Annual Reports

 
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  • 10-Q (Nov 1, 2017)
  • 10-Q (Aug 1, 2017)
  • 10-Q (May 3, 2017)
  • 10-Q (Nov 3, 2016)
  • 10-Q (Jul 29, 2016)
  • 10-Q (May 5, 2016)

 
8-K

 
Other

New York Times Company 10-Q 2017

Documents found in this filing:

  1. 10-Q
  2. Ex-12
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2
Document
 
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 June 25, 2017
Commission file number 1-5837
THE NEW YORK TIMES COMPANY
(Exact name of registrant as specified in its charter)
 
NEW YORK
 
13-1102020
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
620 EIGHTH AVENUE, NEW YORK, NEW YORK
(Address of principal executive offices)
10018
(Zip Code)
Registrant’s telephone number, including area code 212-556-1234
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   x     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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  x
 
Accelerated filer  o
 
Non-accelerated filer  o 
Smaller reporting company  o
 
Emerging growth company  o
 
 
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   o     No  x
Number of shares of each class of the registrant’s common stock outstanding as of July 27, 2017 (exclusive of treasury shares): 
Class A Common Stock
161,164,481

shares
Class B Common Stock
810,957

shares
 




THE NEW YORK TIMES COMPANY
INDEX

 
 
ITEM NO.
 
 
PART I
 
 
 
Financial Information
 
Item
1
 
Financial Statements
 
 
 
 
Condensed Consolidated Balance Sheets as June 25, 2017 
(unaudited) and December 25, 2016
 
 
 
 
Condensed Consolidated Statements of Operations (unaudited) for the quarters and six months ended June 25, 2017 and June 26, 2016
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the quarters and six months ended June 25, 2017 and June 26, 2016
 
 
 
 
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 25, 2017 and June 26, 2016
 
 
 
 
Notes to the Condensed Consolidated Financial Statements
 
Item
2
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item
3
 
Quantitative and Qualitative Disclosures about Market Risk
 
Item
4
 
Controls and Procedures
 
 
 
PART II
 
 
 
Other Information
 
Item
1
 
Legal Proceedings
 
Item
1A
 
Risk Factors
 
Item
2
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item
5
 
Other Information
 
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)
 
 
June 25, 2017


December 25, 2016

 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
204,142

 
$
100,692

Short-term marketable securities
 
382,569

 
449,535

Accounts receivable (net of allowances of $15,663 in 2017 and $16,815 in 2016)
 
149,553

 
197,355

Prepaid expenses
 
13,476

 
15,948

Other current assets
 
25,667

 
32,648

Total current assets
 
775,407

 
796,178

Other assets
 
 
 
 
Long-term marketable securities
 
220,708

 
187,299

Investments in joint ventures
 
16,688

 
15,614

Property, plant and equipment (less accumulated depreciation and amortization of $931,996 in 2017 and $903,736 in 2016)
 
595,079

 
596,743

Goodwill
 
138,795

 
134,517

Deferred income taxes
 
294,630

 
301,342

Miscellaneous assets
 
153,861

 
153,702

Total assets
 
$
2,195,168

 
$
2,185,395

 See Notes to Condensed Consolidated Financial Statements.

1



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS-(Continued)
(In thousands, except share and per share data)
 
 
June 25, 2017

 
December 25, 2016

 
 
(Unaudited)
 
 
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
94,332

 
$
104,463

Accrued payroll and other related liabilities
 
84,541

 
96,463

Unexpired subscriptions
 
79,139

 
66,686

Accrued expenses and other
 
140,444

 
131,125

Total current liabilities
 
398,456

 
398,737

Other liabilities
 
 
 
 
Long-term debt and capital lease obligations
 
248,568

 
246,978

Pension benefits obligation
 
532,936

 
558,790

Postretirement benefits obligation
 
56,315

 
57,999

Other
 
74,867

 
78,647

Total other liabilities
 
912,686

 
942,414

Stockholders’ equity
 
 
 
 
Common stock of $.10 par value:
 
 
 
 
Class A – authorized: 300,000,000 shares; issued: 2017 – 170,035,282; 2016 – 169,206,879 (including treasury shares: 2017 – 8,870,801; 2016 – 8,870,801)
 
17,004

 
16,921

Class B – convertible – authorized and issued shares: 2017 – 810,957; 2016 – 816,632 (including treasury shares: 2017 – none; 2016 – none)
 
81

 
82

Additional paid-in capital
 
155,895

 
149,928

Retained earnings
 
1,354,195

 
1,331,911

Common stock held in treasury, at cost
 
(171,211
)
 
(171,211
)
Accumulated other comprehensive loss, net of income taxes:
 
 
 
 
Foreign currency translation adjustments
 
1,364

 
(1,822
)
Funded status of benefit plans
 
(469,625
)
 
(477,994
)
Total accumulated other comprehensive loss, net of income taxes
 
(468,261
)
 
(479,816
)
Total New York Times Company stockholders’ equity
 
887,703

 
847,815

Noncontrolling interest
 
(3,677
)
 
(3,571
)
Total stockholders’ equity
 
884,026

 
844,244

Total liabilities and stockholders’ equity
 
$
2,195,168

 
$
2,185,395

 See Notes to Condensed Consolidated Financial Statements.


2



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 
 
For the Quarters Ended
 
For the Six Months Ended
 
 
June 25, 2017


June 26, 2016

 
June 25, 2017

 
June 26, 2016

 
 
(13 weeks)
 
(26 weeks)
Revenues
 
 
 
 
 
 
 
 
Subscription
 
$
250,037

 
$
219,480

 
$
492,412

 
$
437,474

Advertising
 
132,234

 
131,155

 
262,262

 
270,835

Other
 
24,803

 
21,995

 
51,204

 
43,836

Total revenues
 
407,074

 
372,630

 
805,878

 
752,145

Operating costs
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
 
Wages and benefits
 
88,565

 
90,630

 
179,343

 
183,101

Raw materials
 
15,813

 
17,012

 
32,743

 
34,887

Other
 
44,907

 
45,075

 
90,435

 
92,591

Total production costs
 
149,285

 
152,717

 
302,521

 
310,579

Selling, general and administrative costs
 
213,004

 
172,069

 
411,008

 
350,315

Depreciation and amortization
 
15,131

 
15,147

 
31,284

 
30,619

Total operating costs
 
377,420

 
339,933

 
744,813

 
691,513

Headquarters redesign and consolidation
 
1,985

 

