366) | | | (22,898) | | Accounts payable, accrued payroll and other liabilities | | (54,170) | | | (64,019) | |
Unexpired subscriptions | Unexpired subscriptions | | 11,730 | | | 2,704 | | Unexpired subscriptions | | 9,394 | | | 11,255 | |
Net cash provided by operating activities | Net cash provided by operating activities | | 206,683 | | | 121,600 | | Net cash provided by operating activities | | 110,434 | | | 118,590 | |
Cash flows from investing activities | Cash flows from investing activities | | | | | Cash flows from investing activities | | | | |
Purchases of marketable securities | Purchases of marketable securities | | (460,117) | | | (466,108) | | Purchases of marketable securities | | (326,996) | | | (278,773) | |
Maturities of marketable securities | Maturities of marketable securities | | 331,786 | | | 458,810 | | Maturities of marketable securities | | 293,053 | | | 228,938 | |
| Business acquisitions | Business acquisitions | | (33,085) | | | 0 | | Business acquisitions | | 0 | | | (8,055) | |
Proceeds from sale of investments – net | | 1,000 | | | 103 | | |
Sales of investments – net | | Sales of investments – net | | 271 | | | 4,074 | |
Capital expenditures | Capital expenditures | | (29,236) | | | (33,101) | | Capital expenditures | | (14,677) | | | (21,510) | |
Other-net | Other-net | | 2,388 | | | 3,038 | | Other-net | | 2,017 | | | 2,388 | |
Net cash used in investing activities | Net cash used in investing activities | | (187,264) | | | (37,258) | | Net cash used in investing activities | | (46,332) | | | (72,938) | |
Cash flows from financing activities | Cash flows from financing activities | | | | | Cash flows from financing activities | | | | |
Long-term obligations: | Long-term obligations: | | Long-term obligations: | |
Repayment of debt and finance lease obligations | | 0 | | | (7,220) | | |
| Dividends paid | Dividends paid | | (28,393) | | | (23,269) | | Dividends paid | | (21,825) | | | (18,359) | |
Payment of contingent consideration | | (862) | | | 0 | | |
| Capital shares: | Capital shares: | | Capital shares: | |
Proceeds from stock option exercises | Proceeds from stock option exercises | | 5,307 | | | 2,998 | | Proceeds from stock option exercises | | 2,441 | | | 1,873 | |
| Share-based compensation tax withholding | Share-based compensation tax withholding | | (11,723) | | | (15,648) | | Share-based compensation tax withholding | | (10,901) | | | (11,706) | |
Net cash used in financing activities | Net cash used in financing activities | | (35,671) | | | (43,139) | | Net cash used in financing activities | | (30,285) | | | (28,192) | |
Net (decrease)/increase in cash, cash equivalents and restricted cash | | (16,252) | | | 41,203 | | |
Net increase in cash, cash equivalents and restricted cash | | Net increase in cash, cash equivalents and restricted cash | | 33,817 | | | 17,460 | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | | 349 | | | (202) | | Effect of exchange rate changes on cash | | (280) | | | 162 | |
Cash, cash equivalents and restricted cash at the beginning of the period | Cash, cash equivalents and restricted cash at the beginning of the period | | 247,518 | | | 259,799 | | Cash, cash equivalents and restricted cash at the beginning of the period | | 301,964 | | | 247,518 | |
Cash, cash equivalents and restricted cash at the end of the period | Cash, cash equivalents and restricted cash at the end of the period | | $ | 231,615 | | | $ | 300,800 | | Cash, cash equivalents and restricted cash at the end of the period | | $ | 335,501 | | | $ | 265,140 | |
See Notes to Condensed Consolidated Financial Statements.
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 SeptemberJune 27, 20202021, and December 29, 2019,27, 2020, and the results of operations, changes in stockholders’ equity and cash flows of the Company for the periods ended SeptemberJune 27, 2020,2021, and September 29, 2019.June 28, 2020. 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 29, 2019.27, 2020. 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 and 3926 weeks for the thirdsecond quarter and ninesix months, respectively.
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.
Reclassification
The Company changed the expense captions on its Condensed Consolidated Statement of Operations effective for the quarter ended March 29, 2020. These changes were made in orderCertain prior period amounts have been reclassified to reflect how the Company manages its business and to communicate where the Company is investing resources and how this alignsconform with the Company’s strategy. The Company reclassified expenses for the priorcurrent period in order to present comparable financial results. There was no change to consolidated operating income, operating expense, net income or cash flows as a result of this change in classification. See Note 15 for more detail.presentation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Except as described herein, as of SeptemberJune 27, 2020,2021, our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the year ended December 29, 2019,27, 2020, have not changed materially.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Recently 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. | 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. The Company adopted this ASU prospectively on December 30, 2019 and will include capitalized implementation costs in Miscellaneous assets in the Company’s Condensed Consolidated Balance Sheet and within Total operating costs in the Condensed Consolidated Statement of Operations. The adoption did not have a material impact on the Company’s consolidated financial statements.
|
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. | 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. The Company adopted this ASU on December 30, 2019. The adoption did not have a material impact on the Company’s 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. | 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. 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. The Company adopted this ASU on December 30, 2019 using a modified retrospective approach. The adoption did not have a material impact on the Company’s consolidated financial statements. |
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (the “FASB”) issued authoritative guidance on the following topics:
| | | | | | | | | | | |
Accounting Standard Update(s) | Topic | Effective Period | Summary |
2019-12 | Simplifying the Accounting for Income Taxes (Topic 740) | Fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.2020. Early adoption is permitted.
| Simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification (“ASC”) 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We do not expectThe Company adopted this guidance toon December 28, 2020. The adoption did not have a material impact on our consolidated financial statements. |
2018-14 | Compensation—Retirement Benefits—Defined Benefit Plans—General | Fiscal years ending after December 15, 2020. Early adoption is permitted. | 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 do not expect this guidance to have a material impact on ourCompany’s consolidated financial statements. |
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Recently Issued Accounting PronouncementsThe 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 digital and print products (which include our news product, as well as our Games, (previously Crossword), Cooking and audioAudm 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 revenue is principally from advertisers (such as technology, financial and luxury goods companies) promoting products, services or brands on digital platforms in the form of bannersdisplay ads, audio and video, and in print, in the form of column-inch ads. Advertising revenue is primarily derived from offerings sold directly to marketers by our advertising sales teams. A smaller proportion of our total advertising revenues is generated through programmatic auctions run by third-party ad exchangesexchanges. Advertising revenue is primarily determined by the volume (e.g., impressions), rate and frommix of advertisements. Digital advertising includes our core digital advertising business and other digital advertising. Our core digital advertising business includes direct-sold website, mobile application, podcast, email and video advertisements. Direct-sold display
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
advertising, a component of core digital advertising, includes offerings on websites and mobile applications sold directly to marketers by our advertising sales teams. Other digital advertising includes open-market programmatic advertising and creative services fees, including those associated with our branded content studio. Digital advertising revenues also include creative services fees and advertising revenue generated by Wirecutter, our product review and recommendation website.fees. Print advertising includes revenue from column-inch ads and classified advertising, including line-ads as well as preprinted advertising, also known as freestanding inserts.
Other revenues primarily consist of revenues from licensing, Wirecutter affiliate referrals, from Wirecutter, the leasing of floors in the New York headquarters building located at 620 Eighth Avenue, New York, New York (the “Company Headquarters”), commercial printing, retail commerce, television and film, retail commerceour student subscription sponsorship program and NYT Live (ourour live events business).business.
Subscription, advertising and other revenues were as follows:
| | | For the Quarters Ended | | For the Nine Months Ended | | For the Quarters Ended | | For the Six Months Ended |
(In thousands) | (In thousands) | | September 27, 2020 | | As % of total | | September 29, 2019 | | As % of total | | September 27, 2020 | | As % of total | | September 29, 2019 | | As % of total | (In thousands) | | June 27, 2021 | | As % of total | | June 28, 2020 | | As % of total | | June 27, 2021 | | As % of total | | June 28, 2020 | | As % of total |
Subscription | Subscription | | $ | 300,950 | | | 70.5 | % | | $ | 267,302 | | | 62.4 | % | | $ | 879,573 | | | 69.0 | % | | $ | 808,568 | | | 62.0 | % | Subscription | | $ | 339,217 | | | 68.1 | % | | $ | 293,189 | | | 72.6 | % | | $ | 668,301 | | | 68.8 | % | | $ | 578,623 | | | 68.3 | % |
Advertising | Advertising | | 79,253 | | | 18.6 | % | | 113,531 | | | 26.5 | % | | 253,150 | | | 19.9 | % | | 359,380 | | | 27.6 | % | Advertising | | 112,774 | | | 22.6 | % | | 67,760 | | | 16.8 | % | | 209,890 | | | 21.6 | % | | 173,897 | | | 20.5 | % |
Other (1) | Other (1) | | 46,692 | | | 10.9 | % | | 47,668 | | | 11.1 | % | | 141,558 | | | 11.1 | % | | 135,873 | | | 10.4 | % | Other (1) | | 46,506 | | | 9.3 | % | | 42,801 | | | 10.6 | % | | 93,351 | | | 9.6 | % | | 94,866 | | | 11.2 | % |
Total | Total | | $ | 426,895 | | | 100.0 | % | | $ | 428,501 | | | 100.0 | % | | $ | 1,274,281 | | | 100.0 | % | | $ | 1,303,821 | | | 100.0 | % | Total | | $ | 498,497 | | | 100.0 | % | | $ | 403,750 | | | 100.0 | % | | $ | 971,542 | | | 100.0 | % | | $ | 847,386 | | | 100.0 | % |
(1) Other revenue includesrevenues include building rental revenue, which is not under the scope of Revenue from Contracts with Customers (Topic 606). Building rental revenue was approximately $7 million and $8 million for the thirdsecond quarters of 20202021 and 2019,2020, respectively, and approximately $22$13 million and $23$15 million for the first ninesix months of 2021 and 2020, and 2019, respectively.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes digital and print subscription revenues, which are components of subscription revenues above, for the thirdsecond quarters and first ninesix months ended SeptemberJune 27, 2020,2021, and September 29, 2019:June 28, 2020:
| | | For the Quarters Ended | | For the Nine Months Ended | | For the Quarters Ended | | For the Six Months Ended |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | September 27, 2020 | | September 29, 2019 | (In thousands) | | June 27, 2021 | | June 28, 2020 | | June 27, 2021 | | June 28, 2020 |
Digital-only subscription revenues: | Digital-only subscription revenues: | | Digital-only subscription revenues: | |
News product subscription revenues(1) | News product subscription revenues(1) | | $ | 140,740 | | | $ | 107,009 | | | $ | 392,620 | | | $ | 313,785 | | News product subscription revenues(1) | | $ | 170,893 | | | $ | 132,922 | | | $ | 332,181 | | | $ | 251,880 | |
Other product subscription revenues(2) | Other product subscription revenues(2) | | 14,546 | | | 8,855 | | | 38,660 | | | 24,573 | | Other product subscription revenues(2) | | 19,252 | | | 13,062 | | | 37,564 | | | 24,114 | |
Subtotal digital-only subscriptions | Subtotal digital-only subscriptions | | 155,286 | | | 115,864 | | | 431,280 | | | 338,358 | | Subtotal digital-only subscriptions | | 190,145 | | | 145,984 | | | 369,745 | | | 275,994 | |
Print subscription revenues: | Print subscription revenues: | | Print subscription revenues: | |
Domestic home delivery subscription revenues(3) | Domestic home delivery subscription revenues(3) | | 129,912 | | | 126,769 | | | 396,620 | | | 395,011 | | Domestic home delivery subscription revenues(3) | | 134,755 | | | 132,971 | | | 269,150 | | | 266,708 | |
Single-copy, NYT International and other subscription revenues(4) | Single-copy, NYT International and other subscription revenues(4) | | 15,752 | | | 24,669 | | | 51,673 | | | 75,199 | | Single-copy, NYT International and other subscription revenues(4) | | 14,317 | | | 14,234 | | | 29,406 | | | 35,921 | |
Subtotal print subscription revenues | Subtotal print subscription revenues | | 145,664 | | | 151,438 | | | 448,293 | | | 470,210 | | Subtotal print subscription revenues | | 149,072 | | | 147,205 | | | 298,556 | | | 302,629 | |
Total subscription revenues | Total subscription revenues | | $ | 300,950 | | | $ | 267,302 | | | $ | 879,573 | | | $ | 808,568 | | Total subscription revenues | | $ | 339,217 | | | $ | 293,189 | | | $ | 668,301 | | | $ | 578,623 | |
(1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. | (1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. | (1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. |
(2) Includes revenues from standalone subscriptions to the Company’s Games, Cooking and audio products. | |
(3) Includes free access to some or all of the Company’s digital products. | |
(2) Includes revenues from standalone subscriptions to the Company’s Games, Cooking and Audm products. | | (2) Includes revenues from standalone subscriptions to the Company’s Games, Cooking and Audm products. |
(3) Includes free access to some of the Company’s digital products. | | (3) Includes free access to some of the Company’s digital products. |
(4) NYT International is the international edition of our print newspaper. | (4) NYT International is the international edition of our print newspaper. | (4) NYT International is the international edition of our print newspaper. |
The following table summarizes digital and print advertising revenues for the thirdsecond quarters and first ninesix months of 2020ended June 27, 2021, and 2019:June 28, 2020:
| | | For the Quarters Ended | For the Nine Months Ended | | For the Quarters Ended | | For the Six Months Ended |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | September 27, 2020 | | September 29, 2019 | (In thousands) | | June 27, 2021 | | June 28, 2020 | | June 27, 2021 | | June 28, 2020 |
Advertising revenues: | Advertising revenues: | | | | | | | | | Advertising revenues: | | | | | | | | |
Digital | Digital | | $ | 47,763 | | | $ | 54,653 | | | $ | 138,452 | | | $ | 168,222 | | Digital | | $ | 70,995 | | | $ | 39,531 | | | $ | 130,491 | | | $ | 90,689 | |
Print | Print | | 31,490 | | | 58,878 | | | 114,698 | | | 191,158 | | Print | | 41,779 | | | 28,229 | | | 79,399 | | | 83,208 | |
Total advertising | Total advertising | | $ | 79,253 | | | $ | 113,531 | | | $ | 253,150 | | | $ | 359,380 | | Total advertising | | $ | 112,774 | | | $ | 67,760 | | | $ | 209,890 | | | $ | 173,897 | |
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Performance Obligations
We have remaining performance obligations related to digital archive and other licensing and certain advertising contracts. As of SeptemberJune 27, 2020,2021, the aggregate amount of the transaction price allocated to the remaining performance obligations for contracts with a duration greater than one year was approximately $153$104 million. The Company will recognize this revenue as performance obligations are satisfied. We expect that approximately $16$24 million, $60$36 million and $77$44 million will be recognized in the remainder of 2020, 2021, 2022 and thereafter, respectively.
Contract Assets
As of SeptemberJune 27, 2020,2021, and December 29, 2019,27, 2020, the Company had $2.2$1.9 million and $3.4$1.8 million, respectively, in contract assets recorded in the Condensed Consolidated Balance Sheets related to digital archiving licensing revenue. The contract asset is reclassified to Accounts receivable when the customer is invoiced based on the contractual billing schedule. The decrease in the contract assets balance of $1.2 million for the nine months ended September 27, 2020, is due to consideration that was reclassified to Accounts receivable when invoiced based on the contractual billing schedules for the period ended September 27, 2020.
