The New York Times Company (NYT)

Q2 2010 Earnings Call

July 22, 2010 11:00 AM EST

Executives

Paula Schwartz – IR

Janet Robinson – President and CEO

Jim Follo – SVP and CFO

Denise Warren – SVP and Chief Advertising Officer, The New York Times Media Group and General Manager NYTimes.com

Analysts

Alexia Quadrani – JPMorgan

Craig Huber – Access 342

Edward Atorino – Benchmark

Presentation

Operator

Good day and welcome to The New York Times Company second quarter 2010 earnings conference call. Today's call is being recorded. A question-and-answer session will follow today's presentation. (Operator Instructions).

For opening remarks and introductions, I'd like to turn the conference over to your host, Ms. Paula Schwartz, Director of Investor Relations. Please go ahead, ma’am.

Paula Schwartz

Thank you, Jason, and good morning, everyone. Welcome to our second quarter 2010 earnings conference call. We have several members of our senior management team here to discuss our results with you, including Janet Robinson, President and CEO; Jim Follo, Senior Vice President and Chief Financial Officer; Martin Nisenholtz, Senior Vice President, Digital Operations; Denise Warren, Senior Vice President and Chief Advertising Officer, The New York Times Media Group and General Manager NYTimes.com; and Roland Caputo, Senior Vice President and Chief Financial Officer of The New York Times Media Group.

All comparisons on this call will be for the second quarter of 2010 to the second quarter of 2009 unless otherwise stated. Our discussion will include forward-looking statements and our actual results may differ from those predicted. Some of the factors that may cause them to differ are included in our 2009 10-K.

Our presentation will also include non-GAAP financial measures and we have provided reconciliations to the most comparable GAAP measures in our earnings press release, which is available on our corporate website at www.nytco.com.

And, with that, I’ll turn it over to Janet.

Janet Robinson

Thank you, Paula, and good morning, everyone. We were very pleased to report persistent strength in our operating performance for the second quarter with June wrapping up on especially solid footings. We saw further positive trending in both print and digital advertising revenues and ended the quarter roughly flat in overall advertising revenue versus the second quarter of 2009.

While we know our work is not done, let us reflect for just one moment what a different a year has made. The key elements that converge to deliver this quarter’s strength are the recovering advertising market, the impact of having taken cost out of the business and our consistent moves into digital platforms.

In the second quarter, while we experienced month to month volatility, we started firming in the rate of advertiser spending across our newspapers, websites and other platforms. The company’s declining operating expenses also contributed to the growth in our operating profit.

Some of the actions that supported our successful effort were managing costs even as we invest in new products, expanding our digital offerings as we head toward a launch of NYTimes.com pay model and step-up our mobile efforts including our recently released iPad and New York Times Scoop ads, leveraging our brand promise of high-quality journalism that engages audiences across multiple platforms and realigning our asset portfolio to support our core operations.

We achieved this strong growth in our operating profit in the second quarter, which excluding depreciation, amortization and severance and a special item in 2009, increased 39% to $93 million from $66 million in the second quarter of 2009. On a GAAP basis, we recorded operating profit from continuing operations of $61 million, more than doubling our operating profit of $23 million from the same period of 2009.

Diluted earnings per share from continuing operations excluding severance expense and special items more than doubled to $0.18 per share compared with $0.08 per share in the same period of 2007. On a GAAP basis, we reported diluted EPS from continuing operations of $0.21 compared with $0.27 in the second quarter 2009 period. Our results involve a couple of special items which Jim will review with you.

Cost control remain a solid contributor to our improved operating performance in the quarter with the operating expenses declining 4%. As we have said, while we remain vigilant about managing our costs, these efforts will become much more challenging in the second half of the year. Jim will discuss this as well.

Another one of our strategic focuses is managing our asset portfolio. Early in the second quarter, we completed the sale of about 7% of our interest in New England Sports Ventures for a pretax gain of approximately $9 million. We continue to hold a 16.6% stake in NESV and we are still exploring the sale of this asset.

In January, we announced that we will be introducing a pay model for NYTimes.com in 2011. And we have a few second quarter developments to report on that front. We have transitioned from the requirement’s base into active development mode, building the systems and infrastructure to support the customer service and production requirements of our cross-platform strategy. As we have previously indicated, we will be announcing pricing and further information as we get closer to the launch.

Now, let me provide you with more detail on our second quarter revenues. Total revenues for the company increased 1%, shifting into positive territory from the first quarter year-over-year decline of 3% with advertising revenues flat, circulation revenues up 3% and other revenues up 1%. Substantial growth in digital advertising revenues which rose 21%, offset a 6% decrease in print advertising revenues and kept our total advertising revenue flat compared with the second quarter of 2009.

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