 
4,387

 

Restructuring charge
 

 
11,855

 

 
11,855

Multiemployer pension plan withdrawal expense
 

 
11,701

 

 
11,701

Operating profit
 
27,669

 
9,141

 
56,678

 
37,076

Loss from joint ventures
 
(266
)
 
(412
)
 
(93
)
 
(42,308
)
Interest expense, net
 
5,133

 
9,097

 
10,458

 
17,923

Income/(loss) from continuing operations before income taxes
 
22,270

 
(368
)
 
46,127

 
(23,155
)
Income tax expense/(benefit)
 
6,711

 
124

 
17,453

 
(9,077
)
Net income/(loss)
 
15,559

 
(492
)
 
28,674

 
(14,078
)
Net loss attributable to the noncontrolling interest
 
40

 
281

 
106

 
5,596

Net income/(loss) attributable to The New York Times Company common stockholders
 
$
15,599

 
$
(211
)
 
$
28,780

 
$
(8,482
)
Average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
161,787

 
161,128

 
161,624

 
161,052

Diluted
 
163,808

 
161,128

 
163,673

 
161,052

Basic earnings/(loss) per share attributable to The New York Times Company common stockholders
 
$
0.10

 
$
(0.00
)
 
$
0.18

 
$
(0.05
)
Diluted earnings/(loss) per share attributable to The New York Times Company common stockholders
 
$
0.09

 
$
(0.00
)
 
$
0.17

 
$
(0.05
)
Dividends declared per share
 
$

 
$

 
$
0.04

 
$
0.04

 See Notes to Condensed Consolidated Financial Statements.

3



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
 
For the Quarters Ended
 
For the Six Months Ended
 
 
June 25, 2017

 
June 26, 2016

 
June 25, 2017

 
June 26, 2016

 
 
(13 weeks)
 
(26 weeks)
Net income/(loss)
 
$
15,559

 
$
(492
)
 
$
28,674

 
$
(14,078
)
Other comprehensive income, before tax:
 
 
 
 
 
 
 
 
Income/(loss) on foreign currency translation adjustments
 
2,896

 
(136
)
 
5,071

 
1,506

Pension and postretirement benefits obligation
 
6,920

 
6,551

 
13,841

 
13,103

Other comprehensive income, before tax
 
9,816

 
6,415

 
18,912

 
14,609

Income tax expense
 
3,826

 
2,477

 
7,357

 
5,580

Other comprehensive income, net of tax
 
5,990

 
3,938

 
11,555

 
9,029

Comprehensive income/(loss)
 
21,549

 
3,446

 
40,229

 
(5,049
)
Comprehensive loss attributable to the noncontrolling interest
 
40

 
281

 
106

 
5,596

Comprehensive income attributable to The New York Times Company common stockholders
 
$
21,589

 
$
3,727

 
$
40,335

 
$
547

 See Notes to Condensed Consolidated Financial Statements.

4



THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 
For the Six Months Ended
 
 
June 25, 2017

 
June 26, 2016

 
 
(26 weeks)
Cash flows from operating activities
 
 
 
 
Net income/(loss)
 
$
28,674

 
$
(14,078
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Restructuring charge
 

 
11,855

Multiemployer pension plan charges
 

 
11,701

Depreciation and amortization
 
31,284

 
30,619

Stock-based compensation expense
 
8,010

 
5,872

Undistributed loss of joint ventures
 
93

 
42,308

Long-term retirement benefit obligations
 
(13,279
)
 
(14,738
)
Uncertain tax positions
 
160

 
121

Other-net
 
1,577

 
5,809

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable-net
 
47,802

 
57,223

Other current assets
 
3,040

 
(19,934
)
Accounts payable, accrued payroll and other liabilities
 
(20,353
)
 
(78,595
)
Unexpired subscriptions
 
12,453

 
2,628

Net cash provided by operating activities
 
99,461

 
40,791

Cash flows from investing activities
 
 
 
 
Purchases of marketable securities
 
(245,033
)
 
(34,912
)
Maturities of marketable securities
 
277,499

 
316,515

Cash distribution from corporate-owned life insurance
 

 
38,000

Business acquisitions
 

 
(12,250
)
Purchase of investments – net of proceeds
 
(163
)
 
(1,350
)
Change in restricted cash
 
7,014

 
521

Capital expenditures
 
(21,411
)
 
(14,592
)
Other-net
 
199

 
(380
)
Net cash provided by investing activities
 
18,105

 
291,552

Cash flows from financing activities
 
 
 
 
Long-term obligations:
 
 
 
 
Repayment of debt and capital lease obligations
 
(276
)
 
(322
)
Dividends paid
 
(12,969
)
 
(12,937
)
Capital shares:
 
 
 
 
Stock issuances
 
2,706

 
93

Repurchases
 

 
(15,684
)
Share-based compensation tax withholding
 
(3,803
)
 
(9,287
)
Net cash used in financing activities
 
(14,342
)
 
(38,137
)
Net increase in cash and cash equivalents
 
103,224

 
294,206

Effect of exchange rate changes on cash
 
226

 
80

Cash and cash equivalents at the beginning of the period
 
100,692

 
105,776

Cash and cash equivalents at the end of the period
 
$
204,142

 
$
400,062

 See Notes to Condensed Consolidated Financial Statements.