NOTE 4. MARKETABLE SECURITIES
The Company accounts for its marketable securities as available for sale (“AFS”). The Company recorded $4.7$2.4 million and $0.8$4.3 million of net unrealized gains in Accumulated other comprehensive income (“AOCI”) as of SeptemberJune 27, 2020,2021, and December 29, 2019,27, 2020, respectively.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the amortized cost, gross unrealized gains and losses, and fair market value of our AFS debt securities as of SeptemberJune 27, 2020,2021, and December 29, 2019:27, 2020:
| | | September 27, 2020 | | June 27, 2021 |
(In thousands) | (In thousands) | | Amortized Cost | | Gross unrealized gains | | Gross unrealized losses | | Fair Value | (In thousands) | | Amortized Cost | | Gross unrealized gains | | Gross unrealized losses | | Fair Value |
| Short-term AFS securities | Short-term AFS securities | | | | | | | | | Short-term AFS securities | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 119,042 | | | $ | 561 | | | $ | (17) | | | $ | 119,586 | | Corporate debt securities | | $ | 110,415 | | | $ | 496 | | | $ | (12) | | | $ | 110,899 | |
Certificates of deposit | | Certificates of deposit | | 105,954 | | | 0 | | | 0 | | | 105,954 | |
U.S. Treasury securities | U.S. Treasury securities | | 97,712 | | | 94 | | | (4) | | | 97,802 | | U.S. Treasury securities | | 74,984 | | | 547 | | | (3) | | | 75,528 | |
U.S. governmental agency securities | U.S. governmental agency securities | | 47,759 | | | 68 | | | (4) | | | 47,823 | | U.S. governmental agency securities | | 26,137 | | | 16 | | | 0 | | | 26,153 | |
Commercial paper | Commercial paper | | 43,523 | | | 0 | | | 0 | | | 43,523 | | Commercial paper | | 19,921 | | | 0 | | | 0 | | | 19,921 | |
| Total short-term AFS securities | Total short-term AFS securities | | $ | 308,036 | | | $ | 723 | | | $ | (25) | | | $ | 308,734 | | Total short-term AFS securities | | $ | 337,411 | | | $ | 1,059 | | | $ | (15) | | | $ | 338,455 | |
Long-term AFS securities | Long-term AFS securities | | | | | | | | | Long-term AFS securities | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 118,690 | | | $ | 1,713 | | | $ | (22) | | | $ | 120,381 | | Corporate debt securities | | $ | 161,767 | | | $ | 725 | | | $ | (123) | | | $ | 162,369 | |
U.S. Treasury securities | U.S. Treasury securities | | 88,059 | | | 2,343 | | | 0 | | | 90,402 | | U.S. Treasury securities | | 60,377 | | | 861 | | | (15) | | | 61,223 | |
U.S. governmental agency securities | U.S. governmental agency securities | | 64,881 | | | 89 | | | (104) | | | 64,866 | | U.S. governmental agency securities | | 51,591 | | | 6 | | | (67) | | | 51,530 | |
Municipal securities | | Municipal securities | | 12,142 | | | 7 | | | (6) | | | 12,143 | |
Total long-term AFS securities | Total long-term AFS securities | | $ | 271,630 | | | $ | 4,145 | | | $ | (126) | | | $ | 275,649 | | Total long-term AFS securities | | $ | 285,877 | | | $ | 1,599 | | | $ | (211) | | | $ | 287,265 | |
| | | December 29, 2019 | | December 27, 2020 |
(In thousands) | (In thousands) | | Amortized Cost | | Gross unrealized gains | | Gross unrealized losses | | Fair Value | (In thousands) | | Amortized Cost | | Gross unrealized gains | | Gross unrealized losses | | Fair Value |
| Short-term AFS securities | Short-term AFS securities | | | | | | | | | Short-term AFS securities | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 98,864 | | | $ | 271 | | | $ | (9) | | | $ | 99,126 | | Corporate debt securities | | $ | 129,805 | | | $ | 504 | | | $ | (8) | | | $ | 130,301 | |
Certificates of deposit | | Certificates of deposit | | 36,525 | | | 0 | | | 0 | | | 36,525 | |
U.S. Treasury securities | U.S. Treasury securities | | 43,098 | | | 8 | | | (11) | | | 43,095 | | U.S. Treasury securities | | 79,467 | | | 39 | | | (3) | | | 79,503 | |
U.S. governmental agency securities | U.S. governmental agency securities | | 37,471 | | | 35 | | | (4) | | | 37,502 | | U.S. governmental agency securities | | 25,113 | | | 61 | | | (3) | | | 25,171 | |
Commercial paper | Commercial paper | | 12,561 | | | 0 | | | 0 | | | 12,561 | | Commercial paper | | 37,580 | | | 0 | | | 0 | | | 37,580 | |
| Certificates of deposit | | 9,501 | | | 0 | | | 0 | | | 9,501 | | |
Total short-term AFS securities | Total short-term AFS securities | | $ | 201,495 | | | $ | 314 | | | $ | (24) | | | $ | 201,785 | | Total short-term AFS securities | | $ | 308,490 | | | $ | 604 | | | $ | (14) | | | $ | 309,080 | |
Long-term AFS securities | Long-term AFS securities | | | | | | | | | Long-term AFS securities | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 103,149 | | | $ | 617 | | | $ | (29) | | | $ | 103,737 | | Corporate debt securities | | $ | 134,296 | | | $ | 1,643 | | | $ | (5) | | | $ | 135,934 | |
U.S. Treasury securities | U.S. Treasury securities | | 101,457 | | | 84 | | | (103) | | | 101,438 | | U.S. Treasury securities | | 95,511 | | | 2,054 | | | 0 | | | 97,565 | |
U.S. governmental agency securities | U.S. governmental agency securities | | 46,600 | | | 5 | | | (84) | | | 46,521 | | U.S. governmental agency securities | | 48,342 | | | 19 | | | (13) | | | 48,348 | |
Municipal securities | | Municipal securities | | 4,994 | | | 0 | | | (10) | | | 4,984 | |
Total long-term AFS securities | Total long-term AFS securities | | $ | 251,206 | | | $ | 706 | | | $ | (216) | | | $ | 251,696 | | Total long-term AFS securities | | $ | 283,143 | | | $ | 3,716 | | | $ | (28) | | | $ | 286,831 | |
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables represent the AFS securities as of SeptemberJune 27, 2020,2021, and December 29, 2019,27, 2020, that were in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:
| | | September 27, 2020 | | June 27, 2021 |
| | Less than 12 Months | | 12 Months or Greater | | Total | | Less than 12 Months | | 12 Months or Greater | | Total |
(In thousands) | (In thousands) | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses | (In thousands) | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses |
| Short-term AFS securities | Short-term AFS securities | | | | | | | | | | | | | Short-term AFS securities | | | | | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 22,174 | | | $ | (17) | | | $ | 0 | | | $ | 0 | | | $ | 22,174 | | | $ | (17) | | Corporate debt securities | | $ | 28,033 | | | $ | (12) | | | $ | 0 | | | $ | 0 | | | $ | 28,033 | | | $ | (12) | |
U.S. Treasury securities | U.S. Treasury securities | | 43,982 | | | (4) | | | 0 | | | 0 | | | 43,982 | | | (4) | | U.S. Treasury securities | | 22,670 | | | (3) | | | 0 | | | 0 | | | 22,670 | | | (3) | |
| U.S. governmental agency securities | | 4,999 | | | (2) | | | 8,748 | | | (2) | | | 13,747 | | | (4) | | |
| Total short-term AFS securities | Total short-term AFS securities | | $ | 71,155 | | | $ | (23) | | | $ | 8,748 | | | $ | (2) | | | $ | 79,903 | | | $ | (25) | | Total short-term AFS securities | | $ | 50,703 | | | $ | (15) | | | $ | 0 | | | $ | 0 | | | $ | 50,703 | | | $ | (15) | |
Long-term AFS securities | Long-term AFS securities | | | | | | | | | | | | | Long-term AFS securities | | | | | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 10,466 | | | $ | (22) | | | $ | 0 | | | $ | 0 | | | $ | 10,466 | | | $ | (22) | | Corporate debt securities | | $ | 50,552 | | | $ | (123) | | | $ | 0 | | | $ | 0 | | | $ | 50,552 | | | $ | (123) | |
| U.S. Treasury securities | | U.S. Treasury securities | | 11,212 | | | (15) | | | 0 | | | 0 | | | 11,212 | | | (15) | |
U.S. governmental agency securities | U.S. governmental agency securities | | 22,146 | | | (104) | | | 0 | | | 0 | | | 22,146 | | | (104) | | U.S. governmental agency securities | | 42,428 | | | (67) | | | 0 | | | 0 | | | 42,428 | | | (67) | |
Municipal securities | | Municipal securities | | 5,141 | | | (6) | | | 0 | | | 0 | | | 5,141 | | | (6) | |
Total long-term AFS securities | Total long-term AFS securities | | $ | 32,612 | | | $ | (126) | | | $ | 0 | | | $ | 0 | | | $ | 32,612 | | | $ | (126) | | Total long-term AFS securities | | $ | 109,333 | | | $ | (211) | | | $ | 0 | | | $ | 0 | | | $ | 109,333 | | | $ | (211) | |
| | | December 29, 2019 | | December 27, 2020 |
| | Less than 12 Months | | 12 Months or Greater | | Total | | Less than 12 Months | | 12 Months or Greater | | Total |
(In thousands) | (In thousands) | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses | (In thousands) | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses | | Fair Value | | Gross unrealized losses |
| Short-term AFS securities | Short-term AFS securities | | | | | | | | | | | | | Short-term AFS securities | | | | | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 20,975 | | | $ | (6) | | | $ | 8,251 | | | $ | (3) | | | $ | 29,226 | | | $ | (9) | | Corporate debt securities | | $ | 33,735 | | | $ | (8) | | | $ | 0 | | | $ | 0 | | | $ | 33,735 | | | $ | (8) | |
U.S. Treasury securities | U.S. Treasury securities | | 13,296 | | | (3) | | | 11,147 | | | (8) | | | 24,443 | | | (11) | | U.S. Treasury securities | | 20,133 | | | (3) | | | 0 | | | 0 | | | 20,133 | | | (3) | |
U.S. governmental agency securities | U.S. governmental agency securities | | 0 | | | 0 | | | 15,000 | | | (4) | | | 15,000 | | | (4) | | U.S. governmental agency securities | | 4,999 | | | (2) | | | 8,749 | | | (1) | | | 13,748 | | | (3) | |
| Total short-term AFS securities | Total short-term AFS securities | | $ | 34,271 | | | $ | (9) | | | $ | 34,398 | | | $ | (15) | | | $ | 68,669 | | | $ | (24) | | Total short-term AFS securities | | $ | 58,867 | | | $ | (13) | | | $ | 8,749 | | | $ | (1) | | | $ | 67,616 | | | $ | (14) | |
Long-term AFS securities | Long-term AFS securities | | | | | | | | | | | | | Long-term AFS securities | | | | | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 35,891 | | | $ | (25) | | | $ | 4,502 | | | $ | (4) | | | $ | 40,393 | | | $ | (29) | | Corporate debt securities | | $ | 6,717 | | | $ | (5) | | | $ | 0 | | | $ | 0 | | | $ | 6,717 | | | $ | (5) | |
U.S. Treasury securities | | 60,935 | | | (103) | | | 0 | | | 0 | | | 60,935 | | | (103) | | |
| U.S. governmental agency securities | U.S. governmental agency securities | | 34,167 | | | (84) | | | 0 | | | 0 | | | 34,167 | | | (84) | | U.S. governmental agency securities | | 26,236 | | | (13) | | | 0 | | | 0 | | | 26,236 | | | (13) | |
Municipal securities | | Municipal securities | | 4,984 | | | (10) | | | 0 | | | 0 | | | 4,984 | | | (10) | |
Total long-term AFS securities | Total long-term AFS securities | | $ | 130,993 | | | $ | (212) | | | $ | 4,502 | | | $ | (4) | | | $ | 135,495 | | | $ | (216) | | Total long-term AFS securities | | $ | 37,937 | | | $ | (28) | | | $ | 0 | | | $ | 0 | | | $ | 37,937 | | | $ | (28) | |
We assess AFS securities on a quarterly basis or more often if a potential loss-triggering event occurs. For AFS securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, creditworthiness of the security, and adverse conditions specifically related to the security. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
As of SeptemberJune 27, 2021, and December 27, 2020, 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. AsUnrealized losses related to these investments are primarily due to interest rate fluctuations as opposed to changes in credit quality. Therefore, as of SeptemberJune 27, 2021, and December 27, 2020, we have recognized 0 losses or allowance for credit losses related to AFS securities.
As of SeptemberJune 27, 2021, and December 27, 2020, our short-term and long-term marketable securities had remaining maturities of less than 1one month to 12 months and 13 months to 36 months, respectively. See Note 8 for more information regarding the fair value of our marketable securities.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5. GOODWILL AND INTANGIBLES
During the first quarter of 2020, the Company acquired Listen In Audio, Inc., a company that transforms journalism articles into audio that is made available in a subscription-based product named “Audm,” in an all-cash transaction. We paid $8.6 million (comprised of $8.0 million cash payment and $0.6 million note receivable previously issued by the Company, which was canceled at the close of the transaction) and entered into agreements that will likely require retention payments over the three years following the acquisition. The Company allocated the purchase price for this acquisition based on the valuation of assets acquired and liabilities assumed, resulting in allocations primarily to goodwill of $5.8 million and intangibles of $2.7 million in the second quarter of 2020. The carrying amount of the intangible asset related to this acquisition has been included in Miscellaneous assets in our Condensed Consolidated Balance Sheets. The estimated useful life for this asset is 8 years and it is amortized on a straight-line basis.
During the third quarter of 2020, the Company acquired substantially all the assets and certain liabilities of Serial Productions, LLC (“Serial”). The purchase price includes approximately $25.0 million in cash that was paid at closing on July 29, 2020, and $9.3 million of contingent consideration. The contingent consideration is related to contingent payments based on the achievement of certain operational targets, as defined in the acquisition agreement, over the five years following the acquisition. The Company estimated the fair value of the contingent consideration liability using a probability-weighted discounted cash flow model. The fair value is based on significant unobservable inputs and therefore represents a Level 3 measurement as defined in Note 8.
The Company allocated the purchase price for this acquisition based on the valuation of assets acquired and liabilities assumed, resulting in allocations primarily to goodwill of $21.5 million and intangibles of $12.9 million as of the date of acquisition. The carrying amount of the intangible assets related to this acquisition has been included in Miscellaneous assets in our Condensed Consolidated Balance Sheets and include an indefinite-lived intangible of $9.0 million. The estimated useful life for the finite asset is 6 years and it is amortized on a straight-line basis.
The changes in the carrying amount of goodwill as of SeptemberJune 27, 2020,2021, and since December 29, 2019,27, 2020, were as follows:
| | | | | | | | |
(In thousands) | | Total Company |
Balance as of December 29, 201927, 2020 | | $ | 138,674 | |
Business acquisitions | | 27,269171,657 | |
Foreign currency translation | | 2,757 (1,501) | |
Balance as of SeptemberJune 27, 20202021 | | $ | 168,700170,156 | |
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 $17.0$15.2 million is included in Miscellaneous assets in our Condensed Consolidated Balance Sheets as of SeptemberJune 27, 2020.2021.
NOTE 6. INVESTMENTS
Non-Marketable Equity Securities
Our non-marketable equity securities are investments in privately held companies/funds without readily determinable market values. Gains and losses on non-marketable securities sold or impaired are recognized in Interest income/(expense)income and other, net.
As of SeptemberJune 27, 2020,2021, and December 29, 2019,27, 2020, non-marketable equity securities included in Miscellaneous assets in our Condensed Consolidated Balance Sheets had a carrying value of $21.8$20.6 million and $13.4$20.9 million, respectively. During the first quartersix months of 2020, we recorded a $10.1 million gain related to a non-marketable equity investment transaction. The gain is comprised of $2.5 million realized gain due to the partial sale of the investment and a $7.6 million unrealized gain due to the
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
mark to market of the remaining investment, and is included in Interest income/(expense)income and other, net in our Condensed Consolidated Statements of Operations.
NOTE 7. OTHER
Capitalized Computer Software Costs
Amortization of capitalized computer software costs included in Depreciation and amortization in our Condensed Consolidated Statements of Operations were $3.9$2.4 million and $4.4$3.9 million in the thirdsecond quarters of 20202021 and 2019,2020, respectively, and $11.6$5.0 million and $13.1$7.7 million in the first ninesix months of 2021 and 2020, and 2019, respectively,respectively.
Interest income/(expense)income and other, net
Interest income/(expense)income 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 | | For the Quarters Ended | | For the Six Months Ended |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | September 27, 2020 | | September 29, 2019 | (In thousands) | | June 27, 2021 | | June 28, 2020 | | June 27, 2021 | | June 28, 2020 |
Interest income and other expense, net (1) | Interest income and other expense, net (1) | | $ | 3,720 | | | $ | 5,078 | | | $ | 20,724 | | | $ | 17,093 | | Interest income and other expense, net (1) | | $ | 2,053 | | | $ | 2,965 | | | $ | 3,743 | | | $ | 17,004 | |
Interest expense | Interest expense | | (188) | | | (7,118) | | | (569) | | | (21,314) | | Interest expense | | (180) | | | (179) | | | (359) | | | (364) | |
Amortization of debt costs and discount on debt | | 0 | | | 1,278 | | | 0 | | | 590 | | |
Capitalized interest | | 5 | | | 7 | | | 22 | | | 59 | | |
Total interest income/(expense) and other, net | | $ | 3,537 | | | $ | (755) | | | $ | 20,177 | | | $ | (3,572) | | |
| Total interest income and other, net | | Total interest income and other, net | | $ | 1,873 | | | $ | 2,786 | | | $ | 3,384 | | | $ | 16,640 | |
(1) The ninesix months ended September 27,June 28, 2020 includeincludes a $10.1 million gain related to a non-marketable equity investment transaction. 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.
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 SeptemberJune 27, 2020,2021, and December 29, 2019,27, 2020, from the Condensed Consolidated Balance Sheets to the Condensed Consolidated Statements of Cash Flows is as follows:
| (In thousands) | (In thousands) | | September 27, 2020 | | December 29, 2019 | (In thousands) | | June 27, 2021 | | December 27, 2020 |
Reconciliation of cash, cash equivalents and restricted cash | Reconciliation of cash, cash equivalents and restricted cash | | | | | Reconciliation of cash, cash equivalents and restricted cash | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 215,763 | | | $ | 230,431 | | Cash and cash equivalents | | $ | 320,871 | | | $ | 286,079 | |
Restricted cash included within other current assets | Restricted cash included within other current assets | | 550 | | | 528 | | Restricted cash included within other current assets | | 299 | | | 686 | |
Restricted cash included within miscellaneous assets | Restricted cash included within miscellaneous assets | | 15,302 | | | 16,559 | | Restricted cash included within miscellaneous assets | | 14,331 | | | 15,199 | |
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | | $ | 231,615 | | | $ | 247,518 | | Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | | $ | 335,501 | | | $ | 301,964 | |
Substantially all of the amount included in restricted cash is set aside to collateralize workers’ compensation obligations.
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 SeptemberJune 27, 2020,2021, there were no0 outstanding borrowings under the Credit Facility and the Company was in compliance with the financial covenants contained in the documents governing the Credit Facility.