5


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


NOTE 1. BASIS OF PRESENTATION
In the opinion of management of The New York Times Company (the “Company”), the Condensed Consolidated Financial Statements present fairly the financial position of the Company as of June 25, 2017 and December 25, 2016, and the results of operations and cash flows of the Company for the periods ended June 25, 2017 and June 26, 2016. 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 25, 2016. Due to the seasonal nature of our business, operating results for the interim periods are not necessarily indicative of a full year’s operations. The fiscal periods included herein comprise 13 weeks for the second quarter.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements. Actual results could differ from these estimates.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Except as described herein, as of June 25, 2017, our significant accounting policies, which are detailed in our Annual Report on Form 10-K for the year ended December 25, 2016, have not changed materially.
As of the second quarter of 2017, the Company has renamed “circulation revenues” as “subscription revenues.” Subscription revenues consist of revenues from subscriptions to our print and digital products (including our news products and Crossword product), as well as single-copy sales of our print products (which comprise approximately 10% of these revenues). These 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.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation,” which provides guidance on accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance became effective for the Company for fiscal years beginning after December 25, 2016.
As a result of the adoption of ASU 2016-09 in the first quarter of 2017, we recognized excess tax windfalls in income tax expense rather than additional paid-in capital of $1.6 million and $0.1 million for the quarter and six months ended June 25, 2017, respectively. Excess tax shortfalls and/or windfalls for share-based payments are now included in net cash from operating activities rather than net cash from financing activities. The changes have been applied prospectively in accordance with the ASU and prior periods have not been adjusted. Additionally, the presentation of employee taxes paid to taxing authorities for share-based transactions are now included in net cash from financing activities rather than net cash from operating activities. This change was applied retrospectively and as a result, we reclassified $9.3 million for the six months ended June 26, 2016 in our Condensed Statement of Cash Flows from operating activities to financing activities. No other material changes resulted from the adoption of this standard.
Recently Issued Accounting Pronouncements
In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new guidance requires the service cost component to be presented separately from the other components of net benefit costs. Service cost will be presented with other employee compensation cost within operations. The other components of net benefit cost, such as interest cost, amortization of prior service cost and gains or losses are required to be presented outside of operations. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The guidance should be applied retrospectively for the presentation of the service cost component in the income statement and allows a practical expedient for the estimation basis for applying the retrospective presentation requirements. We are currently in the process of evaluating the impact of this guidance on our consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the

6


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

impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new guidance is effective for 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. We are currently in the process of evaluating the impact of this guidance on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases,” which provides guidance on accounting for leases and disclosure of key information about leasing arrangements. The guidance requires lessees to recognize the following for all operating and finance leases at the commencement date: (1) a lease liability, which is the obligation to make lease payments arising from a lease, measured on a discounted basis and (2) a right-of-use asset representing the lessee’s right to use, or control the use of, the underlying asset for the lease term. A lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities for short-term leases with a term of 12 months or less. The guidance does not fundamentally change lessor accounting; however, some changes have been made to align that guidance with the lessee guidance and other areas within GAAP. This guidance becomes effective for the Company for fiscal years beginning after December 30, 2018. Early application is permitted. This guidance will be applied on a modified retrospective basis for leases existing at, or entered into after, the earliest period presented in the financial statements. We are currently in the process of evaluating the impact of the new leasing guidance and expect that most of our operating lease commitments will be subject to the new standard. The adoption of the standard will require us to add right-of-use assets and lease liabilities onto our balance sheet. Based upon our initial evaluation, we do not expect the adoption of the standard to have a material effect on our results of operations and liquidity.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities” which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments including requirements to measure most equity investments at fair value with changes in fair value recognized in net income, to perform a qualitative assessment of equity investments without readily determinable fair values, and to separately present financial assets and liabilities by measurement category and by type of financial asset on the balance sheet or the accompanying notes to the financial statements. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently in the process of evaluating the impact of this guidance on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which prescribes a single comprehensive model for entities to use in the accounting for revenue arising from contracts with customers. The new guidance will supersede virtually all existing revenue guidance under GAAP and International Financial Reporting Standards and is effective for fiscal years beginning after December 31, 2017. There are two transition options available to entities: the full retrospective approach or the modified retrospective approach. Under the full retrospective approach, the Company would restate prior periods in compliance with Accounting Standards Codification 250, “Accounting Changes and Error Corrections.” Alternatively, the Company may elect the modified retrospective approach, which allows for the new revenue standard to be applied to existing contracts as of the effective date with a cumulative catch-up adjustment recorded to retained earnings. We currently anticipate adopting the new standard using the modified retrospective method beginning January 1, 2018.
Subsequently, in March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the implementation guidance on principal versus agent considerations in ASU 2014-09. In April 2016, the FASB also issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” to reduce the cost and complexity of applying the guidance on identifying promised goods or services when identifying a performance obligation and improve the operability and understandability of the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients,” to reduce the cost and complexity of applying the guidance to address certain issues on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The amendments in ASU 2014-09, 2016-10, and 2016-12 do not change the core principle of ASU 2014-09.
Based upon our initial evaluation, we do not expect the adoption of ASU 2014-09 to have a material effect on our financial condition or results of operations. While we continue to evaluate the impact of the new revenue guidance, we currently believe that the most significant changes will be primarily related to how we account for certain licensing arrangements in the other revenue category. However, preliminary assessments may be subject to change.
The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.

7


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

NOTE 3. MARKETABLE SECURITIES
Our marketable debt securities consisted of the following:
(In thousands)
 
June 25, 2017

 
December 25, 2016

Short-term marketable securities
 
 
 
 
U.S Treasury securities
 
$
111,222

 
$
150,623

Corporate debt securities
 
178,869

 
150,599

U.S. governmental agency securities
 
50,488

 
64,135

Certificates of deposit
 
11,102

 

Commercial paper
 
30,888

 
84,178

Total short-term marketable securities
 
$
382,569

 
$
449,535

Long-term marketable securities
 
 
 
 
U.S. governmental agency securities
 
$
107,692

 
$
110,732

Corporate debt securities
 
64,076

 
61,775

U.S Treasury securities
 
48,940

 
14,792

Total long-term marketable securities
 
$
220,708

 
$
187,299

As of June 25, 2017, our short-term and long-term marketable securities had remaining maturities of less than 1 month to 12 months and 13 months to 32 months, respectively. See Note 8 for additional information regarding the fair value of our marketable securities.
On June 29, 2017, our Board of Directors approved a change to the Company’s cash reserve investment policy to allow the Company to sell marketable securities prior to maturity. Beginning in the third quarter of 2017, the Company will reclassify all marketable securities from held to maturity to available for sale. If the marketable securities were classified as available for sale as of June 25, 2017, the Company would have recorded approximately a $1 million net unrecognized loss in other comprehensive income.
NOTE 4. GOODWILL AND INTANGIBLES
In 2016, the Company acquired two digital marketing agencies, HelloSociety, LLC and Fake Love, LLC for an aggregate of $15.4 million in separate all-cash transactions. Also in 2016, the Company acquired Submarine Leisure Club, Inc., which owns the product review and recommendation websites The Wirecutter and The Sweethome, in an all-cash transaction. We paid $25.0 million, including a payment made for a non-compete agreement, and also entered into a consulting agreement and retention agreements that will likely require payments over the three years following the acquisition.
The Company allocated the purchase prices for these acquisitions based on the final valuation of assets acquired and liabilities assumed, resulting in allocations to goodwill, intangibles, property, plant and equipment and other miscellaneous assets.
The aggregate carrying amount of intangible assets of $9.1 million related to these acquisitions has been included in “Miscellaneous Assets” in our Condensed Consolidated Balance Sheets. The estimated useful lives for these assets range from 3 to 7 years and are amortized on a straight-line basis.
The changes in the carrying amount of goodwill as of June 25, 2017, and since December 25, 2016, were as follows:
(In thousands)
 
Total Company
Balance as of December 25, 2016
 
$
134,517

Measurement period adjustment (1)
 
(198
)
Foreign currency translation
 
4,476

Balance as of June 25, 2017
 
$
138,795

(1)Includes measurement period adjustment in connection with Submarine Leisure Club, Inc. acquisition.
The foreign currency translation line item reflects changes in goodwill resulting from fluctuating exchange rates related to the consolidation of certain international subsidiaries.

8


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

NOTE 5. INVESTMENTS
Equity Method Investments
As of June 25, 2017, our investments in joint ventures totaled $16.7 million and we had equity ownership interests in the following entities:
Company
 
Approximate %
Ownership
Donohue Malbaie Inc.
 
49
%
Madison Paper Industries
 
40
%
Women in the World Media, LLC
 
30
%
We have investments in Donohue Malbaie Inc. (“Malbaie”), a Canadian newsprint company, Madison Paper Industries (“Madison”), a partnership that previously operated a supercalendered paper mill in Maine, and Women in the World Media, LLC, a live-event conference business.
The Company and UPM-Kymmene Corporation (“UPM”), a Finnish paper manufacturing company, are partners through subsidiary companies in Madison. The Company’s 40% ownership of Madison is through an 80%-owned consolidated subsidiary which owns 50% of Madison. UPM owns 60% of Madison, including a 10% interest through a 20% noncontrolling interest in the consolidated subsidiary of the Company. The paper mill was closed in May 2016. During the first quarter of 2016, we recognized a $41.4 million loss from joint ventures related to the closure. Our proportionate share of the loss was reduced by the 20% noncontrolling interest. As a result of the mill closure, we wrote our investment down to zero. As of June 25, 2017, we had a liability of $29.2 million, reflecting our share of the losses incurred to date from the closure. These amounts are presented in “Accrued expenses and other” in our Condensed Consolidated Balance Sheets.
The Company’s joint venture in Madison is currently being liquidated. In the fourth quarter of 2016, Madison sold certain assets at the mill site and we recognized a gain of $3.9 million related to the sale. On July 31, 2017, Madison sold substantially all of the remaining assets at the mill site (which consisted of hydro power assets). We expect to recognize a gain of approximately $20 to $25 million in the third quarter of 2017 related to this sale, which will reduce our liability accordingly.
The following table presents summarized income statement information for Madison, which follows a calendar year:
 
 
For the Quarters Ended
 
For the Six Months Ended
(In thousands)
 
June 30, 2017

 
June 30, 2016

 
June 30, 2017

 
June 30, 2016

Revenues
 
$

 
$
15,371

 
$

 
$
40,550

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales
 
(118
)
 
(17,654
)
 
(1,172
)
 
(66,589
)
General and administrative
 
(528
)
 
(2,416
)
 
(554
)
 
(65,517
)
 
 
(646
)
 
(20,070
)
 
(1,726
)
 
(132,106
)
Operating loss
 
(646
)
 
(4,699
)
 
(1,726
)
 
(91,556
)
Other (expense)/income
 
(4
)
 
1

 
(6
)
 
2

Net loss
 
$
(650
)
 
$
(4,698
)
 
$
(1,732
)
 
$
(91,554
)
We received no distributions from our equity method investments during the quarters and six months ended June 25, 2017 and June 26, 2016.
We purchase newsprint from Malbaie, and previously purchased supercalendered paper from Madison, at competitive prices. Such purchases totaled approximately $2.4 million and $3.6 million for the second quarters ended June 25, 2017, and June 26, 2016, respectively, and approximately $5.4 million and $6.6 million for the six-month periods ended June 25, 2017, and June 26, 2016, respectively.
Cost Method Investments
The aggregate carrying amounts of cost method investments included in “Miscellaneous assets’’ in our Condensed Consolidated Balance Sheets were $13.7 million and $13.6 million for June 25, 2017 and December 25, 2016, respectively.

9


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

NOTE 6. DEBT OBLIGATIONS
Our current indebtedness consisted of the repurchase option related to a sale-leaseback of a portion of our New York headquarters. Our total debt and capital lease obligations consisted of the following:
(In thousands)
 
June 25, 2017

 
December 25, 2016

Option to repurchase ownership interest in headquarters building in 2019:
 
 
 
 
Principal amount
 
$
250,000

 
$
250,000

Less unamortized discount based on imputed interest rate of 13.0%
 
8,224

 
9,801

Total option to repurchase ownership interest in headquarters building in 2019
 
241,776

 
240,199

Capital lease obligations
 
6,792

 
6,779

Total long-term debt and capital lease obligations
 
$
248,568

 
$
246,978

See Note 8 for additional information regarding the fair value of our long-term debt.
“Interest expense, net,” as shown in the accompanying Condensed Consolidated Statements of Operations was as follows:
 
 
For the Quarters Ended
 
For the Six Months Ended
(In thousands)
 
June 25, 2017

 
June 26, 2016

 
June 25, 2017

 
June 26, 2016

Interest expense
 
$
6,955

 
$
10,020

 
$
13,819

 
$
19,942

Amortization of debt costs and discount on debt
 
778

 
1,191

 
1,578

 
2,444

Capitalized interest
 
(287
)
 
(165
)
 
(507
)
 
(281
)
Interest income
 
(2,313
)
 
(1,949
)
 
(4,432
)
 