Severance Costs
We recognized 0 severance costs in the thirdsecond quarter of 20202021 and $0.3$6.3 million in severance costs in the thirdsecond quarter of 2019,2020, and $6.7$0.4 million and $2.4$6.7 million in the first ninesix months of 2021 and 2020, and 2019, respectively. Severance costs recognized in 2020 were largely related to workforce reductions primarily affecting our advertising department. These costs are recorded in General and administrative costs in our Condensed Consolidated Statements of Operations.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We had a severance liability of $10.2$2.4 million and $8.4$5.0 million included in Accrued expenses and other in our Condensed Consolidated Balance Sheets as of SeptemberJune 27, 2021, and December 27, 2020, and December 29, 2019, respectively. We anticipate most of the payments will be made within the next twelve months.
NOTE 8. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received upon the sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The transaction would be in the principal or most advantageous market for the asset or liability, based on assumptions that a market participant would use in pricing the asset or liability. The fair value hierarchy consists of three levels:
Level 1–quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2–inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3–unobservable inputs for the asset or liability.
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 SeptemberJune 27, 2020,2021, and December 29, 2019:27, 2020:
| (In thousands) | (In thousands) | | September 27, 2020 | | December 29, 2019 | (In thousands) | | June 27, 2021 | | December 27, 2020 |
| Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | Assets: | | | | | | | | | | | | | | | | | Assets: | | | | | | | | | | | | | | | | |
Short-term AFS securities (1) | Short-term AFS securities (1) | | Short-term AFS securities (1) | |
Corporate debt securities | Corporate debt securities | | $ | 119,586 | | | $ | 0 | | | $ | 119,586 | | | $ | 0 | | | $ | 99,126 | | | $ | 0 | | | $ | 99,126 | | | $ | 0 | | Corporate debt securities | | $ | 110,899 | | | $ | 0 | | | $ | 110,899 | | | $ | 0 | | | $ | 130,301 | | | $ | 0 | | | $ | 130,301 | | | $ | 0 | |
Certificates of deposit | | Certificates of deposit | | 105,954 | | | 0 | | | 105,954 | | | 0 | | | 36,525 | | | 0 | | | 36,525 | | | 0 | |
U.S. Treasury securities | U.S. Treasury securities | | 97,802 | | | 0 | | | 97,802 | | | 0 | | | 43,095 | | | 0 | | | 43,095 | | | 0 | | U.S. Treasury securities | | 75,528 | | | 0 | | | 75,528 | | | 0 | | | 79,503 | | | 0 | | | 79,503 | | | 0 | |
U.S. governmental agency securities | U.S. governmental agency securities | | 47,823 | | | 0 | | | 47,823 | | | 0 | | | 37,502 | | | 0 | | | 37,502 | | | 0 | | U.S. governmental agency securities | | 26,153 | | | 0 | | | 26,153 | | | 0 | | | 25,171 | | | 0 | | | 25,171 | | | 0 | |
Commercial paper | Commercial paper | | 43,523 | | | 0 | | | 43,523 | | | 0 | | | 12,561 | | | 0 | | | 12,561 | | | 0 | | Commercial paper | | 19,921 | | | 0 | | | 19,921 | | | 0 | | | 37,580 | | | 0 | | | 37,580 | | | 0 | |
Certificates of deposit | | 0 | | | 0 | | | 0 | | | 0 | | | 9,501 | | | 0 | | | 9,501 | | | 0 | | |
Total short-term AFS securities | Total short-term AFS securities | | $ | 308,734 | | | $ | 0 | | | $ | 308,734 | | | $ | 0 | | | $ | 201,785 | | | $ | 0 | | | $ | 201,785 | | | $ | 0 | | Total short-term AFS securities | | $ | 338,455 | | | $ | 0 | | | $ | 338,455 | | | $ | 0 | | | $ | 309,080 | | | $ | 0 | | | $ | 309,080 | | | $ | 0 | |
Long-term AFS securities (1) | Long-term AFS securities (1) | | | | | | | | | | | | | | | | | Long-term AFS securities (1) | | | | | | | | | | | | | | | | |
Corporate debt securities | Corporate debt securities | | $ | 120,381 | | | $ | 0 | | | $ | 120,381 | | | $ | 0 | | | $ | 103,737 | | | $ | 0 | | | $ | 103,737 | | | $ | 0 | | Corporate debt securities | | $ | 162,369 | | | $ | 0 | | | $ | 162,369 | | | $ | 0 | | | $ | 135,934 | | | $ | 0 | | | $ | 135,934 | | | $ | 0 | |
U.S. Treasury securities | U.S. Treasury securities | | 90,402 | | | 0 | | | 90,402 | | | 0 | | | 101,438 | | | 0 | | | 101,438 | | | 0 | | U.S. Treasury securities | | 61,223 | | | 0 | | | 61,223 | | | 0 | | | 97,565 | | | 0 | | | 97,565 | | | 0 | |
U.S. governmental agency securities | U.S. governmental agency securities | | 64,866 | | | 0 | | | 64,866 | | | 0 | | | 46,521 | | | 0 | | | 46,521 | | | 0 | | U.S. governmental agency securities | | 51,530 | | | 0 | | | 51,530 | | | 0 | | | 48,348 | | | 0 | | | 48,348 | | | 0 | |
Municipal securities | | Municipal securities | | 12,143 | | | 0 | | | 12,143 | | | 0 | | | 4,984 | | | 0 | | | 4,984 | | | 0 | |
Total long-term AFS securities | Total long-term AFS securities | | $ | 275,649 | | | $ | 0 | | | $ | 275,649 | | | $ | 0 | | | $ | 251,696 | | | $ | 0 | | | $ | 251,696 | | | $ | 0 | | Total long-term AFS securities | | $ | 287,265 | | | $ | 0 | | | $ | 287,265 | | | $ | 0 | | | $ | 286,831 | | | $ | 0 | | | $ | 286,831 | | | $ | 0 | |
Liabilities: | Liabilities: | | | | | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | | | | | |
Deferred compensation (2)(3) | Deferred compensation (2)(3) | | $ | 19,797 | | | $ | 19,797 | | | $ | 0 | | | $ | 0 | | | $ | 23,702 | | | $ | 23,702 | | | $ | 0 | | | $ | 0 | | Deferred compensation (2)(3) | | $ | 19,754 | | | $ | 19,754 | | | $ | 0 | | | $ | 0 | | | $ | 22,245 | | | $ | 22,245 | | | $ | 0 | | | $ | 0 | |
Contingent consideration(4) | | $ | 8,431 | | | $ | 0 | | | $ | 0 | | | $ | 8,431 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | |
Contingent consideration | | Contingent consideration | | $ | 7,450 | | | $ | 0 | | | $ | 0 | | | $ | 7,450 | | | $ | 8,431 | | | $ | 0 | | | $ | 0 | | | $ | 8,431 | |
(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 the assets associated with the deferred compensation liability in life insurance products. Our investments in life insurance products are included in Miscellaneous assets in our Condensed Consolidated Balance Sheets, and were $46.8$51.1 million as of SeptemberJune 27, 2020,2021, and $46.0$49.2 million as of December 29, 2019.27, 2020. 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.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(4) Level 3 Liabilities
The contingent consideration liability is related to the 2020 acquisition of substantially all the assets and certain liabilities of Serial Productions, LLC (the “Serial acquisition”) and represents contingent payments based on the achievement of certain operational targets, as defined in connection with the Serialacquisition agreement, over the 5 years following the acquisition. The Company estimated the fair value of the contingent consideration liability using a probability-weighted discounted cash flow model. The estimate of the fair value of contingent consideration requires subjective assumptions to be made regarding probabilities assigned to operational targets and the discount rate. DuringAs the threefair value is based on significant unobservable inputs, this is a Level 3 liability.
The following table presents changes in the contingent consideration balances for the quarter and six months ended SeptemberJune 27, 2021:
| | | | | | | | | | | | | | |
| | Quarter ended | | Six months ended |
(In thousands) | | June 27, 2021 | | June 27, 2021 |
Balance at the beginning of the period (1) | | $ | 7,728 | | | $ | 8,431 | |
| | | | |
Payments | | (862) | | | (862) | |
Fair value adjustments (2) | | 584 | | | (119) | |
Contingent consideration at the end of the period | | $ | 7,450 | | | $ | 7,450 | |
(1) There were no transactions involving contingent consideration during the quarter and six months ended June 28, 2020. The contingent consideration reflected above relates to the Serial acquisition, which was completed during the third quarter of 2020.
(2) Fair value adjustments are included in General and administrative expenses in our Condensed Consolidated Statements of Operations.
The remaining contingent consideration balances as of June 27, 2021, and December 27, 2020, the Company made payments of $0.9$7.5 million related to the contingent consideration. The remaining balance ofand $8.4 million, isrespectively, are included in Accrued expenses and other, for the current portion of the liability, and Other non-current liabilities, for the long-term portion of the liability, in our Condensed Consolidated Balance Sheets. See Note 5 for more information.
NOTE 9. PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension
Single-Employer Plans
We maintain The New York Times Companies Pension Plan (the “Pension Plan”), a frozen single-employer defined benefit pension plan. The Company also jointly sponsors a defined benefit plan with The NewsGuild of New York known as the Guild-Times Adjustable Pension Plan (the “APP”) that continues to accrue active benefits.
We also have a foreign-based pension plan for certain employees (the “foreign plan”). The information for the foreign plan is combined with the information for U.S. non-qualified plans. The benefit obligation of the foreign plan is immaterial to our total benefit obligation.
The components of net periodic pension cost/(income)cost were as follows:
| | | For the Quarters Ended | | For the Quarters Ended |
| | | September 27, 2020 | | September 29, 2019 | | | June 27, 2021 | | June 28, 2020 |
(In thousands) | (In thousands) | | Qualified Plans | | Non- Qualified Plans | | All Plans | | Qualified Plans | | Non- Qualified Plans | | All Plans | (In thousands) | | Qualified Plans | | Non- Qualified Plans | | All Plans | | Qualified Plans | | Non- Qualified Plans | | All Plans |
Service cost | Service cost | | $ | 2,608 | | | $ | 0 | | | $ | 2,608 | | | $ | 1,278 | | | $ | 0 | | | $ | 1,278 | | Service cost | | $ | 2,276 | | | $ | 0 | | | $ | 2,276 | | | $ | 2,607 | | | $ | 0 | | | $ | 2,607 | |
Interest cost | Interest cost | | 11,742 | | | 1,648 | | | 13,390 | | | 14,708 | | | 2,089 | | | 16,797 | | Interest cost | | 7,629 | | | 1,088 | | | 8,717 | | | 11,742 | | | 1,649 | | | 13,391 | |
Expected return on plan assets | Expected return on plan assets | | (17,741) | | | 0 | | | (17,741) | | | (20,258) | | | 0 | | | (20,258) | | Expected return on plan assets | | (12,678) | | | 0 | | | (12,678) | | | (17,745) | | | 0 | | | (17,745) | |
Amortization of actuarial loss | Amortization of actuarial loss | | 5,655 | | | 1,521 | | | 7,176 | | | 4,635 | | | 1,094 | | | 5,729 | | Amortization of actuarial loss | | 5,057 | | | 1,822 | | | 6,879 | | | 5,655 | | | 1,522 | | | 7,177 | |
Amortization of prior service credit | Amortization of prior service credit | | (486) | | | 0 | | | (486) | | | (487) | | | 0 | | | (487) | | Amortization of prior service credit | | (486) | | | 0 | | | (486) | | | (486) | | | 0 | | | (486) | |
| Net periodic pension cost/(income) (1) | | $ | 1,778 | | | $ | 3,169 | | | $ | 4,947 | | | $ | (124) | | | $ | 3,183 | | | $ | 3,059 | | |
Net periodic pension cost (1) | | Net periodic pension cost (1) | | $ | 1,798 | | | $ | 2,910 | | | $ | 4,708 | | | $ | 1,773 | | | $ | 3,171 | | | $ | 4,944 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended |
| | September 27, 2020 | | September 29, 2019 |
(In thousands) | | Qualified Plans | | Non- Qualified Plans | | All Plans | | Qualified Plans | | Non- Qualified Plans | | All Plans |
Service cost | | $ | 7,822 | | | $ | 0 | | | $ | 7,822 | | | $ | 3,835 | | | $ | 0 | | | $ | 3,835 | |
Interest cost | | 35,226 | | | 4,945 | | | 40,171 | | | 44,125 | | | 6,265 | | | 50,390 | |
Expected return on plan assets | | (53,222) | | | 0 | | | (53,222) | | | (60,775) | | | 0 | | | (60,775) | |
Amortization of actuarial loss | | 16,966 | | | 4,564 | | | 21,530 | | | 13,905 | | | 3,282 | | | 17,187 | |
Amortization of prior service credit | | (1,459) | | | 0 | | | (1,459) | | | (1,459) | | | 0 | | | (1,459) | |
| | | | | | | | | | | | |
Net periodic pension cost/(income) (1) | | $ | 5,333 | | | $ | 9,509 | | | $ | 14,842 | | | $ | (369) | | | $ | 9,547 | | | $ | 9,178 | |
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended |
| | June 27, 2021 | | June 28, 2020 |
(In thousands) | | Qualified Plans | | Non- Qualified Plans | | All Plans | | Qualified Plans | | Non- Qualified Plans | | All Plans |
Service cost | | $ | 4,552 | | | $ | 0 | | | $ | 4,552 | | | $ | 5,214 | | | $ | 0 | | | $ | 5,214 | |
Interest cost | | 15,258 | | | 2,176 | | | 17,434 | | | 23,484 | | | 3,297 | | | 26,781 | |
Expected return on plan assets | | (25,355) | | | 0 | | | (25,355) | | | (35,481) | | | 0 | | | (35,481) | |
Amortization of actuarial loss | | 10,113 | | | 3,642 | | | 13,755 | | | 11,310 | | | 3,043 | | | 14,353 | |
Amortization of prior service credit | | (972) | | | 0 | | | (972) | | | (972) | | | 0 | | | (972) | |
| | | | | | | | | | | | |
Net periodic pension cost (1) | | $ | 3,596 | | | $ | 5,818 | | | $ | 9,414 | | | $ | 3,555 | | | $ | 6,340 | | | $ | 9,895 | |
(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 ninesix months of 20202021 and 2019,2020, we made pension contributions of $6.9$4.2 million and $6.3$4.6 million, respectively, to the APP. We expect contributions in 20202021 to total approximately $9 million to satisfy minimum funding requirements.
As part of our continued effort to reduce the size and volatility of our pension plan obligations, and the administrative costs related thereto, in October 2020 we entered into an agreement with an insurance company to transfer approximately $235 million in pension obligations under the Pension Plan. See Note 16 for more information.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Multiemployer Plans
During the third quarter of 2019 we recorded a gain of $2.0 million from a multiemployer pension liability adjustment, which was recorded in Gain from pension liability adjustment in our Condensed Consolidated Statements of Operations.
Other Postretirement Benefits
The components of net periodic postretirement benefit cost/(income)/cost were as follows:
| | | For the Quarters Ended | | For the Nine Months Ended | | For the Quarters Ended | | For the Six Months Ended |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | September 27, 2020 | | September 29, 2019 | (In thousands) | | June 27, 2021 | | June 28, 2020 | | June 27, 2021 | | June 28, 2020 |
Service cost | Service cost | | $ | 7 | | | $ | 6 | | | $ | 21 | | | $ | 20 | | Service cost | | $ | 13 | | | $ | 7 | | | $ | 26 | | | $ | 14 | |
Interest cost | Interest cost | | 257 | | | 402 | | | 770 | | | 1,202 | | Interest cost | | 141 | | | 257 | | | 282 | | | 513 | |
Amortization of actuarial loss | Amortization of actuarial loss | | 763 | | | 843 | | | 2,289 | | | 2,531 | | Amortization of actuarial loss | | 852 | | | 763 | | | 1,704 | | | 1,526 | |
Amortization of prior service credit | Amortization of prior service credit | | (1,099) | | | (1,192) | | | (3,378) | | | (3,574) | | Amortization of prior service credit | | (836) | | | (1,223) | | | (1,672) | | | (2,279) | |
Net periodic postretirement benefit (income)/cost (1) | | $ | (72) | | | $ | 59 | | | $ | (298) | | | $ | 179 | | |
Net periodic postretirement benefit cost/(income) (1) | | Net periodic postretirement benefit cost/(income) (1) | | $ | 170 | | | $ | (196) | | | $ | 340 | | | $ | (226) | |
(1)The service cost component of net periodic postretirement benefit costcost/(income) 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 10. INCOME TAXES
The Company had income tax expense of $7.3$18.2 million and $19.1$27.7 million in the thirdsecond quarter and first ninesix months of 2020,2021, respectively. The Company had income tax expense of $6.1$5.8 million and $16.8$11.8 million in the thirdsecond quarter and first nine months of 2019, respectively. The Company’s effective tax rates from continuing operations were 17.8% and 17.5% for the third quarter and first ninesix months of 2020, respectively. The Company’s effective tax rates from continuing operations were 27.0%25.1% and 19.0%22.5% for the thirdsecond quarter and first ninesix months of 2019,2021, respectively. The Company’s effective tax rates from continuing operations were 19.6% and 17.3% for the second quarter and first six months of 2020, respectively. The increase in income tax expense in the second quarter and first six months of 2021 is primarily due to higher income from continuing operations in those periods. The Company received a tax benefit in the first and third quarterssecond quarter of 2020 from a reduction in the Company’s reserve for uncertain tax positions, and in the first quarter of 2019both 2021 and 2020 from stock price appreciation on stock-based awards that settled in the quarters, resultingquarter, which in the case of 2020, resulted in lower than statutory tax rates in the thirdsecond quarter of 2020 and in the first ninesix months of 2020 and 2019.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. We do not expect the tax provisions in the CARES Act to have a material impact on the Company’s consolidated financial statements.2020.