(4,182
)
Total interest expense, net
 
$
5,133

 
$
9,097

 
$
10,458

 
$
17,923

NOTE 7. OTHER
Advertising Expenses
Advertising expenses incurred to promote our brand, subscription products and marketing services were $25.8 million and $20.1 million in the second quarters of 2017 and 2016, respectively and $59.4 million and $41.2 million in the first six months of 2017 and 2016, respectively.
Capitalized Computer Software Costs
Amortization of capitalized computer software costs included in “Depreciation and amortization” in our Condensed Consolidated Statements of Operations were $2.7 million in the second quarters of 2017 and 2016, respectively and $5.8 million and $5.7 million in the first six months of 2017 and 2016, respectively.
Headquarters Redesign and Consolidation
In December 2016, we announced plans to redesign our headquarters building, consolidate our space within a smaller number of floors and lease the remaining floors to third parties. We incurred $2.0 million and $4.4 million of total costs related to these measures in the second quarter and first six months of 2017, respectively. The capital expenditures related to these measures were approximately $10 million and $11 million in the second quarter and the first six months of 2017, respectively.
Severance Costs
On May 31, 2017, we announced certain measures in our newsroom designed to streamline our editing process and allow us to make further investments in our newsroom. These measures resulted in a workforce reduction affecting our newsroom. We recognized severance costs of $19.3 million in the second quarter of 2017 and $20.9 million in the first six months of 2017, substantially all of which were related to this workforce reduction, and we expect to incur up to approximately $6 million of additional costs in the second half of 2017 in connection with these measures. We recognized severance costs of $1.7 million in the second quarter of 2016 and $5.3 million in the first six months of 2016. These costs are recorded in “Selling, general and administrative costs” in our Condensed Consolidated Statements of Operations.

10


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

During the second quarter of 2016, we announced certain measures to streamline our international print operations and support future growth efforts. These measures included a redesign of our international print newspaper and the relocation of certain editing and production operations currently conducted in Paris to our locations in Hong Kong and New York. During the second quarter of 2016, we incurred $11.9 million of total costs related to the measures, primarily related to relocation and severance charges.
We had a severance liability of $30.2 million and $23.2 million included in “Accrued expenses and other” in our Condensed Consolidated Balance Sheets as of June 25, 2017, and December 25, 2016, respectively. We anticipate most of the expenditures associated with the workforce reduction will be recognized 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.
Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The following table summarizes our financial liabilities measured at fair value on a recurring basis as of June 25, 2017, and December 25, 2016:
(In thousands)
 
June 25, 2017
 
December 25, 2016
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Deferred compensation
 
$
27,387

 
$
27,387

 
$

 
$

 
$
31,006

 
$
31,006

 
$

 
$

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 enables certain eligible executives to elect to defer a portion of their compensation on a pre-tax basis. The deferred amounts are invested at the executives’ option in various mutual funds. The fair value of deferred compensation is based on the mutual fund investments elected by the executives and on quoted prices in active markets for identical assets. Participation in the DEC was frozen effective December 31, 2015.
Financial Instruments Disclosed, But Not Reported, at Fair Value
Our marketable securities, which include U.S. Treasury securities, corporate debt securities, U.S. government agency securities, municipal securities, certificates of deposit and commercial paper, are recorded at amortized cost (see Note 3). As of June 25, 2017, the amortized cost was approximately $1 million more than the fair value. As of December 25, 2016, the amortized cost approximated fair value because of the short-term maturity and highly liquid nature of these investments. We classified these investments as Level 2 since the fair value estimates are based on market observable inputs for investments with similar terms and maturities.
The carrying value of our long-term debt was approximately $242 million as of June 25, 2017 and approximately $240 million as of December 25, 2016. The fair value of our long-term debt was approximately $287 million and $298 million as of June 25, 2017 and December 25, 2016, respectively. We estimate the fair value of our debt utilizing market quotations for debt that have quoted prices in active markets. Since our debt does not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2).
NOTE 9. PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension
Single-Employer Plans
We sponsor several single-employer defined benefit pension plans, the majority of which have been frozen. We also

11


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

participate in two joint Company and Guild-sponsored defined benefit pension plans covering employees who are members of The NewsGuild of New York, including The Newspaper Guild of New York - The New York Times Pension Fund, which was frozen in 2012 and replaced by a successor plan, The Guild-Times Adjustable Pension Plan.
The components of net periodic pension cost were as follows:
 
 
For the Quarters Ended
 
 
June 25, 2017
 
June 26, 2016
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
Service cost
 
$
2,423

 
$

 
$
2,423

 
$
2,248

 
$

 
$
2,248

Interest cost
 
15,594

 
1,956

 
17,550

 
16,573

 
2,034

 
18,607

Expected return on plan assets
 
(26,136
)
 

 
(26,136
)
 
(27,789
)
 

 
(27,789
)
Amortization of actuarial loss
 
7,353

 
1,088

 
8,441

 
7,068

 
1,053

 
8,121

Amortization of prior service credit
 
(486
)
 

 
(486
)
 
(486
)
 

 
(486
)
Net periodic pension (income)/cost
 
$
(1,252
)
 
$
3,044

 
$
1,792

 
$
(2,386
)
 
$
3,087

 
$
701

 
 
For the Six Months Ended
 
 
June 25, 2017
 
June 26, 2016
(In thousands)
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
 
Qualified
Plans
 
Non-
Qualified
Plans
 
All
Plans
Service cost
 
$
4,846

 
$

 
$
4,846

 
$
4,495

 
$

 
$
4,495

Interest cost
 
31,188

 
3,912

 
35,100

 
33,147

 
4,068

 
37,215

Expected return on plan assets
 
(52,272
)
 

 
(52,272
)
 
(55,579
)
 

 
(55,579
)
Amortization of actuarial loss
 
14,706

 
2,176

 
16,882

 
14,137

 
2,106

 
16,243

Amortization of prior service credit
 
(972
)
 

 
(972
)
 
(972
)
 

 
(972
)
Net periodic pension (income)/cost
 
$
(2,504
)
 
$
6,088

 
$
3,584

 
$
(4,772
)
 
$
6,174

 
$
1,402

During the first six months of 2017 and 2016, we made pension contributions of $3.8 million and $3.9 million, respectively, to certain qualified pension plans. We expect contributions to total approximately $8 million to satisfy funding requirements in 2017.
Multiemployer Plans
During the second quarter of 2016, we recorded a charge of $11.7 million related to a partial withdrawal obligation under a multiemployer pension plan following an unfavorable arbitration decision. See Note 14 for additional information with respect to the arbitration.
Other Postretirement Benefits
The components of net periodic postretirement benefit income were as follows:
 
 
For the Quarters Ended
 
For the Six Months Ended
(In thousands)
 