NOTE 11. 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,
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 1.00.3 million and 1.10.5 million in the thirdsecond quarter and first ninesix months of 2020,2021, respectively, and 1.41.2 million in each of the thirdsecond quarter and first ninesix months of 2019,2020, resulted primarily from the dilutive effect of certain stock options, performance awards and restricted stock units.
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 0 anti-dilutive stock options, stock-settled long-term performance awards orapproximately 0.2 million restricted stock units excluded from the computation of diluted earnings per share in the third quarters and first ninesix months of 2021 and 2020, respectively, because they were anti-dilutive, and 2019, respectively.0 anti-dilutive stock options or stock-settled long-term performance awards excluded in the same periods. There were approximately 0.3 million restricted stock units excluded from the computation of diluted earnings per share in the second quarter of 2021, because they were anti-dilutive, and 0 anti-dilutive stock options or stock-settled long-term performance awards excluded in the same period.
NOTE 12. 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 SeptemberJune 27, 2020,2021, repurchases under this authorization totaled $84.9 million (excluding commissions)
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and $16.2 million remained under this authorization. The Company did not repurchase any shares during the first nine months of 2020. All purchases were made pursuant to our publicly announced share repurchase program.remained. 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. There have been no purchases under this authorization since 2016.
The following table summarizes the changes in AOCI by component as of SeptemberJune 27, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Foreign Currency Translation Adjustments | | Funded Status of Benefit Plans | | Net Unrealized Gain on Available-For-Sale Securities | | Total Accumulated Other Comprehensive Loss |
Balance as of December 29, 2019 | | $ | 3,438 | | | $ | (498,986) | | | $ | 572 | | | $ | (494,976) | |
Other comprehensive income before reclassifications, before tax | | 3,095 | | | 0 | | | 3,936 | | | 7,031 | |
Amounts reclassified from accumulated other comprehensive loss, before tax | | 0 | | | 18,982 | | | 0 | | | 18,982 | |
Income tax expense | | 823 | | | 5,083 | | | 1,049 | | | 6,955 | |
Net current-period other comprehensive income, net of tax | | 2,272 | | | 13,899 | | | 2,887 | | | 19,058 | |
| | | | | | | | |
Balance as of September 27, 2020 | | $ | 5,710 | | | $ | (485,087) | | | $ | 3,459 | | | $ | (475,918) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Foreign Currency Translation Adjustments | | Funded Status of Benefit Plans | | Net Unrealized Gain on Available-For-Sale Securities | | Total Accumulated Other Comprehensive Loss |
Balance as of December 27, 2020 | | $ | 8,386 | | | $ | (421,698) | | | $ | 3,131 | | | $ | (410,181) | |
Other comprehensive income before reclassifications, before tax | | (1,767) | | | 0 | | | (1,846) | | | (3,613) | |
Amounts reclassified from accumulated other comprehensive loss, before tax | | 0 | | | 12,815 | | | 0 | | | 12,815 | |
Income tax (benefit)/expense | | (473) | | | 3,432 | | | (494) | | | 2,465 | |
Net current-period other comprehensive (loss)/ income, net of tax | | (1,294) | | | 9,383 | | | (1,352) | | | 6,737 | |
| | | | | | | | |
Balance as of June 27, 2021 | | $ | 7,092 | | | $ | (412,315) | | | $ | 1,779 | | | $ | (403,444) | |
The following table summarizes the reclassifications from AOCI for the ninesix months ended SeptemberJune 27, 2020:2021:
| | | | | | | | | | | | | | |
| | | | |
(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) | | $ | (4,837)(2,644) | | | Other components of net periodic benefit costs |
Amortization of actuarial loss(1) | | 23,81915,459 | | | Other components of net periodic benefit costs |
| | | | |
Total reclassification, before tax(2) | | 18,98212,815 | | | |
Income tax expense | | 5,0833,432 | | | Income tax expense |
Total reclassification, net of tax | | $ | 13,8999,383 | | | |
(1) These AOCI components are included in the computation of net periodic benefit cost for pension and other postretirement benefits. See Note 9 for more information.
(2) There were no reclassifications relating to noncontrolling interest for the ninesix monthsended SeptemberJune 27, 2020.2021.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 13. 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 1 reportable segment. Therefore, all required segment information can be found in the Condensed Consolidated Financial Statements.
NOTE 14. CONTINGENT LIABILITIES
Legal Proceedings
We are involved in various legal actions incidental to our business that are now pending against us. These actions are generally for amountshave damage claims that are greatly in excess of the payments, if any, that maywe would be required to be made.pay if we lost or settled the cases. 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.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 15. RECLASSIFICATION
The Company changed the expense captions on its Condensed Consolidated Statement of Operations effective for the quarter ended March 29, 2020. These changes were made in order to reflect how the Company manages its business and to communicate where the Company is investing resources and how this aligns with the Company’s strategy. The Company reclassified expenses for the prior period in order to present comparable financial results. There was no change to consolidated operating income, operating expense, net income or cash flows as a result of this change in classification. A summary of changes is as follows:
“Production costs” has become “Cost of revenue”:
◦Cost of revenue contains all costs related to content creation, subscriber and advertiser servicing, and print production and distribution costs as well as infrastructure costs related to delivering digital content, which include all cloud and cloud related costs as well as compensation for employees that enhance and maintain our platforms. This represents a change from previously disclosed production costs, which did not include distribution or subscriber servicing costs. In addition, certain product development costs previously included in production costs have been reclassified to product development.
“Selling, general and administrative” hasbeen split into three lines:
◦Sales and marketing represents all costs related to the Company’s marketing efforts as well as advertising sales costs.
◦Product development represents the Company’s investment into developing and enhancing new and existing product technology including engineering, product development, and data insights.
◦General and administrative includes general management, corporate enterprise technology, building operations, unallocated overhead costs, severance and multiemployer pension plan withdrawal costs.
In addition, incentive compensation, which was previously wholly included in selling, general and administrative, was reclassified to align with the classification of the related wages across each of the expense captions.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A reconciliation of the expenses as previously disclosed to the recast presentation for the quarter and nine months ended September 29, 2019, is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | As Reported for the Quarter Ended September 29, 2019 | | Reclassification | | Recast for the Quarter Ended September 29, 2019 |
Operating costs | | | | | | |
Production costs: | | | | | | |
Wages and benefits | | $ | 106,377 | | | $ | (106,377) | | (1)(2) | $ | 0 | |
Raw materials | | 18,531 | | | (18,531) | | (1) | 0 | |
Other production costs | | 53,868 | | | (53,868) | | (1)(2) | 0 | |
Total production costs | | 178,776 | | | (178,776) | | (1)(2) | 0 | |
Cost of revenue (excluding depreciation and amortization) | | 0 | | | 245,100 | | (1)(3)(4) | 245,100 | |
Selling, general and administrative costs | | 207,226 | | | (207,226) | | (3)(4)(5) | 0 | |
Sales and marketing | | 0 | | | 64,218 | | (4)(5) | 64,218 | |
Product development | | 0 | | | 26,669 | | (2)(4)(5) | 26,669 | |
General and administrative | | 0 | | | 50,015 | | (4)(5) | 50,015 | |
Depreciation and amortization | | 15,450 | | | 0 | | | 15,450 | |
Total operating costs | | $ | 401,452 | | | $ | 0 | | | $ | 401,452 | |
| | | | | | | | | | | | | | | | | | | | |
| | As Reported for the Nine Months Ended September 29, 2019 | | Reclassification | | Recast for the Nine Months Ended September 29, 2019 |
Operating costs | | | | | | |
Production costs: | | | | | | |
Wages and benefits | | $ | 313,244 | | | $ | (313,244) | | (1)(2) | $ | 0 | |
Raw materials | | 57,527 | | | (57,527) | | (1) | 0 | |
Other production costs | | 149,102 | | | (149,102) | | (1)(2) | 0 | |
Total production costs | | 519,873 | | | (519,873) | | (1)(2) | 0 | |
Cost of revenue (excluding depreciation and amortization) | | 0 | | | 729,654 | | (1)(3)(4) | 729,654 | |
Selling, general and administrative costs | | 638,820 | | | (638,820) | | (3)(4)(5) | 0 | |
Sales and marketing | | 0 | | | 201,327 | | (4)(5) | 201,327 | |
Product development | | 0 | | | 75,658 | | (2)(4)(5) | 75,658 | |
General and administrative | | 0 | | | 152,054 | | (4)(5) | 152,054 | |
Depreciation and amortization | | 45,548 | | | 0 | | | 45,548 | |
Total operating costs | | $ | 1,204,241 | | | $ | 0 | | | $ | 1,204,241 | |
(1) In the first quarter of 2020, the Company discontinued the use of the production cost caption. These costs, with the exception of product engineering and product design costs, which were reclassified to product development, were reclassified to cost of revenue.
(2) Costs related to developing and enhancing new and existing product technology previously included in production costs were reclassified to product development.
(3) Distribution and fulfillment costs and subscriber and advertising servicing related costs previously included in selling, general and administrative were reclassified to cost of revenue.
(4) Incentive Compensation previously included in selling, general and administrative was reclassified to align with the related salaries in each caption.
(5) In the first quarter of 2020, the Company discontinued the use of the selling, general and administrative cost caption. These costs, with the exception of those related to distribution and fulfillment, subscriber and advertising servicing and incentive compensation related to cost of revenue, were reclassified to the new captions: sales and marketing, product development and general and administrative.
THE NEW YORK TIMES COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 16.15. SUBSEQUENT EVENTEVENTS
On October 9, 2020, the Company entered into an agreement with Massachusetts Mutual Life Insurance Company (“MassMutual”) under which approximately $235 million in pension obligations under The New York Times Companies Pension Plan will be transferredJune 30, 2021, our Board of Directors approved a quarterly dividend of $0.07 per share on our Class A and Class B common stock that was paid on July 22, 2021, to MassMutual.
Under the agreement, the Company will purchase from MassMutual a group annuity contract for approximately 1,850 retirees (and beneficiaries) that will provide for an irrevocable commitment by MassMutual to make annuity payments to the affected retirees. As a result, the payment obligation and administration thereof for the affected retirees will be transferred from the Pension Plan to MassMutual. The transfer will not change the amountall stockholders of record as of the monthly pension benefits received by the affected retirees.
This arrangement is partclose of the Company’s continued effort to reduce the overall size and volatility of our pension plan obligations, and the administrative costs related thereto. The purchase of the group annuity contract will be funded through existing Pension Plan assets. As a result of the transaction, the Company expects to recognize a non-cash pension settlement charge of approximately $80-85 million before tax in the fourth quarter of 2020. This charge represents the acceleration of deferred charges currently accrued in AOCI.
business on July 12, 2021.
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, digital and print products and related businesses. We have one reportable segment.segment with businesses that include our core news product and other interest-specific products, and related content and services.
We generate revenues principally from subscriptions and advertising. OtherIn addition, we generate other revenues primarily consistconsisting of revenues from licensing, Wirecutter affiliate referrals, from Wirecutter, the leasing of floors in our New York headquarters building located at 620 Eighth Avenue, New York, New York (the “Company Headquarters”), commercial printing, retail commerce, television and film, retail commerceour student subscription sponsorship program and NYT Live (ourour live events business).business.
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.”
The Company changed the expense captions on its Condensed Consolidated Statement of Operations effective for the quarter ended March 29, 2020. These changes were made in order to reflect how the Company manages its business and to communicate where the Company is investing resources and how this aligns with the Company’s strategy. The Company reclassified expenses for the prior period in order to present comparable financial results. There was no change to consolidated operating income, operating expense, net income or cash flows as a result of this change in classification. See Note 15 of the Notes to the Condensed Consolidated Financial Statements for more detail.
Financial Highlights
•Diluted earnings per share from continuing operations were $0.20$0.32 and $0.10$0.14 for the thirdsecond quarters of 20202021 and 2019,2020, respectively. 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 $0.22$0.36 and $0.12$0.18 for the thirdsecond quarters of 2021 and 2020, and 2019, respectively.
•The Company had an operating profit of $39.6$73.3 million in the thirdsecond quarter of 2020,2021, compared with $25.1$28.8 million in the thirdsecond quarter of 2019. The increase was principally driven by higher digital-only subscription revenues and lower costs, which more than offset lower advertising revenues.2020. Operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items discussed below (or “adjusted operating profit,” a non-GAAP measure) increased to $56.5$92.9 million in the thirdsecond quarter of 20202021 from $44.1$52.1 million in the thirdsecond quarter of 2019, primarily as a result of the factors identified above.2020.
•Total revenues decreased 0.4%increased 23.5% to $426.9$498.5 million in the thirdsecond quarter of 20202021 from $428.5$403.8 million in the thirdsecond quarter of 2020.
•Subscription revenues increased 15.7% in the second quarter of 2021 compared with the same prior-year period. Paid digital-only subscriptions totaled approximately 7,133,000 at the end of the second quarter of 2021, a net increase of 142,000 subscriptions compared with the end of the first quarter of 2021. Of the 142,000 total net additions, 77,000 came from the Company’s digital news product, while 65,000 came from the Company’s Cooking, Games and Audm products. We expect total net subscription additions in 2021 to be in the range of the number of total net subscription additions in 2019, primarily driven by a decreasethough it remains difficult to predict with precision.
•Total advertising revenues increased 66.4% in the second quarter of 2021 compared with the same prior-year period, due to an increase of 79.6% in digital advertising revenuerevenues and other revenue. These declines were partially offset by higher subscriptionan increase of 48.0% in print advertising revenues.
•Operating costs decreased in the third quarter of 2020increased 12.4% to $387.3 million from $401.5$421.4 million in the thirdsecond quarter of 2019, largely due to lower media expenses and lower advertising sales costs, as well as lower print production and distribution and advertising servicing costs. These were partially offset by higher digital content delivery and journalism costs, including growth in2021 from $374.9 million compared with the numbersecond quarter of digital product development employees in connection with digital subscription strategic initiatives.2020. Operating costs before depreciation, amortization, severance and multiemployer pension plan withdrawal costs (or “adjusted operating costs,” a non-GAAP measure) decreasedincreased 15.4% in the thirdsecond quarter of 2021 to $405.6 million from $351.6 million in the second quarter of 2020.
Impact of Covid-19 Pandemic
Given the impact of the Covid-19 pandemic on our business in 2020, we believe that certain comparisons of our operating results in 2021 to 2019 provide useful context for our 2021 results. We have included supplemental tables comparing the operating results in 2021 to 2020 and to 2019 (see “Supplemental Financial Information”), as well as discussion comparing the second quarter and first six months in 2021 to 2020 and 2019.
The Covid-19 pandemic impacted our business in various ways, including impacts on both our operating revenues and operating expenses. Beginning in the first quarter of 2020, to $370.4 million from $384.4 million in the third quarter of 2019, primarily as a result of the factors identified above.
Impact of COVID-19 Pandemic
The global coronavirus (COVID-19) pandemic, and attempts to contain it, have continued to result in significant economic disruption, market volatility and uncertainty. These conditions have affected our business and could continue to do so for the foreseeable future.
Unlike many media companies, which are primarily dependent on advertising, we derive substantial revenue from subscriptions (approximately 60% of total revenues in 2019 and 69% in the first three quarters of 2020). Although moderating from the early months of the pandemic, we have experienced significant growth in the number of subscriptions to our digital
news and other products, which iswe believe was attributable in part to an increase in traffic given the news environment. However, revenues
environment and as a result of the pandemic. More recently, we have seen these pandemic-related trends subside and we expect total net subscription additions in 2021 to be in the range of the number of total net subscription additions in 2019, though it remains difficult to predict with precision. Revenues from the single-copy and bulk sales of our print newspaper (which include our international edition and collectively represent less than 10%5% of our total subscription revenues) have been, and we expect will continue to be,were adversely affected as a result of widespread business closures, increased remote working and reductions in travel.
The worldwide economic slowdown caused by the pandemic also led to a significant decline in our advertising revenues beginning in 2020 as advertisers reduced their spending. More recently, we experienced increasing demand for advertising with the first quarterrecovery of 2020the broader market. Our live events business was and continuing through the third quarter of 2020, and to the extent conditions persist, we expect that our advertising revenues will continuecontinues to be adversely affected.affected by the impacts of the Covid-19 pandemic.
However, our strong balance sheet has enabled us to continue to operate without the liquidity issues experienced by many other companies. As of September 27,In 2020 we had cash, cash equivalentsincurred less media expense as we decreased marketing spend due to a heightened news cycle, lower print production and short-distribution costs due to less demand for print copies of the newspaper, lower costs related to our advertising business as a result of lower variable expenses in connection with lower advertising revenues and long-term marketable securitieslower travel and entertainment costs as a result of $800.1 million, andthe Covid-19 pandemic. More recently we were debt-free.have begun increasing some of our spending in these areas. 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, enabling us to continue hiring in our newsroom, and in product and technology, and continue investment in important growth areas.
We havealso incurred and expect to continue to incur some additional costsexpenses in response to the pandemic, including certain enhanced employee benefits. These costsbenefits; however these expenses have not yet been significantsignificant. We expect to date, butincur additional costs as we prepare for our employees to return to our headquarters building and other offices, and may incur significant additional costs as we continue to implementcircumstances evolve, including in connection with potential operational changes in response to the pandemic.changes.