June 25, 2017

 
June 26, 2016

 
June 25, 2017

 
June 26, 2016

Service cost
 
$
92

 
$
104

 
$
184

 
$
208

Interest cost
 
470

 
495

 
940

 
990

Amortization of actuarial loss
 
905

 
1,026

 
1,810

 
2,052

Amortization of prior service credit
 
(1,938
)
 
(2,110
)
 
(3,877
)
 
(4,220
)
Net periodic postretirement benefit income
 
$
(471
)
 
$
(485
)
 
$
(943
)
 
$
(970
)

12


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

NOTE 10. INCOME TAXES
The Company had income tax expense of $6.7 million and $17.5 million in the second quarter and first six months of 2017, respectively. The Company had income tax expense of $0.1 million in the second quarter of 2016 and an income tax benefit of $9.1 million in the first six months of 2016. The increase in income tax expense was primarily due to higher income from continuing operations in the second quarter and first six months of 2017.
NOTE 11. EARNINGS/(LOSS) PER SHARE
We compute earnings/(loss) per share using a two-class method, 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/(loss) 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/(loss) per share is computed using both basic shares and diluted shares. The difference between basic and diluted shares is that diluted shares include the dilutive effect of the assumed exercise of outstanding securities. Our stock options, stock-settled long-term performance awards and restricted stock units could have the most significant impact on diluted shares.
For the quarter and six months ended June 25, 2017, $0.1 million of net income was allocated to 1 million shares of participating securities. Excluding this $0.1 million from the calculation of diluted earnings per share attributable to the Company’s common stockholders results in diluted earnings per share of $0.09 and $0.17 for the quarter and six months ended June 25, 2017, after rounding. 
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.
The number of stock options excluded from the computation of diluted earnings per share because they were anti-dilutive was approximately 2 million in the second quarter and first six months of 2017 and approximately 6 million in the second quarter and first six months of 2016.
There were no anti-dilutive restricted stock units or stock-settled long-term incentive compensation awards excluded from the computation of diluted earnings per share in the second quarter and first six months of 2017. The number of restricted stock units and stock-settled long-term incentive compensation awards excluded from the computation of diluted earnings per share because they were anti-dilutive was approximately 2 million in the second quarter and first six months of 2016.
NOTE 12. SUPPLEMENTAL STOCKHOLDERS’ EQUITY INFORMATION
Stockholders’ equity is summarized as follows:
(In thousands)
 
Total New York Times Company Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance as of December 25, 2016
 
$
847,815

 
$
(3,571
)
 
$
844,244

Net income/(loss)
 
28,780

 
(106
)
 
28,674

Other comprehensive income, net of tax
 
11,555

 

 
11,555

Effect of issuance of shares
 
(1,096
)
 

 
(1,096
)
Dividends declared
 
(6,496
)
 

 
(6,496
)
Stock-based compensation
 
7,145

 

 
7,145

Balance as of June 25, 2017
 
$
887,703

 
$
(3,677
)
 
$
884,026


13


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

(In thousands)
 
Total New York Times Company Stockholders’ Equity
 
Noncontrolling Interest
 
Total Stockholders’ Equity
Balance as of December 27, 2015
 
$
826,751

 
$
1,704

 
$
828,455

Net loss
 
(8,482
)
 
(5,596
)
 
(14,078
)
Other comprehensive income, net of tax
 
9,029

 

 
9,029

Effect of issuance of shares
 
(9,194
)
 

 
(9,194
)
Share repurchases
 
(15,056
)
 

 
(15,056
)
Dividends declared
 
(6,445
)
 

 
(6,445
)
Stock-based compensation
 
6,440

 

 
6,440

Balance as of June 26, 2016
 
$
803,043

 
$
(3,892
)
 
$
799,151

On January 14, 2015, the Board of Directors approved an authorization of $101.1 million to repurchase shares of the Company’s Class A Common Stock. As of June 25, 2017, the Company had repurchased 6,690,905 Class A shares under this authorization for a cost of $84.9 million (excluding commissions) and $16.2 million 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.
The following table summarizes the changes in AOCI by component as of June 25, 2017:
(In thousands)
 
Foreign Currency Translation Adjustments
 
Funded Status of Benefit Plans
 
Total Accumulated Other Comprehensive Loss
Balance as of December 25, 2016
 
$
(1,822
)
 
$
(477,994
)
 
$
(479,816
)
Other comprehensive income before reclassifications, before tax(1)
 
5,071

 

 
5,071

Amounts reclassified from accumulated other comprehensive loss, before tax(1)
 

 
13,841

 
13,841

Income tax expense(1)
 
1,885

 
5,472

 
7,357

Net current-period other comprehensive income, net of tax
 
3,186

 
8,369

 
11,555

Balance as of June 25, 2017
 
$
1,364

 
$
(469,625
)
 
$
(468,261
)
(1)
All amounts are shown net of noncontrolling interest.
The following table summarizes the reclassifications from AOCI for the six months ended June 25, 2017:
(In thousands)
 
 
 
 
Detail about accumulated other comprehensive loss components
 
 Amounts reclassified from accumulated other comprehensive loss
 
Affect line item in the statement where net income is presented
Funded status of benefit plans:
 
 
 
 
Amortization of prior service credit(1)
 
$
(4,850
)
 
Selling, general & administrative costs
Amortization of actuarial loss(1)
 
18,691

 
Selling, general & administrative costs
Total reclassification, before tax(2)
 
13,841

 
 
Income tax expense
 
5,472

 
Income tax (benefit)/expense
Total reclassification, net of tax
 
$
8,369

 
 
(1)
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost for pension and other retirement benefits. See Note 9 for additional information.
(2)
There were no reclassifications relating to noncontrolling interest for the six months ended June 25, 2017.