At this time, the completefull impact that the COVID-19Covid-19 pandemic and the associated economic downturn, will have on our business, operations and financial results is uncertain. While we remain confident in our prospects over the longer term, theThe extent to which the pandemic impactswill continue to impact us will depend on numerous evolving factors and future developments, including the severityscope and duration of the outbreak,pandemic (including the extent of a resurgence); the effect of ongoing vaccination and any resurgence thereof;mitigation efforts; the impact of the pandemic on economic activityconditions and the companies with which we do business; governmental, business and other actions; the status of travel restrictions; and social distancing measures,changes in consumer behavior in response to the pandemic, among many other factors. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are appropriate. Please see “Part II—Item 1A—“Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended December 27, 2020, for more information.
RESULTS OF OPERATIONS
The following table presents our consolidated financial results:
| | | | For the Quarters Ended | | For the Nine Months Ended | | | | For the Quarters Ended | | For the Six Months Ended | |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change | (In thousands) | | June 27, 2021 | | June 28, 2020 | | % Change | | June 27, 2021 | | June 28, 2020 | | % Change |
Revenues | Revenues | | | | | | | | | | | | | Revenues | | | | | | | | | | | | |
Subscription | Subscription | | $ | 300,950 | | | $ | 267,302 | | | 12.6 | % | | $ | 879,573 | | | $ | 808,568 | | | 8.8 | % | Subscription | | $ | 339,217 | | | $ | 293,189 | | | 15.7 | % | | $ | 668,301 | | | $ | 578,623 | | | 15.5 | % |
Advertising | Advertising | | 79,253 | | | 113,531 | | | (30.2) | % | | 253,150 | | | 359,380 | | | (29.6) | % | Advertising | | 112,774 | | | 67,760 | | | 66.4 | % | | 209,890 | | | 173,897 | | | 20.7 | % |
Other | Other | | 46,692 | | | 47,668 | | | (2.0) | % | | 141,558 | | | 135,873 | | | 4.2 | % | Other | | 46,506 | | | 42,801 | | | 8.7 | % | | 93,351 | | | 94,866 | | | (1.6) | % |
Total revenues | Total revenues | | 426,895 | | | 428,501 | | | (0.4) | % | | 1,274,281 | | | 1,303,821 | | | (2.3) | % | Total revenues | | 498,497 | | | 403,750 | | | 23.5 | % | | 971,542 | | | 847,386 | | | 14.7 | % |
Operating costs | Operating costs | | Operating costs | |
Cost of revenue (excluding depreciation and amortization) | Cost of revenue (excluding depreciation and amortization) | | 235,900 | | | 245,100 | | | (3.8) | % | | 709,719 | | | 729,654 | | | (2.7) | % | Cost of revenue (excluding depreciation and amortization) | | 251,358 | | | 229,913 | | | 9.3 | % | | 502,355 | | | 473,397 | | | 6.1 | % |
Sales and marketing | Sales and marketing | | 50,627 | | 64,218 | | (21.2) | % | | 164,040 | | 201,327 | | | (18.5) | % | Sales and marketing | | 53,555 | | | 39,605 | | 35.2 | % | | 113,708 | | 113,389 | | | 0.3 | % |
Product development | Product development | | 34,102 | | | 26,669 | | | 27.9 | % | | 95,641 | | | 75,658 | | | 26.4 | % | Product development | | 39,699 | | | 30,983 | | | 28.1 | % | | 78,642 | | | 61,985 | | | 26.9 | % |
General and administrative | General and administrative | | 51,118 | | | 50,015 | | | 2.2 | % | | 162,791 | | | 152,054 | | | 7.1 | % | General and administrative | | 62,283 | | | 58,812 | | | 5.9 | % | | 118,860 | | | 111,673 | | | 6.4 | % |
Depreciation and amortization | Depreciation and amortization | | 15,552 | | | 15,450 | | | 0.7 | % | | 46,368 | | | 45,548 | | | 1.8 | % | Depreciation and amortization | | 14,486 | | | 15,631 | | | (7.3) | % | | 29,203 | | | 30,816 | | | (5.2) | % |
Total operating costs | Total operating costs | | 387,299 | | | 401,452 | | | (3.5) | % | | 1,178,559 | | | 1,204,241 | | | (2.1) | % | Total operating costs | | 421,381 | | | 374,944 | | | 12.4 | % | | 842,768 | | | 791,260 | | | 6.5 | % |
| Restructuring charge | | — | | 4,008 | | * | | — | | 4,008 | | | * | |
Gain from pension liability adjustment | | — | | | (2,045) | | | * | | — | | | (2,045) | | | * | |
| Lease termination charge | | Lease termination charge | | 3,831 | | | — | | | * | | 3,831 | | | — | | | * |
Operating profit | Operating profit | | 39,596 | | | 25,086 | | | 57.8 | % | | 95,722 | | | 97,617 | | | (1.9) | % | Operating profit | | 73,285 | | | 28,806 | | | * | | 124,943 | | | 56,126 | | | * |
Other components of net periodic benefit costs | Other components of net periodic benefit costs | | 2,272 | | | 1,834 | | | 23.9 | % | | 6,735 | | | 5,502 | | | 22.4 | % | Other components of net periodic benefit costs | | 2,598 | | | 2,149 | | | 20.9 | % | | 5,197 | | | 4,463 | | | 16.4 | % |
| Interest income/(expense) and other, net | | 3,537 | | | (755) | | | * | | 20,177 | | | (3,572) | | | * | |
Interest income and other, net | | Interest income and other, net | | 1,873 | | | 2,786 | | | (32.8) | % | | 3,384 | | | 16,640 | | | (79.7) | % |
Income from continuing operations before income taxes | Income from continuing operations before income taxes | | 40,861 | | | 22,497 | | | 81.6 | % | | 109,164 | | | 88,543 | | | 23.3 | % | Income from continuing operations before income taxes | | 72,560 | | | 29,443 | | | * | | 123,130 | | | 68,303 | | | 80.3 | % |
Income tax expense | Income tax expense | | 7,283 | | | 6,070 | | | 20.0 | % | | 19,070 | | | 16,789 | | | 13.6 | % | Income tax expense | | 18,243 | | | 5,781 | | | * | | 27,704 | | | 11,787 | | | * |
| Net income | Net income | | 33,578 | | | 16,427 | | | * | | 90,094 | | | 71,754 | | | 25.6 | % | Net income | | 54,317 | | | 23,662 | | | * | | 95,426 | | | 56,516 | | | 68.8 | % |
| Net income attributable to The New York Times Company common stockholders | Net income attributable to The New York Times Company common stockholders | | $ | 33,578 | | | $ | 16,427 | | | * | | $ | 90,094 | | | $ | 71,754 | | | 25.6 | % | Net income attributable to The New York Times Company common stockholders | | $ | 54,317 | | | $ | 23,662 | | | * | | $ | 95,426 | | | $ | 56,516 | | | 68.8 | % |
* Represents a change equal to or in excess of 100% or not meaningfulmeaningful.
SUPPLEMENTAL FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter |
| | 2021 | | 2020 | | 2021 vs 2020 % Change | | 2019 | | 2021 vs 2019 % Change |
| | | | | | | | | | |
Revenues | | | | | | | | | | |
Digital | | $ | 190,145 | | | $ | 145,984 | | | 30.3 | % | | $ | 112,635 | | | 68.8 | % |
Print | | 149,072 | | | 147,205 | | | 1.3 | % | | 157,821 | | | (5.5) | % |
Subscription revenues | | 339,217 | | | 293,189 | | | 15.7 | % | | 270,456 | | | 25.4 | % |
Digital | | 70,995 | | | 39,531 | | | 79.6 | % | | 58,026 | | | 22.4 | % |
Print | | 41,779 | | | 28,229 | | | 48.0 | % | | 62,735 | | | (33.4) | % |
Advertising revenues | | 112,774 | | | 67,760 | | | 66.4 | % | | 120,761 | | | (6.6) | % |
Other revenues | | 46,506 | | | 42,801 | | | 8.7 | % | | 45,041 | | | 3.3 | % |
Total revenues | | 498,497 | | | 403,750 | | | 23.5 | % | | 436,258 | | | 14.3 | % |
Operating costs | | | | | | | | | | |
Cost of revenue (excluding depreciation and amortization) | | 251,358 | | | 229,913 | | | 9.3 | % | | 244,939 | | | 2.6 | % |
Sales and marketing | | 53,555 | | | 39,605 | | | 35.2 | % | | 62,280 | | | (14.0) | % |
Product development | | 39,699 | | | 30,983 | | | 28.1 | % | | 25,526 | | | 55.5 | % |
General and administrative | | 62,283 | | | 58,812 | | | 5.9 | % | | 50,400 | | | 23.6 | % |
Depreciation and amortization | | 14,486 | | | 15,631 | | | (7.3) | % | | 15,180 | | | (4.6) | % |
Total operating costs | | 421,381 | | | 374,944 | | | 12.4 | % | | 398,325 | | | 5.8 | % |
Lease termination charge | | 3,831 | | | — | | | * | | — | | | * |
Operating profit | | $ | 73,285 | | | $ | 28,806 | | | * | | $ | 37,933 | | | 93.2 | % |
| | | | | | | | | | |
* Represents a change equal to or in excess of 100% or not meaningful. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months |
| | 2021 | | 2020 | | 2021 vs 2020 % Change | | 2019 | | 2021 vs 2019 % Change |
Revenues | | | | | | | | | | |
Digital | | $ | 369,745 | | | $ | 275,994 | | | 34.0 | % | | $ | 222,494 | | | 66.2 | % |
Print | | 298,556 | | | 302,629 | | | (1.3) | % | | 318,772 | | | (6.3) | % |
Subscription revenues | | 668,301 | | | 578,623 | | | 15.5 | % | | 541,266 | | | 23.5 | % |
Digital | | 130,491 | | | 90,689 | | | 43.9 | % | | 113,569 | | | 14.9 | % |
Print | | 79,399 | | | 83,208 | | | (4.6) | % | | 132,280 | | | (40.0) | % |
Advertising revenues | | 209,890 | | | 173,897 | | | 20.7 | % | | 245,849 | | | (14.6) | % |
Other revenues | | 93,351 | | | 94,866 | | | (1.6) | % | | 88,205 | | | 5.8 | % |
Total revenues | | 971,542 | | | 847,386 | | | 14.7 | % | | 875,320 | | | 11.0 | % |
Operating costs | | | | | | | | | | |
Cost of revenue (excluding depreciation and amortization) | | 502,355 | | | 473,397 | | | 6.1 | % | | 484,125 | | | 3.8 | % |
Sales and marketing | | 113,708 | | | 113,389 | | | 0.3 | % | | 137,094 | | | (17.1) | % |
Product development | | 78,642 | | | 61,985 | | | 26.9 | % | | 49,433 | | | 59.1 | % |
General and administrative | | 118,860 | | | 111,673 | | | 6.4 | % | | 102,039 | | | 16.5 | % |
Depreciation and amortization | | 29,203 | | | 30,816 | | | (5.2) | % | | 30,098 | | | (3.0) | % |
Total operating costs | | 842,768 | | | 791,260 | | | 6.5 | % | | 802,789 | | | 5.0 | % |
Lease termination charge | | 3,831 | | | — | | | * | | — | | | * |
Operating profit | | $ | 124,943 | | | $ | 56,126 | | | * | | $ | 72,531 | | | 72.3 | % |
| | | | | | | | | | |
* Represents a change equal to or in excess of 100% or not meaningful. |
Revenues
Subscription Revenues
Subscription revenues consist of revenues from subscriptions to our digital and print products (which include our news product, as well as our Games, (previously Crossword), Cooking and audioAudm products), and single-copy and bulk sales of our print products (which represent less than 10%5% of these revenues). 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.
2021 Compared with 2020
Subscription revenues increased 12.6%15.7% in the thirdsecond quarter and 8.8%increased 15.5% in the first ninesix months of 20202021 compared with the same prior-year periods,periods. The increase in the second quarter and first six months was primarily due to year-over-year growth of 49.6%25.8% in the number of subscriptions to the Company’s digitaldigital-only products as well as subscriptions graduating to higher prices from introductory promotional pricing. Subscription revenues also benefited from an increase in revenue from our domestic home delivery print subscription products during both periods, primarily due to an increase in home delivery prices.However, for the continued focus onfirst six months of 2021 compared with the same prior-year period, the increase attributable to higher home delivery subscription prices was more than offset by a decrease in revenue from single-copy and bulk sales as a result of business closures, increased levels of remote working and reductions in travel due to the Covid-19 pandemic as well as ongoing secular trends.
Paid digital-only subscriptions totaled approximately 7,133,000 at the end of the second quarter of 2021, a net increase of 142,000 subscriptions compared with the end of the first quarter of 2021 and a net increase of 1,463,000 compared with the end of the second quarter of 2020. We experienced significant growth in the number of subscriptions to our digital pricing strategy which included price increasesdigital-only products in 2020, and we do not expect the 2020 growth rate to be sustainable or indicative of results for future periods. Net subscription additions for our most tenured subscribers.digital-only products were modest in the second quarter of 2021, especially in comparison to the significant growth in the number of subscriptions we saw in the second quarter of 2020 at the beginning of the Covid-19 pandemic. In the second quarter, which is traditionally our slowest quarter of the year for net digital subscription additions, we saw improvement in net additions each month during the quarter since a low in March. We expect total net subscription additions in 2021 to be in the range of the number of total net subscription additions in 2019, although it remains difficult to predict with precision.
Digital-only news product subscriptions totaled approximately 5,334,000 at the end of the second quarter of 2021, a 77,000 net increase compared with the end of the first quarter of 2021 and a 944,000 increase compared with the end of the second quarter of 2020. Other product subscriptions (which include our Games, Cooking and Audm products) totaled approximately 1,799,000 at the end of the second quarter of 2021, an increase of 65,000 subscriptions compared with the end of the first quarter of 2021 and an increase of 519,000 subscriptions compared with the end of the second quarter of 2020.
Print domestic home delivery subscriptions totaled approximately 803,000 at the end of the second quarter of 2021, a net decrease of 22,000 compared with the end of the first quarter of 2021 and a net decrease of 37,000 compared with the end of the second quarter of 2020.
2021 Compared with 2019
Subscription revenues increased 25.4% in the second quarter and increased 23.5% in the first six months of 2021 compared with the same prior-year periods in 2019. The increasesincrease in both periodsthe second quarter and first six months of 2021 was primarily due to year-over-year growth of 88.7% in the number of subscriptions to the Company’s digital-only products. These increases were partially offset by a decrease in print subscription revenue attributable to lowerfrom single-copy and bulk sales primarily as a result of business closures, increased levels of remote working and reductions in travel due to the COVID-19Covid-19 pandemic as well as fewer subscriptions, partially offset by an increasesecular trends. Single-copy and bulk sales decreased 38.9% and 38.8% in home delivery prices. The third quarter was the first full quarter in which digital-only subscription revenue exceeded print subscription revenue.
Paid digital-only subscriptions totaled approximately 6,063,000 at the end of the third quarter of 2020, a net increase of 393,000 subscriptions compared with the end of the second quarter of 2020 and a net increase of 2,010,000 compared with the end of the third quarter of 2019. The significant rate of year-over-year growth in our digital subscriptions that continued, although moderated, from the earlyfirst six months, of the COVID-19 pandemic is attributable in part to an increase in traffic given the news environment, as well as a change made to the digital access model last year, which requires users to register and log in to access most of our content.respectively.
Digital-only news product subscriptions totaled approximately 4,665,000 at the end of the third quarter of 2020, a 275,000 net increase compared with the end of the second quarter of 2020 and a 1,468,000 increase compared with the end of the third quarter of 2019. Other product subscriptions (which include our Games, Cooking and audio products) totaled approximately 1,398,000 at the end of the third quarter of 2020, an increase of 118,000 subscriptions compared with the end of the second quarter of 2020 and an increase of 542,000 subscriptions compared with the end of the third quarter of 2019.
Print domestic home delivery subscriptions totaled approximately 831,000 at the end of the third quarter of 2020, relatively flat compared with the end of the second quarter of 2020 and a net decrease of 34,000 compared with the end of the third quarter of 2019. The year-over-year decrease is a result of secular declines.