14


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

NOTE 13. SEGMENT INFORMATION
We have one reportable segment that includes The New York Times, NYTimes.com and related businesses. Therefore, all required segment information can be found in the Condensed Consolidated Financial Statements.
Our operating segment generated revenues principally from subscriptions and advertising. Other revenues consist primarily of revenues from news services/syndication, digital archives, building rental income, NYT Live (our live events business), e-commerce and affiliate referrals.
NOTE 14. CONTINGENT LIABILITIES
Restricted Cash
We were required to maintain $17.9 million and $24.9 million of restricted cash as of June 25, 2017 and December 25, 2016, respectively, the majority of which is set aside to collateralize workers’ compensation obligations.
Newspaper and Mail Deliverers–Publishers’ Pension Fund
In September 2013, the Newspaper and Mail Deliverers-Publishers’ Pension Fund (the “NMDU Fund”) assessed a partial withdrawal liability against the Company in the amount of approximately $26 million for the plan years ending May 31, 2012 and 2013 (the “Initial Assessment”), an amount that was increased to approximately $34 million in December 2014, when the NMDU Fund issued a revised partial withdrawal liability assessment for the plan year ending May 31, 2013 (the “Revised Assessment”). The NMDU Fund claimed that when City & Suburban Delivery Systems, Inc., a retail and newsstand distribution subsidiary of the Company and the largest contributor to the NMDU Fund, ceased operations in 2009, it triggered a decline of more than 70% in contribution base units in each of these two plan years.
The Company disagreed with both the NMDU Fund’s determination that a partial withdrawal occurred and the methodology by which it calculated the withdrawal liability, and the parties engaged in arbitration proceedings to resolve the matter. In June 2016, the arbitrator issued an interim award and opinion that supported the NMDU Fund’s determination that a partial withdrawal had occurred, including concluding that the methodology used to calculate the Initial Assessment was correct. However, the arbitrator also concluded that the NMDU Fund’s calculation of the Revised Assessment was incorrect. In July 2017, the arbitrator issued a final award and opinion. The Company plans to appeal the arbitrator’s decision.
Due to requirements of the Employee Retirement Income Security Act of 1974 that sponsors make payments demanded by plans during arbitration and any resultant appeals, the Company had been making payments to the NMDU fund since September 2013 relating to the Initial Assessment and February 2015 relating to the Revised Assessment based on the NMDU Fund’s demand. As a result, as of June 25, 2017, we have paid $13.5 million relating to the Initial Assessment since the receipt of the initial demand letter. We also paid $5.0 million related to the Revised Assessment, which was refunded in July 2016 based on the arbitrator’s ruling. The Company recognized $0.1 million and $0.2 million of expense for the second quarter and six months ended June 25, 2017, respectively. The Company recognized $13.3 million and $15.1 million of expense (inclusive of a special item of $11.7 million) for the second quarter and six months ended June 26, 2016, respectively.
The Company had a liability of $8.1 million as of June 25, 2017, related to this matter. Management believes it is reasonably possible that the total loss in this matter could exceed the liability established by a range of zero to approximately $10 million.
NEMG T&G, Inc. 
The Company was involved in class action litigation brought on behalf of individuals who, from 2006 to 2011, delivered newspapers at NEMG T&G, Inc., a subsidiary of the Company (“T&G”). T&G was a part of the New England Media Group, which the Company sold in 2013. The plaintiffs asserted several claims against T&G, including a challenge to their classification as independent contractors, and sought unspecified damages. In December 2016, the Company reached a settlement with respect to the claims, which was approved by the court in May 2017. As a result of the settlement, the Company recorded a charge of $3.7 million in the fourth quarter of 2016 within discontinued operations.
Other
We are involved in various legal actions incidental to our business that are now pending against us. These actions are generally for amounts greatly in excess of the payments, if any, that may be required to be made. Although the Company cannot predict the outcome of these matters, it is possible that an unfavorable outcome in one or more matters could be material to the Company’s consolidated results of operations or cash flows for an individual reporting period. However, based on currently available information, management does not believe that the ultimate resolution of these matters, individually or in the aggregate, is likely to have a material effect on the Company’s financial position.

15


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

NOTE 15. SUBSEQUENT EVENT
On June 29, 2017, our Board of Directors approved a dividend of $0.04 per share on our Class A and Class B common stock that was paid on July 27, 2017, to all stockholders of record as of the close of business on July 12, 2017. Our Board of Directors will continue to evaluate the appropriate dividend level on an ongoing basis in light of our earnings, capital requirements, financial condition and other relevant factors.
On July 19, 2017, the arbitrator in the ongoing arbitration matter involving in the NMDU Fund issued a final award and opinion. See Note 14 for additional information on this matter.
On July 31, 2017, Madison, a partnership in which the Company has an investment through a subsidiary, sold substantially all of the remaining assets at its mill site (which consisted of hydro power assets). See Note 5 for additional information on this sale and the Company’s joint venture investment in Madison.

16



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXECUTIVE OVERVIEW
We are a global media organization that includes newspapers, print and digital products and investments. We have one reportable segment with businesses that include our newspapers, websites, mobile applications and related businesses.
We generate revenues principally from subscriptions and advertising. Other revenues primarily consist of revenues from news services/syndication, digital archives, building rental income, NYT Live (our live events business), e-commerce and affiliate referrals. 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”). These supplemental non-GAAP financial performance measures exclude depreciation, amortization, severance, non-operating retirement 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 “—Results of Operations—Non-GAAP Financial Measures.”
Financial Highlights
For the second quarter of 2017, diluted earnings per share from continuing operations were $0.09, compared with $0.00 for the second quarter of 2016. 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 $0.18 and $0.11 for the second quarters of 2017 and 2016, respectively.
The Company had an operating profit of $27.7 million in the second quarter of 2017, compared with $9.1 million for the second quarter of 2016. The increase was largely due to two special items (discussed below) recorded in the second quarter of 2016. Operating profit before depreciation, amortization, severance, non-operating retirement costs and special items discussed below (or “adjusted operating profit,” a non-GAAP measure) was $67.1 million and $54.5 million for the second quarters of 2017 and 2016, respectively.
Total revenues increased 9.2% to $407.1 million in the second quarter of 2017 from $372.6 million in the second quarter of 2016, primarily driven by increases in digital and print subscription revenue, as well as digital advertising revenue, partially offset by a decrease in print advertising revenue.
Subscription revenues increased 13.9% in the second quarter of 2017 compared with the second quarter of 2016, primarily due to significant growth in the number of subscriptions to the Company’s digital subscription products, as well as the 2017 increase in home-delivery prices for The New York Times newspaper, which more than offset a decline in print copies sold. Revenue from our digital-only subscriptions (which includes news product and Crossword product subscriptions) increased 46.4% in the second quarter of 2017 compared with the second quarter of 2016.
Paid digital-only subscriptions totaled approximately 2,333,000 at the end of the second quarter of 2017, a 63.4% increase compared with the end of the second quarter of 2016.
Total advertising revenues increased 0.8% in the second quarter of 2017 compared with the second quarter of 2016, reflecting a 22.5% increase in digital advertising revenues, partially offset by a 10.5% decrease in print advertising revenues. The increase in digital advertising revenues primarily reflected increases in revenue from our smartphone platform, our programmatic channels and branded content, partially offset by a decrease in traditional website display advertising. The decrease in print advertising revenues was driven by a decline in display advertising, primarily in the luxury, real estate, technology, telecommunications and travel categories.
Other revenues increased 12.8% in the second quarter of 2017 compared with the second quarter of 2016, largely due to affiliate referral revenue associated with the product review and recommendation websites, The Wirecutter and The Sweethome, which the Company acquired in October 2016. The increase was partially offset by lower revenue from fewer conferences held in the second quarter of 2017 compared with the second quarter of 2016.
Operating costs increased in the second quarter of 2017 to $377.4 million from $339.9 million in the second quarter of 2016, largely due to severance expense associated with workforce reductions as well as higher compensation, marketing costs and costs from acquired companies, which were partially offset by lower print production and distribution costs and savings in international operations. Operating costs before depreciation, amortization, severance and non-operating retirement costs (or “adjusted operating costs,” a non-GAAP measure) increased in the second quarter of 2017 to $340.0 million from $318.2 million in the second quarter of 2016.