The following table summarizes digital and print subscription revenues for the thirdsecond quarters and first ninesix months of 20202021 and 2019:2020:
| | | For the Quarters Ended | | For the Nine Months Ended | | | For the Quarters Ended | | For the Six Months Ended | |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change | (In thousands) | | June 27, 2021 | | June 28, 2020 | | % Change | | June 27, 2021 | | June 28, 2020 | | % Change |
Digital-only subscription revenues: | Digital-only subscription revenues: | | Digital-only subscription revenues: | |
News product subscription revenues(1) | News product subscription revenues(1) | | $ | 140,740 | | | $ | 107,009 | | | 31.5 | % | | $ | 392,620 | | | $ | 313,785 | | | 25.1 | % | News product subscription revenues(1) | | $ | 170,893 | | | $ | 132,922 | | | 28.6 | % | | $ | 332,181 | | | $ | 251,880 | | | 31.9 | % |
Other product subscription revenues(2) | Other product subscription revenues(2) | | 14,546 | | | 8,855 | | | 64.3 | % | | 38,660 | | | 24,573 | | | 57.3 | % | Other product subscription revenues(2) | | 19,252 | | | 13,062 | | | 47.4 | % | | 37,564 | | | 24,114 | | | 55.8 | % |
Subtotal digital-only subscription revenues | Subtotal digital-only subscription revenues | | 155,286 | | | 115,864 | | | 34.0 | % | | 431,280 | | | 338,358 | | | 27.5 | % | Subtotal digital-only subscription revenues | | 190,145 | | | 145,984 | | | 30.3 | % | | 369,745 | | | 275,994 | | | 34.0 | % |
Print subscription revenues: | Print subscription revenues: | | Print subscription revenues: | |
Domestic home delivery subscription revenues(3) | Domestic home delivery subscription revenues(3) | | 129,912 | | | 126,769 | | | 2.5 | % | | 396,620 | | | 395,011 | | | 0.4 | % | Domestic home delivery subscription revenues(3) | | 134,755 | | | 132,971 | | | 1.3 | % | | 269,150 | | | 266,708 | | | 0.9 | % |
Single-copy, NYT International and other subscription revenues(4) | Single-copy, NYT International and other subscription revenues(4) | | 15,752 | | | 24,669 | | | (36.1) | % | | 51,673 | | | 75,199 | | | (31.3) | % | Single-copy, NYT International and other subscription revenues(4) | | 14,317 | | | 14,234 | | | 0.6 | % | | 29,406 | | | 35,921 | | | (18.1) | % |
Subtotal print subscription revenues | Subtotal print subscription revenues | | 145,664 | | | 151,438 | | | (3.8) | % | | 448,293 | | | 470,210 | | | (4.7) | % | Subtotal print subscription revenues | | 149,072 | | | 147,205 | | | 1.3 | % | | 298,556 | | | 302,629 | | | (1.3) | % |
Total subscription revenues | Total subscription revenues | | $ | 300,950 | | | $ | 267,302 | | | 12.6 | % | | $ | 879,573 | | | $ | 808,568 | | | 8.8 | % | Total subscription revenues | | $ | 339,217 | | | $ | 293,189 | | | 15.7 | % | | $ | 668,301 | | | $ | 578,623 | | | 15.5 | % |
(1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. | (1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. | (1) Includes revenues from subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. |
(2) Includes revenues from standalone subscriptions to the Company’s Games, Cooking and audio products. | |
(3) Includes free access to some or all of the Company’s digital products. | |
(2) Includes revenues from standalone subscriptions to the Company’s Games, Cooking and Audm products. | | (2) Includes revenues from standalone subscriptions to the Company’s Games, Cooking and Audm products. |
(3) Includes free access to some of the Company’s digital products. | | (3) Includes free access to some of the Company’s digital products. |
(4) NYT International is the international edition of our print newspaper. | (4) NYT International is the international edition of our print newspaper. | (4) NYT International is the international edition of our print newspaper. |
The following table summarizes digital and print subscriptions as of the end of the thirdsecond quarters of 20202021 and 2019:2020:
| | | For the Quarters Ended | | | Quarters Ended | |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | % Change | (In thousands) | | June 27, 2021 | | June 28, 2020 | | % Change |
Digital-only subscriptions: | Digital-only subscriptions: | | Digital-only subscriptions: | |
News product subscriptions(1) | News product subscriptions(1) | | 4,665 | | | 3,197 | | | 45.9 | % | News product subscriptions(1) | | 5,334 | | | 4,390 | | | 21.5 | % |
Other product subscriptions(2) | Other product subscriptions(2) | | 1,398 | | | 856 | | | 63.3 | % | Other product subscriptions(2) | | 1,799 | | | 1,280 | | | 40.5 | % |
Subtotal digital-only subscriptions | Subtotal digital-only subscriptions | | 6,063 | | | 4,053 | | | 49.6 | % | Subtotal digital-only subscriptions | | 7,133 | | | 5,670 | | | 25.8 | % |
Print subscriptions | Print subscriptions | | 831 | | | 865 | | | (3.9) | % | Print subscriptions | | 803 | | | 840 | | | (4.4) | % |
Total subscriptions | Total subscriptions | | 6,894 | | | 4,918 | | | 40.2 | % | Total subscriptions | | 7,936 | | | 6,510 | | | 21.9 | % |
| (1) Includes subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. | (1) Includes subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. | (1) Includes subscriptions to the Company’s news product. News product subscription packages that include access to the Company’s Games and Cooking products are also included in this category. |
(2) Includes standalone subscriptions to the Company’s Games, Cooking and audio products. During the first quarter of 2020, the Company acquired a subscription-based audio product. Approximately 20,000 of the audio product’s subscriptions were included in the Company’s digital-only other product subscriptions at the time of acquisition. | |
(2) Includes standalone subscriptions to the Company’s Games, Cooking and Audm products. | | (2) Includes standalone subscriptions to the Company’s Games, Cooking and Audm products. |
We believe that the significant growth over the last several years in subscriptions to our products demonstrates the success of our “subscription-first” strategy and the willingness of our readers to pay for high-quality journalism. The following charts illustrate the accelerationgrowth in net digital-only subscription additions and corresponding subscription revenues as well as the relative stability of our print domestic home delivery subscription products since the launch of the digital pay model in 2011.
(1) Amounts may not add due to rounding.
(2) Print domestic home delivery subscriptions include free access to some or all of our digital products.
(3) Print Other includes single-copy, NYT International and other subscription revenues.
Note: Revenues for 2012 and 2017 include the impact of an additional week.
Advertising Revenues
Advertising revenue is principally from advertisers (such as technology, financial and luxury goods companies) promoting products, services or brands on digital platforms in the form of bannersdisplay ads, audio and video, and in print, in the form of column-inch ads. Advertising revenue is primarily derived from offerings sold directly to marketers by our advertising sales teams. A smaller proportion of our total advertising revenues is generated through programmatic auctions run by third-party ad exchanges and from creative service fees, including those associated with our branded content studio.
. Advertising revenues arerevenue is primarily determined by the volume (e.g., impressions), rate and mix of advertisements. Digital advertising includes our core digital advertising business and other digital advertising. Our core digital advertising business includes advertising on websites,direct-sold website, mobile applications, podcasts, emailsapplication, podcast, email and videos.video advertisements. Direct-sold display advertising, a component of core digital advertising, includes offerings on websites and mobile applications sold directly to marketers by our advertising sales teams. Other digital advertising includes open marketopen-market programmatic advertising and creative services fees and advertising revenue generated by Wirecutter, our product review and recommendation website.fees. Print advertising includes revenue from column-inch ads and classified advertising, including line-ads as well as preprinted advertising, also known as freestanding inserts.
The following table summarizes digital and print advertising revenues for the thirdsecond quarters and first ninesix months of 20202021 and 2019:2020:
| | | For the Quarters Ended | | For the Nine Months Ended | | For the Quarters Ended | | For the Six Months Ended |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change | (In thousands) | | June 27, 2021 | | June 28, 2020 | | % Change | | June 27, 2021 | | June 28, 2020 | | % Change |
Advertising revenues: | Advertising revenues: | | | | | | | | | | | Advertising revenues: | | | | | | | | | | |
Digital | Digital | | $ | 47,763 | | | $ | 54,653 | | | (12.6) | % | | $ | 138,452 | | | $ | 168,222 | | | (17.7) | % | Digital | | $ | 70,995 | | | $ | 39,531 | | | 79.6 | % | | $ | 130,491 | | | $ | 90,689 | | | 43.9 | % |
Print | Print | | 31,490 | | | 58,878 | | | (46.5) | % | | 114,698 | | | 191,158 | | | (40.0) | % | Print | | 41,779 | | | 28,229 | | | 48.0 | % | | 79,399 | | | 83,208 | | | (4.6) | % |
Total advertising | Total advertising | | $ | 79,253 | | | $ | 113,531 | | | (30.2) | % | | $ | 253,150 | | | $ | 359,380 | | | (29.6) | % | Total advertising | | $ | 112,774 | | | $ | 67,760 | | | 66.4 | % | | $ | 209,890 | | | $ | 173,897 | | | 20.7 | % |
2021 Compared with 2020
Digital advertising revenues, which represented 60.3%63.0% of total advertising revenues in the thirdsecond quarter of 2020, declined $6.92021, increased $31.5 million, or 12.6%79.6%, to $47.8$71.0 million compared with $54.7$39.5 million in the same prior-year periodperiod. The increase was primarily driven by a decreasehigher direct-sold advertising, including traditional display and podcasts, as well as the impact of the comparison to weak digital advertising revenues in creative service fees.the prior year period caused by reduced advertiser spending during the start of the Covid-19 pandemic. Core digital advertising revenue increased $0.4$27.6 million due to growth in direct-sold display advertising and podcast and email advertising revenue, which was partially offset by a decrease in revenues attributed to direct-sold display.revenues. Direct-sold display impressions declined 23%increased 77%, while the average rate grew 18%24%. Other digital advertising revenue decreased $7.3increased $3.9 million, asprimarily due to a result of the discontinuation of our HelloSociety and Fake Love78% increase in creative services businesses,fees, as well as lower creative services demand due to the COVID-19 pandemic. Open marketa 12.3% increase in open-market programmatic advertising revenue was flat, asrevenue. Programmatic impressions increaseddecreased by 25%47%, while the average rate decreased 17%. Overall display advertising impressions increased 71% as a result of an increase in traffic to our products, which were primarily filled by programmatic impressions.107%.
Digital advertising revenues, which represented 54.7%62.2% of total advertising revenues in the first ninesix months of 2020, declined $29.82021, increased $39.8 million, or 17.7%43.9%, to $138.5$130.5 million compared with $168.2$90.7 million in the same prior-year periodperiod. The increase was primarily driven by a decreasehigher direct-sold advertising, including traditional display and podcasts, as well as the impact of the comparison to weak digital advertising revenues in creative services and direct-sold display.the prior year period caused by reduced advertiser spending during the start of the Covid-19 pandemic. Core digital advertising revenue decreased $10.2increased $37.1 million due to growth in direct-sold display advertising revenue and podcast advertising revenues. Direct-sold display impressions increased 16%, while the average rate grew 31%. Other digital advertising revenue increased $2.7 million, primarily due to a 19% decline31% increase in direct-sold displaycreative services fees. Open-market programmatic advertising revenue partially offsetwas flat to prior year as programmatic impressions decreased by a 19% increase in podcast revenues. Direct-sold display impressions declined 15%, while average rate grew 5%. Other digital advertising declined $19.6 million as a result of the discontinuation of HelloSociety and Fake Love creative services business, as well as lower demand for creative services due to the COVID-19 pandemic. This decline was partially offset by growth in open market programmatic advertising, as impressions increased by 51%, while39% offsetting the average rate decreased 30%. Overall display advertising impressions increased 103% as a resultincrease of an increase in traffic to our products, which were primarily filled by programmatic impressions.63%.
Print advertising revenues, which represented 39.7%37.0% of total advertising revenues in the thirdsecond quarter of 2020, declined $27.42021, increased $13.6 million, or 46.5%48.0%, to $31.5$41.8 million compared with $58.9$28.2 million in the same prior-year period. Print advertising revenues, which represented 45.3%37.8% of total advertising revenues in the first ninesix months of 2020,2021, declined $76.5$3.8 million, or 40.0%4.6%, to $114.7$79.4 million compared with $191.2$83.2 million in the same prior yearprior-year period. The declineincrease in both periodsthe second quarter of 2021 was drivenprimarily in the luxury, media and technology categories, largely due to the impact of the comparison to weak print advertising revenues in the second quarter of 2020 caused by lower demand asreduced advertiser spending by businesses negatively impacted by the COVID-19 pandemic further acceleratedstart of the Covid-19 pandemic. The increase in the second quarter of 2021 was partially offset by secular trends. The decline in print advertising revenue in the third quarterfirst six months of 2020 was primarily in the luxury, entertainment, media and home furnishings categories. The decline in print advertising revenue2021 reflected reduced spending in the first nine monthsquarter of 2020 was2021 on print advertising by businesses negatively impacted by the Covid-19 pandemic and secular trends, partially offset by higher print advertising revenues in the second quarter of 2021 due to the impact of the comparison to weak print advertising revenues in the second quarter of 2020. Decreases, primarily in the entertainment, luxury,travel and real estate categories were partially offset by an increase in the media category. We expect reduced advertising spending by these businesses, along with secular trends, to continue to adversely affect our print advertising revenues. Some of our print advertising revenues may not return to pre-pandemic levels once economic conditions improve.
2021 Compared with 2019
Digital advertising revenues for the second quarter of 2021 increased $13.0 million, or 22.4%, to $71.0 million compared with $58.0 million in the second quarter of 2019. The increase was primarily driven by higher direct-sold advertising, including traditional display and home furnishings categories.podcasts. Core digital advertising revenue increased $18.5 million due to growth in podcast advertising revenues and direct-sold display advertising revenues. Direct-sold display impressions increased 13%, while the average rate grew 24%. Other digital advertising revenue decreased $5.5 million, primarily due to the closure of our HelloSociety and Fake Love digital marketing agencies, partially offset by a 4.0% increase in open-market programmatic advertising revenue. Programmatic impressions decreased by 24%, while the average rate increased 31%.
Digital advertising revenues for the first six months of 2021 increased $16.9 million, or 14.9%, to $130.5 million compared with $113.6 million in the first six months of 2019. The increase was primarily driven by higher direct-sold advertising, including traditional display and podcasts. Core digital advertising revenue increased $26.5 million due to growth in podcast advertising revenues and direct-sold display advertising revenue. Direct-sold display impressions decreased 4%, while the average rate grew 25%. Other digital advertising revenue decreased $9.6 million, primarily due to the closure of our HelloSociety and Fake Love digital marketing agencies, partially offset by a 7.2% increase in open-market programmatic advertising revenue. Programmatic impressions decreased by 3%, while the average rate increased 10%.
Print advertising revenues for the second quarter of 2021 declined $20.9 million, or 33.4%, to $41.8 million compared with $62.7 million in the same period of 2019. Print advertising revenues for the first six months of 2021 declined $52.9 million, or 40.0%, to $79.4 million compared with $132.3 million in the same period of 2019. The declines in both periods reflected reduced spending on print advertising by businesses negatively impacted by the Covid-19 pandemic as well as continued secular trends.
Other Revenues
Other revenues primarily consist of revenues from licensing, Wirecutter affiliate referrals, from Wirecutter, the leasing of floors in the Company Headquarters, commercial printing, retail commerce, television and film, retail commerceour student subscription sponsorship program and NYT Live (ourour live events business). Building rental revenue consists of revenue from the lease of floors in our Company Headquarters, which totaled $7.1 millionbusiness.
and $7.9 millionOther revenues increased 8.7% in the third quarterssecond quarter of 20202021 and 2019, respectively, and $22.3 million and $23.0 milliondecreased 1.6% in the first ninesix months of 2020 and 2019, respectively.
Other revenues decreased 2.0% in the third quarter of 2020 and increased 4.2% in the first nine months of 2020,2021, compared with the same prior-year periods. The increase in the second quarter of 2021 was primarily a result of higher Wirecutter affiliate referral revenues. The decrease in the third quarterfirst six months of 20202021 was primarily a result of fewer television episodes as well as lower revenues frombuilding rental revenue, live events revenue and commercial printing and live events. These declines wererevenue, partially offset by higher Wirecutter affiliate referral revenues.
Building rental revenue from the leasing of floors in the Company Headquarters totaled $6.6 million and $7.3 million in the second quarters of 2021 and 2020, respectively, and $12.8 millionand $15.2 million in the first six months of 2021 and 2020, respectively.
2021 Compared with 2019
Other revenues increased 3.3% in the second quarter of 2021 and increased 5.8% in the first six months, compared with the same periods in 2019. The increase in the second quarter of 2021 was primarily a result of higher Wirecutter affiliate referral revenues and licensing revenue related to Facebook News, partially offset by fewer television episodes and affiliate referral revenue related to Wirecutter.lower live events and commercial printing revenue. The increase in other revenues for the first ninesix months of 20202021 was primarily resulted froma result of higher Wirecutter affiliate referral revenues and licensing revenue related to Facebook News, and affiliate referral revenue related to Wirecutter, partially offset by a decline in revenues fromlower live events revenue, lower commercial printing revenue and live events.fewer television episodes.
Operating Costs
As noted above, effective with the quarter ended March 29, 2020, the Company changed the Operating costs captions on its Condensed Consolidated Statement of Operations. See Note 15 of the Notes to the Condensed Consolidated Financial Statements for more detail.