17



Non-operating retirement costs decreased to $3.0 million during the second quarter of 2017 from $5.0 million in the second quarter of 2016 due to lower multiemployer pension plan withdrawal expense.
On May 31, 2017, we announced certain measures in our newsroom designed to streamline our editing process and allow us to make further investments in our newsroom. These measures resulted in a workforce reduction affecting our newsroom. We recognized severance costs of $19.3 million in the second quarter of 2017, substantially all of which were related to this workforce reduction, and we expect to incur up to approximately $6 million of additional costs in the second half of 2017 in connection with these measures.


18



RESULTS OF OPERATIONS
The following table presents our consolidated financial results:
 
 
For the Quarters Ended
 
 
 
For the Six Months Ended
 
 
(In thousands)
 
June 25, 2017

 
June 26, 2016

 
% Change

 
June 25, 2017

 
June 26, 2016

 
% Change

Revenues
 
 
 
 
 

 
 
 
 
 
 
Subscription
 
$
250,037

 
$
219,480

 
13.9
 %
 
$
492,412

 
$
437,474

 
12.6
 %
Advertising
 
132,234

 
131,155

 
0.8
 %
 
262,262

 
270,835

 
(3.2
)%
Other
 
24,803

 
21,995

 
12.8
 %
 
51,204

 
43,836

 
16.8
 %
Total revenues
 
407,074

 
372,630

 
9.2
 %
 
805,878

 
752,145

 
7.1
 %
Operating costs
 
 
 
 
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 

 
 
 
 
 
 
Wages and benefits
 
88,565

 
90,630

 
(2.3
)%
 
179,343

 
183,101

 
(2.1
)%
Raw materials
 
15,813

 
17,012

 
(7.0
)%
 
32,743

 
34,887

 
(6.1
)%
Other
 
44,907

 
45,075

 
(0.4
)%
 
90,435

 
92,591

 
(2.3
)%
Total production costs
 
149,285

 
152,717

 
(2.2
)%
 
302,521

 
310,579

 
(2.6
)%
Selling, general and administrative costs
 
213,004

 
172,069

 
23.8
 %
 
411,008

 
350,315

 
17.3
 %
Depreciation and amortization
 
15,131

 
15,147

 
(0.1
)%
 
31,284

 
30,619

 
2.2
 %
Total operating costs
 
377,420

 
339,933

 
11.0
 %
 
744,813

 
691,513

 
7.7
 %
Headquarters redesign and consolidation
 
1,985

 

 
*

 
4,387

 

 
*

Restructuring charge
 

 
11,855

 
*

 

 
11,855

 
*

Multiemployer pension withdrawal expense

 

 
11,701

 
*

 

 
11,701

 
*

Operating profit
 
27,669

 
9,141

 
*

 
56,678

 
37,076

 
52.9
 %
Loss from joint ventures
 
(266
)
 
(412
)
 
*

 
(93
)
 
(42,308
)
 
*

Interest expense, net
 
5,133

 
9,097

 
(43.6
)%
 
10,458

 
17,923

 
(41.7
)%
Income/(loss) from continuing operations before income taxes
 
22,270

 
(368
)
 
*

 
46,127

 
(23,155
)
 
*

Income tax expense/(benefit)
 
6,711

 
124

 
*

 
17,453

 
(9,077
)
 
*

Net income/(loss)
 
15,559

 
(492
)
 
*

 
28,674

 
(14,078
)
 
*

Net loss attributable to the noncontrolling interest
 
40

 
281

 
(85.8
)%
 
106

 
5,596

 
(98.1
)%
Net income/(loss) attributable to The New York Times Company common stockholders
 
$
15,599

 
$
(211
)
 
*

 
$
28,780

 
$
(8,482
)
 
*

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

19



Revenues
Subscription Revenues
As of the second quarter of 2017, the Company has renamed “circulation revenues” as “subscription revenues.” Subscription revenues consist of revenues from subscriptions to our print and digital products (including our news products and Crossword product), as well as single-copy sales of our print products (which comprise approximately 10% of these revenues). These 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.
Subscription revenues increased 13.9% in the second quarter and 12.6% in the first six months of 2017 compared with the same prior-year periods, primarily due to significant growth in the number of subscriptions to the Company’s digital subscription products, as well as the 2017 increase in home-delivery prices for The New York Times newspaper, which more than offset a decline in print copies sold. Revenues from our digital-only news subscriptions (including e-readers and replica editions) were $79.3 million in the second quarter of 2017 and $152.2 million in the first six months of 2017, an increase of 46.5% and 43.3% from the second quarter and first six months of 2016, respectively.
The following table summarizes digital-only subscription revenues for the second quarters and first six months of 2017 and 2016:
 
 
For the Quarters Ended
 
 
 
For the Six Months Ended
 
 
(In thousands)
 
June 25, 2017

 
June 26, 2016

 
% Change
 
June 25, 2017

 
June 26, 2016

 
% Change
Digital-only subscription revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Digital-only news product subscription revenues
 
$
79,300

 
$
54,126

 
46.5
%
 
$
152,161

 
$
106,201

 
43.3
%
Digital Crossword product subscription revenues
 
3,243

 
2,272

 
42.7
%
 
6,199

 
4,370