Operating costs were as follows:
| | | For the Quarters Ended | | For the Nine Months Ended | | | For the Quarters Ended | | For the Six Months Ended | |
(In thousands) | (In thousands) | | September 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change | (In thousands) | | June 27, 2021 | | June 28, 2020 | | % Change | | June 27, 2021 | | June 28, 2020 | | % Change |
Operating costs: | Operating costs: | | | | | | | | | | | | | Operating costs: | | | | | | | | | | | | |
Cost of revenue (excluding depreciation and amortization) | Cost of revenue (excluding depreciation and amortization) | | $ | 235,900 | | | $ | 245,100 | | | (3.8) | % | | $ | 709,719 | | | $ | 729,654 | | | (2.7) | % | Cost of revenue (excluding depreciation and amortization) | | $ | 251,358 | | | $ | 229,913 | | | 9.3 | % | | $ | 502,355 | | | $ | 473,397 | | | 6.1 | % |
Sales and marketing | Sales and marketing | | 50,627 | | | 64,218 | | | (21.2) | % | | 164,040 | | | 201,327 | | | (18.5) | % | Sales and marketing | | 53,555 | | | 39,605 | | | 35.2 | % | | 113,708 | | | 113,389 | | | 0.3 | % |
Product development | Product development | | 34,102 | | | 26,669 | | | 27.9 | % | | 95,641 | | | 75,658 | | | 26.4 | % | Product development | | 39,699 | | | 30,983 | | | 28.1 | % | | 78,642 | | | 61,985 | | | 26.9 | % |
General and administrative | General and administrative | | 51,118 | | | 50,015 | | | 2.2 | % | | 162,791 | | | 152,054 | | | 7.1 | % | General and administrative | | 62,283 | | | 58,812 | | | 5.9 | % | | 118,860 | | | 111,673 | | | 6.4 | % |
Depreciation and amortization | Depreciation and amortization | | 15,552 | | | 15,450 | | | 0.7 | % | | 46,368 | | | 45,548 | | | 1.8 | % | Depreciation and amortization | | 14,486 | | | 15,631 | | | (7.3) | % | | 29,203 | | | 30,816 | | | (5.2) | % |
Total operating costs | Total operating costs | | $ | 387,299 | | | $ | 401,452 | | | (3.5) | % | | $ | 1,178,559 | | | $ | 1,204,241 | | | (2.1) | % | Total operating costs | | $ | 421,381 | | | $ | 374,944 | | | 12.4 | % | | $ | 842,768 | | | $ | 791,260 | | | 6.5 | % |
Cost of Revenue (excluding depreciation and amortization)
Cost of revenue includes all costs related to content creation, subscriber and advertiser servicing, and print production and distribution as well as infrastructure costs related to delivering digital content, which include all cloud and cloud-related costs as well as compensation for employees that enhance and maintain our platforms.
2021 Compared with 2020
Cost of revenue decreasedincreased in the thirdsecond quarter of 2021 by $21.4 million, or 9.3%, compared with the second quarter of 2020, by $9.2 million compared with the third quarter of 2019, largely due to higher journalism costs of $17.9 million, higher subscriber servicing costs of $2.9 million, and higher advertising servicing costs of $2.8 million. The increases were partially offset by lower print production and distribution costs of $13.5$2.5 million. The increase in journalism costs was largely driven by growth in the number of employees in the newsroom, Games, Cooking and audio, costs in connection with the production of audio content and a higher incentive compensation accrual. The increase in subscriber servicing costs was primarily due to higher credit card processing fees and third-party commissions due to increased subscriptions. Advertising servicing costs increased primarily due to higher incentive compensation and higher outside services costs. The decrease in print production and distribution costs was largely due to lower outside printing and distribution costs.
Cost of revenue increased in the first six months of 2021 by $29.0 million, and lower advertisingor 6.1%, compared with the first six months of 2020, largely due to higher journalism costs of $27.1 million, higher subscriber servicing costs of $7.9$7.6 million, which were partially offset byand higher digital content delivery costs of $5.1 million, higher$4.2 million. The increases were partially offset by lower print production and distribution costs of $11.7 million. The increase in journalism costs was largely driven by growth in the number of $4.1 millionemployees in the newsroom, Games, Cooking and audio, costs in connection with the production of audio content and a higher incentive compensation accrual. This cost growth was partially offset by lower content creation costs as a result of fewer television episodes. The increase in subscriber servicing costs of $3.0 million.was primarily due to higher credit card processing fees and third-party commissions due to increased subscriptions. Digital content delivery costs increased due to a higher incentive compensation accrual and higher cloud storage costs. The decrease in print production and distribution costs was largely due to lower newsprint consumption and pricing, as well as lower outside printing and distribution costs. The decrease
2021 Compared with 2019
Cost of revenue increased in advertisingthe second quarter of 2021 by $6.4 million, or 2.6%, compared with the second quarter of 2019, largely due to higher journalism costs of $19.8 million, higher subscriber servicing costs was due to lower creative services revenues, as well as lower volume of campaigns$5.7 million, and live events. Higherhigher digital content delivery costs of $5.3 million. The increases were due to a growth in the numberpartially offset by lower print production and distribution costs of employees to support cloud related operations, content creation$20.0 million and delivery systems and higher cloud storage costs.lower advertising servicing costs of $4.4 million. The increase in journalism costs was largely driven by an increasegrowth in the number of employees in the newsroom, employees, partially offset by lowerGames, Cooking and audio, costs related to our television series.in connection with the production of audio content and a higher incentive compensation accrual. The increase in subscriber servicing costs was primarily due to higher credit card processing fees and third-party commissions due to increased subscriptions. Digital content delivery costs increased due to an increase in the number of employees and higher cloud-related costs. The decrease in print production and distribution costs was largely due to lower distribution costs, lower newsprint consumption and pricing, and lower outside printing costs. Advertising servicing costs decreased primarily as a result of the closure of our HelloSociety and Fake Love digital marketing agencies, as well as lower volume of creative services campaigns and live events.
Cost of revenue decreasedincreased in the first ninesix months of 20202021 by $19.9$18.2 million, or 3.8%, compared with the first ninesix months of 2019, largely due to higher journalism costs of $42.8 million, higher subscriber servicing costs of $11.8 million, and higher digital content delivery costs of $11.5 million. The increases were partially offset by lower print production and distribution costs of $41.9$40.0 million and lower advertising servicing costs of $17.4 million, which were partially offset by higher journalism costs of $19.8 million, higher digital content delivery costs of $12.4 million and higher subscriber servicing costs of $7.2$7.8 million. The decreases in print production and distribution costs and in advertising servicing costs were largely due to the factors identified above. The increase in journalism costs was largely driven by an increasegrowth in the number of employees in the newsroom, employees. Higher digitalGames, Cooking and audio, costs in connection with the production of audio content delivery and a higher incentive compensation accrual. The increase in subscriber servicing costs werewas primarily due to higher credit card processing fees and third-party commissions due to increased subscriptions. Digital content delivery costs increased due to growth in the number of employees and higher cloud storage costs. The decrease in print production and distribution costs was largely due to fewer print copies produced and lower newsprint pricing, as well as lower distribution costs and outside printing costs. Advertising servicing costs decreased primarily as a result of the factors identified above.
closure of our HelloSociety and Fake Love digital marketing agencies as well as fewer live events.Sales and Marketing
Sales and marketing includes costs related to the Company’s marketing efforts as well as advertising sales costs.
2021 Compared with 2020
Sales and marketing costs in the thirdsecond quarter of 2021 increased by $14.0 million, or 35.2%, compared with the second quarter of 2020, decreased by $13.6 million compared withprimarily due to higher subscription-related media spending, which the third quarterCompany had reduced during the start of 2019, due primarily to lower media expenses and advertising sales costs.the Covid-19 pandemic.
Sales and marketing costs decreased in the first ninesix months of 2020 by $37.3 million2021 remained relatively flat compared with the first ninesix months of 2019, primarily as a result of the factors identified above.2020. The increase in marketing costs resulting from higher subscription-related media expenses was partially offset by lower advertising sales costs.
Media expenses, a component of sales and marketing costs that represents the cost to promote our subscription business, decreasedincreased to $27.3$29.0 million in the thirdsecond quarter of 2021 from $16.5 million in the second quarter of 2020 from $35.9and increased to $64.9 million in the thirdfirst six months of 2021 from $61.9 million in the first six months of 2020 as the Company increased its marketing spend.
2021 Compared with 2019
Sales and marketing costs in the second quarter of 2021 decreased by $8.7 million, or 14.0%, compared with the second quarter of 2019, primarily as a result of the closure of our HelloSociety and Fake Love digital marketing agencies and lower media expenses.
Sales and marketing costs in the first six months of 2021 decreased by $23.4 million, or 17.1%, compared with the first six months of 2019. The decrease in sales and marketing costs are primarily a result of the factors identified above.
Media expenses decreased to $29.0 million in the second quarter of 2021 from $33.9 million in the second quarter of 2019 and decreased to $89.2$64.9 million in the first ninesix months of 20202021 from $114.6$78.7 million in the first ninesix months of 2019 as the Company reduced its marketing spend during the COVID-19Covid-19 pandemic.
Product Development
Product development includes costs associated with the Company’s investment into developing and enhancing new and existing product technology, including engineering, product development and data insights.
2021 Compared with 2020
Product development costs in the thirdsecond quarter of 20202021 increased by $7.4$8.7 million, or 28.1%, compared with the thirdsecond quarter of 2019,2020, largely due to growth in the number of digital product development employees in connection with digital subscription strategic initiatives.initiatives as well as a higher incentive compensation accrual.
Product development costs in the first ninesix months of 20202021 increased by $20.0$16.7 million, or 26.9%, compared with the first ninesix months of 2020, largely due to the factors identified above.
2021 Compared with 2019
Product development costs in the second quarter of 2021 increased by $14.2 million, or 55.5%, compared with the second quarter of 2019, largely due to growth in the number of digital product development employees to support our digital subscription strategic initiatives as well as a higher incentive compensation accrual.
Product development costs in the first six months of 2021 increased by $29.2 million, or 59.1%, compared with the first six months of 2019, primarily as a result oflargely due to the factors identified above.
General and Administrative Costs
General and administrative costs includesinclude general management, corporate enterprise technology, building operations, unallocated overhead costs, severance and multiemployer pension plan withdrawal costs.
2021 Compared with 2020
General and administrative costs in the thirdsecond quarter of 2021 increased by $3.5 million, or 5.9%, compared with the second quarter of 2020, increased by $1.1 million compared with the third quarter of 2019, primarily as a result ofdue to growth in the number of employees, as well as higher outside services costs.and a higher incentive compensation accrual, partially offset by severance expense in the second quarter of 2020 compared with no expense in the second quarter of 2021.
General and administrative costs in the first ninesix months of 20202021 increased by $10.7$7.2 million, or 6.4%, compared with the first ninesix months of 2019,2020, primarily asdue to a result of severance,higher incentive compensation accrual, higher outside services and growth in the number of employees, as well aspartially offset by a severance charge in the second quarter of 2020, a favorable fair market value adjustment in 2021, and lower building operations and maintenance costs in 2021.
2021 Compared with 2019
General and administrative costs in the second quarter of 2021 increased by $11.9 million, or 23.6%, compared with the second quarter of 2019, primarily due to growth in the number of employees, mainly in the enterprise technology and human resources departments in support of employee growth in other areas, higher outside services costs.and a higher incentive compensation accrual.
General and administrative costs in the first six months of 2021 increased by $16.8 million, or 16.5%, compared with the first six months of 2019, largely due to the factors identified above, partially offset by a favorable fair market value adjustment.
Depreciation and Amortization
2021 Compared with 2020
Depreciation and amortization costs in the thirdsecond quarter and first ninesix months of 2020 remained relatively flat2021 decreased $1.1 million, or 7.3%, and $1.6 million, or 5.2%, respectively, compared with the same prior-year periods.period. The decrease in both periods is due to lower depreciation of software assets.
Other Items2021 Compared with 2019
Depreciation and amortization costs in the second quarter and first six months of 2021 compared with the same periods in 2019 were flat.
See Note 7 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
See Note 9 of the Notes to the Condensed Consolidated Financial Statements for information regarding other components of net periodic benefit costs.
Interest Income/(expense)Income and other, net
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for information regarding interest income/(expense) and other, net.
Income Taxes
See Note 10 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 item in 2021 consisted of:
•a $3.8 million charge ($2.8 million or $0.02 per share after tax) in the second quarter resulting from the termination of a tenant’s lease in our headquarters building.
The special item in 2020 consisted of:
•a $10.1 million gain ($7.4 million after tax or $.04$0.04 per share) in the first quarter related to a non-marketable equity investment transaction. The gain is comprised of $2.5 million realized gain due to the partial sale of the investment and ana $7.6 million unrealized gain due to the mark to market of the remaining investment, and is included in Interest income/(expense)income and other, net in our Condensed Consolidated Statements of Operations.
TheThere were no 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.2019.
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.
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.
Included in our non-GAAP financial measures are non-operating retirement costs which are primarily tied to financial market performance and 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.
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) | 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) | 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 | | | For the Quarters Ended | | For the Six Months Ended | |
| | September 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change | | June 27, 2021 | | June 28, 2020 | | % Change | | June 27, 2021 | | June 28, 2020 | | % Change |
Diluted earnings per share from continuing operations | Diluted earnings per share from continuing operations | | $ | 0.20 | | | $ | 0.10 | | | * | | $ | 0.54 | | | $ | 0.43 | | | 25.6 | % | Diluted earnings per share from continuing operations | | $ | 0.32 | | | $ | 0.14 | | | * | | $ | 0.57 | | | $ | 0.34 | | | 67.6 | % |
Add: | Add: | | Add: | |
Severance | Severance | | — | | | — | | | — | | | 0.04 | | | 0.01 | | | * | Severance | | — | | | 0.04 | | | * | | — | | | 0.04 | | | * |
Non-operating retirement costs: | Non-operating retirement costs: | | Non-operating retirement costs: | |
Multiemployer pension plan withdrawal costs | Multiemployer pension plan withdrawal costs | | 0.01 | | | 0.01 | | | — | | | 0.02 | | | 0.03 | | | (33.3) | % | Multiemployer pension plan withdrawal costs | | 0.01 | | | 0.01 | | | — | | | 0.02 | | | 0.02 | | | — | |
Other components of net periodic benefit costs | Other components of net periodic benefit costs | | 0.01 | | | 0.01 | | | — | | | 0.04 | | | 0.03 | | | 33.3 | % | Other components of net periodic benefit costs | | 0.02 | | | 0.01 | | | * | | 0.03 | | | 0.03 | | | — | |
Special item: | | |
Special items: | | Special items: | |
| Restructuring charge | | — | | | 0.02 | | | * | | — | | | 0.02 | | | * | |
Gain from non- marketable equity security | | — | | | — | | | — | | | (0.06) | | | — | | | * | |
Gain from pension liability adjustment | | — | | | (0.01) | | | * | | — | | | (0.01) | | | * | |
| | Gain from non-marketable equity security | | Gain from non-marketable equity security | | — | | | — | | | * | | — | | | (0.06) | | | * |
Lease termination charge | | Lease termination charge | | 0.02 | | | — | | | * | | 0.02 | | | — | | | * |
Income tax expense of adjustments | Income tax expense of adjustments | | (0.01) | | | (0.01) | | | — | | | (0.01) | | | (0.02) | | | (50.0) | % | Income tax expense of adjustments | | (0.01) | | | (0.02) | | | (50.0) | % | | (0.02) | | | (0.01) | | | * |
Adjusted diluted earnings per share from continuing operations(1) | Adjusted diluted earnings per share from continuing operations(1) | | $ | 0.22 | | | $ | 0.12 | | | 83.3 | % | | $ | 0.57 | | | $ | 0.49 | | | 16.3 | % | Adjusted diluted earnings per share from continuing operations(1) | | $ | 0.36 | | | $ | 0.18 | | | * | | $ | 0.62 | | | $ | 0.35 | | | 77.1 | % |
(1)Amounts may not add due to rounding.
* Represents a change equal to or in excess of 100% or not meaningfulmeaningful.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change |
Operating profit | | $ | 39,596 | | | $ | 25,086 | | | 57.8 | % | | $ | 95,722 | | | $ | 97,617 | | | (1.9) | % |
Add: | | | | | | | | | | | | |
Depreciation & amortization | | 15,552 | | | 15,450 | | | 0.7 | % | | 46,368 | | | 45,548 | | | 1.8 | % |
Severance | | — | | | 367 | | | * | | 6,675 | | | 2,441 | | | * |
Multiemployer pension plan withdrawal costs | | 1,376 | | | 1,204 | | | 14.3 | % | | 4,198 | | | 4,454 | | | (5.7) | % |
Special items: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Restructuring charge | | — | | | 4,008 | | | * | | — | | | 4,008 | | | * |
Gain from pension liability adjustment | | — | | | (2,045) | | | * | | — | | | (2,045) | | | * |
| | | | | | | | | | | | |
Adjusted operating profit | | $ | 56,524 | | | $ | 44,070 | | | 28.3 | % | | $ | 152,963 | | | $ | 152,023 | | | 0.6 | % |
* Represents a change equal to or in excess of 100% or not meaningful | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit) |
| | | | | | | | | | |
| | For the Quarters Ended |
| | 2021 | | 2020 | | 2021 vs 2020 % Change | | 2019 | | 2021 vs 2019 % Change |
Operating profit | | $ | 73,285 | | | $ | 28,806 | | | * | | $ | 37,933 | | | 93.2 | % |
Add: | | | | | | | | | | |
Depreciation and amortization | | 14,486 | | | 15,631 | | | (7.3) | % | | 15,180 | | | (4.6) | % |
Severance | | — | | | 6,305 | | | * | | 672 | | | * |
Multiemployer pension plan withdrawal costs | | 1,301 | | | 1,400 | | | (7.1) | % | | 1,801 | | | (27.8) | % |
Special items: | | | | | | | | | | |
Lease termination charge | | 3,831 | | | — | | | * | | — | | | * |
Adjusted operating profit | | $ | 92,903 | | | $ | 52,142 | | | 78.2 | % | | $ | 55,586 | | | 67.1 | % |
| | | | | | | | | | |
* 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) | |
Reconciliation of operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs) | | Reconciliation of operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs) |
| | For the Quarters Ended | | For the Nine Months Ended | | |
(In thousands) | | September 27, 2020 | | September 29, 2019 | | % Change | | September 27, 2020 | | September 29, 2019 | | % Change | |
| | | For the Quarters Ended |
| | | 2021 | | 2020 | | 2021 vs 2020 % Change | | 2019 | | 2021 vs 2019 % Change |
Operating costs | Operating costs | | $ | 387,299 | | | $ | 401,452 | | | (3.5) | % | | $ | 1,178,559 | | | $ | 1,204,241 | | | (2.1) | % | Operating costs | | $ | 421,381 | | | $ | 374,944 | | | 12.4 | % | | $ | 398,325 | | | 5.8 | % |
Less: | Less: | | Less: | |
Depreciation & amortization | Depreciation & amortization | | 15,552 | | | 15,450 | | | 0.7 | % | | 46,368 | | | 45,548 | | | 1.8 | % | Depreciation & amortization | | 14,486 | | | 15,631 | | | (7.3) | % | | 15,180 | | | (4.6) | % |
Severance | Severance | | — | | | 367 | | | * | | 6,675 | | | 2,441 | | | * | Severance | | — | | | 6,305 | | | * | | 672 | | | * |
Multiemployer pension plan withdrawal costs | Multiemployer pension plan withdrawal costs | | 1,376 | | | 1,204 | | | 14.3 | % | | 4,198 | | | 4,454 | | | (5.7) | % | Multiemployer pension plan withdrawal costs | | 1,301 | | | 1,400 | | | (7.1) | % | | 1,801 | | | (27.8) | % |
Adjusted operating costs | Adjusted operating costs | | $ | 370,371 | | | $ | 384,431 | | | (3.7) | % | | $ | 1,121,318 | | | $ | 1,151,798 | | | (2.6) | % | Adjusted operating costs | | $ | 405,594 | | | $ | 351,608 | | | 15.4 | % | | $ | 380,672 | | | 6.5 | % |
| * Represents a change equal to or in excess of 100% or not meaningful. | | * Represents a change equal to or in excess of 100% or not meaningful. |
* Represents a change equal to or in excess of 100% or not meaningful | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit) |
| | | | | | | | | | |
| | For the Six Months Ended |
| | 2021 | | 2020 | | 2021 vs 2020 % Change | | 2019 | | 2021 vs 2019 % Change |
Operating profit | | $ | 124,943 | | | $ | 56,126 | | | * | | $ | 72,531 | | | 72.3 | % |
Add: | | | | | | | | | | |
Depreciation and amortization | | 29,203 | | | 30,816 | | | (5.2) | % | | 30,098 | | | (3.0) | % |
Severance | | 406 | | | 6,675 | | | (93.9) | % | | 2,075 | | | (80.4) | % |
Multiemployer pension plan withdrawal costs | | 2,627 | | | 2,823 | | | (6.9) | % | | 3,250 | | | (19.2) | % |
Special items: | | | | | | | | | | |
Lease termination charge | | 3,831 | | | — | | | * | | — | | | * |
Adjusted operating profit | | $ | 161,010 | | | $ | 96,440 | | | 67.0 | % | | $ | 107,954 | | | 49.1 | % |
| | | | | | | | | | |
* Represents a change equal to or in excess of 100% or not meaningful. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of operating costs before depreciation and amortization, severance and multiemployer pension plan withdrawal costs (or adjusted operating costs) |
| | | | | | | | | | |
| | For the Six Months Ended |
| | 2021 | | 2020 | | 2021 vs 2020 % Change | | 2019 | | 2021 vs 2019 % Change |
Operating costs | | $ | 842,768 | | | $ | 791,260 | | | 6.5 | % | | $ | 802,789 | | | 5.0 | % |
Less: | | | | | | | | | | |
Depreciation & amortization | | 29,203 | | | 30,816 | | | (5.2) | % | | 30,098 | | | (3.0) | % |
Severance | | 406 | | | 6,675 | | | (93.9) | % | | 2,075 | | | (80.4) | % |
Multiemployer pension plan withdrawal costs | | 2,627 | | | 2,823 | | | (6.9) | % | | 3,250 | | | (19.2) | % |
Adjusted operating costs | | $ | 810,532 | | | $ | 750,946 | | | 7.9 | % | | $ | 767,366 | | | 5.6 | % |
| | | | | | | | | | |
* Represents a change equal to or in excess of 100% or not meaningful. |
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. Although there is uncertainty related to the anticipated continued effect of the COVID-19Covid-19 pandemic on our business (see “—Executive Overview— Impact of COVID-19 Pandemic”(as referenced above and “Part II—Item 1A—in “Item 1A — Risk Factors”) in our Annual Report on Form 10-K for the year ended December 27, 2020), given the strength of our balance sheet and based on the information currently available to us, we do not expect the impact of the pandemic to materiallyhave a material impact on our liquidity position. As of SeptemberJune 27, 2020,2021, we had cash, cash equivalents and short- and long-term marketable securities of $800.1$946.6 million. Our cash and marketable securities balances between the end of 20192020 and SeptemberJune 27, 2020,2021, increased, primarily due to cash proceeds from operating activities, and proceeds from sale of investments, partially offset by consideration paid for acquisitions,dividend payments, capital expenditures dividend payments, and share-based compensation tax withholding.
We have paid quarterly dividends on the Class A and Class B Common Stock each quarter since late 2013. In February 2020,2021, the Board of Directors approved an increase in the quarterly dividend to $0.06$0.07 per share, which was paid in April 2020. In2021. On June and September 2020,30, 2021, the Board of Directors declared a quarterly dividend of $0.06$0.07 per share on the Class A and Class B Common Stock, which was paid in July and October 2020.2021. 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.
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 27, 2020 | | September 29, 2019 | | % Change |
Operating activities | | $ | 206,683 | | | $ | 121,600 | | | 70.0 | % |
Investing activities | | $ | (187,264) | | | $ | (37,258) | | | * |
Financing activities | | $ | (35,671) | | | $ | (43,139) | | | (17.3) | % |
* Represents a change equal to or in excess of 100% or not meaningful | | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended | | |
(In thousands) | | June 27, 2021 | | June 28, 2020 | | % Change |
Operating activities | | $ | 110,434 | | | $ | 118,590 | | | (6.9) | % |
Investing activities | | $ | (46,332) | | | $ | (72,938) | | | (36.5) | % |
Financing activities | | $ | (30,285) | | | $ | (28,192) | | | 7.4 | % |
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, contributions to retirement fundspension and other benefit payments,benefits, raw materials, marketing expenses interest and income taxes.
Net cash provided by operating activities increaseddecreased in the first ninesix months of 20202021 compared with the same prior-year period primarily due to higherlower cash collections from accounts receivable, higher incomean increase in other assets and higherlower cash payments received from prepaid subscriptions, partially offset by higher net income adjusted for non-cash items and lower cash payments made to settle accounts payable, accrued payroll and other liabilities.
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 ninesix months of 20202021 was primarily related to $128.3$33.9 million in net purchases of marketable securities consideration paid for acquisitions of $33.1 million, and $29.2$14.7 million in capital expenditures payments.
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 ninesix months of 20202021 was primarily related to dividend payments of $28.4$21.8 million and share-based compensation tax withholding payments of $11.7$10.9 million.
Restricted Cash
We were required to maintain $15.9$14.6 million of restricted cash as of SeptemberJune 27, 2020,2021, and $17.1$15.9 million as of December 29, 2019,27, 2020, substantially all of which is set aside to collateralize workers’ compensation obligations.
Capital Expenditures
Capital expenditures totaled approximately $25$15 million and $33$17 million in the first ninesix months of 20202021 and 2019,2020, respectively. The decrease in capital expenditures was primarily driven by lower expenditures related to the build-out of additional office space in Long Island City, N.Y. and lower expenditures related to improvements at our College Point, N.Y., printing and distribution facility.facility and lower investments in technology, partially offset by improvements at our newsroom bureaus and Company Headquarters. The cash payments related to capital expenditures totaled approximately $29$15 million and $33$22 million in the first ninesix months of 20202021 and 2019,2020, respectively.
Third-Party Financing
In September 2019, we entered into a $250 million five-year unsecured credit facility (the “Credit Facility”). Certain of our domestic subsidiaries have guaranteed our obligations under the Credit Facility. As of SeptemberJune 27, 2020,2021, there were no outstanding borrowings under the Credit Facility and the Company was in compliance with the financial covenants contained in the Credit Facility.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 29, 2019.27, 2020. Other than as described in Note 2 of the Notes to the Condensed Consolidated Financial Statements, as of SeptemberJune 27, 2020,2021, our critical accounting policies have not changed from December 29, 2019.27, 2020.
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 29, 2019.27, 2020. As of SeptemberJune 27, 2020,2021, our contractual obligations and off-balance sheet arrangements have not changed materially from December 29, 2019.27, 2020.
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 relatewithin the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Terms such as “aim,” “anticipate,” “believe,” “confidence,” “contemplate,” “continue,” “conviction,” “could,” “drive,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “objective,” “opportunity,” “optimistic,” “outlook,” “plan,” “position,” “potential,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” or similar statements or variations of such words and other similar expressions are intended to future events or our future financial performance. We may also make written and oralidentify 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. Anyalthough not all forward-looking statements contain such terms. Forward-looking statements are and will be based upon our then-currentcurrent expectations, estimates and assumptions and involve risks and uncertainties that change over time; actual results could differ materially from those predicted by such forward-looking statements. These risks and uncertainties include, but are not limited to: the impact of the Covid-19 pandemic; significant competition in all aspects of our business; our ability to improve and scale our technical infrastructure and respond and adapt to changes in technology and consumer behavior; our ability to continue to retain and grow our subscriber base; numerous factors that affect our advertising revenues, including economic conditions, market dynamics, audience fragmentation, evolving digital advertising trends and the evolution of our strategy; damage to our brand or reputation; economic, geopolitical and other risks associated with the international scope of our business and foreign operations; our ability to attract and maintain a highly skilled and diverse workforce; adverse results from litigation or governmental investigations; the risks and challenges associated with investments we make in new and existing products and services; risks associated with acquisitions, divestitures, investments and other transactions; the effects of the fixed cost nature of significant portions of our expenses; the effects of the size and volatility of our pension plan obligations; liabilities that may result from our participation in multiemployer pension plans; the impact of labor negotiations and agreements; increases in the price of newsprint or significant disruptions in our newsprint supply chain or newspaper printing and distribution channels; security breaches and other network and information systems disruptions; our ability to comply with laws and regulations, including with respect to privacy, data protection and consumer marketing practices; payment processing risk; defects, delays or interruptions in the cloud-based hosting services we utilize; our ability to protect our intellectual property; claims of intellectual property infringement that we have been, and may be in the future, be subject to; the effects of restrictions on our operations as a result of the terms of our credit facility; our future access to capital markets and other financing options; and the concentration of control of our company due to our dual-class capital structure.
More information regarding future eventsthese risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in “Item 1A — Risk Factors” in our Annual Report
on Form 10-K for the year ended December 27, 2020, and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q. Investors are applicablecautioned not to place undue reliance on any such forward-looking statements, which speak only as of the dates of such statements. We undertakedate they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements,statement, 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 under the heading “Part II-Item 1A-Risk Factors” in this report, in our Annual Report on Form 10-K for the year ended December 29, 2019, 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 29, 2019,27, 2020, details our disclosures about market risk. As of SeptemberJune 27, 2020,2021, there were no material changes in our market risks from December 29, 2019.27, 2020.
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 SeptemberJune 27, 2020.2021. 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
During the second quarter of 2021, we completed the implementation of (i) a new cloud-based procure-to-pay system relating to our procurement suppliers, and (ii) a new cloud-based system for digital advertising billing. In connection with these systems implementations, we updated our internal control over financial reporting to accommodate the resulting changes to our existing controls, systems and procedures.
There were no other changes in our internal control over financial reporting during the quarter ended SeptemberJune 27, 2020,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced a material impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continuing to monitor and evaluate the situation to minimize any impact of the pandemic on the design and operating effectiveness of our internal control over financial reporting.
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 amountshave damage claims that are greatly in excess of the payments, if any, that maywe would be required to be made.pay if we lost or settled the cases. 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
The followingThere have been no material changes to our risk factor supplements the risk factors as set forth in “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 29, 2019.
The global coronavirus (COVID-19) pandemic will continue to affect our industry, business and results of operations.
The global coronavirus (COVID-19) pandemic and attempts to contain it have continued to result in significant economic disruption, market volatility and uncertainty. As with many companies, the pandemic has disrupted our business and could continue to do so for the foreseeable future.
We derive substantial revenues from the sale of advertising (approximately 29% of our total revenues in 2019). Advertising spending is sensitive to overall economic conditions, and our advertising revenues are adversely affected if advertisers respond to weak and uneven economic conditions by reducing their budgets or shifting spending patterns or priorities, or if they are forced to consolidate or cease operations. The worldwide economic slowdown caused by the outbreak and spread of COVID-19 has materially adversely affected our advertising revenues, and our advertising revenues will likely continue to be adversely affected while these conditions persist. Likewise, the pandemic and attempts to contain it have resulted in the postponement and cancellation of live events, which has adversely affected our revenues from live events and related services, and will continue to adversely affect these revenues to the extent these conditions persist. It is possible that these revenues will not return to pre-pandemic levels once economic conditions improve.
We derive the majority of our revenues from the sale of subscriptions (approximately 60% of our total revenues in 2019). Although we have experienced significant growth in the number of subscriptions to our digital news and other products in the first nine months of 2020, this growth rate has been driven in part by an increase in traffic given the news environment, and may not be sustainable or indicative of results for future periods. In addition, the recent growth may reflect in part the shifting forward of growth that we would have otherwise seen in subsequent periods. Accordingly, the rate of growth in our digital subscriptions, which has moderated since the early months of the pandemic, may continue to moderate due to slower acquisition and/or higher cancellations as and when the pandemic subsides. Furthermore, to the extent that a prolonged weakening of global economic conditions leads consumers to reduce spending on discretionary activities, subscribers may increasingly shift to lower-priced subscription options or may forgo subscriptions altogether. In light of these factors, our ability to obtain new subscribers or to retain subscribers at their current or higher pricing levels could be hindered, reducing our subscription revenue. In addition, revenues from the single-copy and bulk sales of our print newspaper (which include our international edition and collectively represent less than 10% of our total subscription revenues) have been, and we expect will continue to be, adversely affected as a result of widespread business closures, increased remote working and reductions in travel.
In response to public health recommendations, government mandates and other concerns, we have altered certain aspects of our operations, including having the vast majority of our workforce work remotely since March 2020, and remote work arrangements are expected to continue for the majority of our workforce at least through early July 2021. An extended period of remote work arrangements could introduce operational risk (including cybersecurity risk), result in a decline in productivity or otherwise negatively affect our ability to manage the business. In addition, if a significant portion of our workforce is unable to work, including because of illness, travel or government restrictions in connection with COVID-19 or shortages of necessary personal protective equipment, our operations may be negatively impacted. We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our business operations as may be required or that we determine are appropriate. We have incurred and expect to continue to incur some additional costs in response to the pandemic, including certain enhanced employee benefits. These costs have not been significant to date, but we may incur significant additional costs as we continue to implement operational changes in response to the pandemic. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our financial results.
The Times is printed at our production and distribution facility in College Point, N.Y., as well as under contract at remote print sites across the United States and throughout the world. If a significant percentage of our College Point employees were unable to work as a result of the pandemic, our ability to print and distribute the newspaper and other commercial print
products in the New York area could be negatively affected. To the extent our newsprint suppliers or print and distribution partners are affected by government “stay-at-home” mandates or recommendations, financial pressures, labor shortages or other circumstances relating to COVID-19 that lead to reduced operations or consolidations or closures of print sites and/or distribution routes, this could lead to an increase in costs to print and distribute our newspapers and/or a decrease in revenues if printing and distribution are disrupted. Some of our print and distribution partners have taken steps to reduce the frequency with which newspapers are printed and distributed, and additional partners may take similar steps. Significant disruptions to operations at our College Point production and distribution facility or at our newsprint suppliers or print and distribution partners could adversely affect our operating results.
It is also possible that the COVID-19 pandemic may accelerate or worsen the other risks discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the severity and duration of the outbreak, and any resurgence thereof; the impact of the pandemic on economic activity and the companies with which we do business; governmental, business and other actions; travel restrictions and social distancing measures, among many other factors.27, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities
On July 17, 2020, August 17, 2020, and September 18, 2020, we issued 1,520, 13,440 and 6,720 shares, respectively, of Class A Common Stock to holders of Class B Common Stock upon the conversion of such Class B shares into Class A shares. The conversions, which were in accordance with our Certificate of Incorporation, did not involve a public offering and were exempt from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended.
(c) Issuer Purchases of Equity Securities
In 2015, the Board of Directors approved an authorization ofauthorized up to $101.1 million to repurchaseof repurchases of shares of the Company’s Class A Common Stock. As of SeptemberJune 27, 2020,2021, 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 2020. All purchases were made pursuant to our publicly announced share repurchase program.remained. 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. There have been no purchases under this authorization since 2016.
Item 6. Exhibits
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Exhibit No. | | |
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31.1 | | |
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31.2 | | |
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32.1 | | |
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32.2 | | |
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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. |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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.
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| | THE NEW YORK TIMES COMPANY |
| | (Registrant) |
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Date: | November 5, 2020August 4, 2021 | /s/ Roland A. Caputo |
| | Roland A. Caputo Executive Vice President and Chief Financial Officer (Principal Financial Officer) |