New York Times Reports $39.1 Million 2Q Profit
The New York Times Co. produced an unexpected second-quarter profit from dogged cost cutting, becoming the latest publisher to show that newspapers can still make money even when their main source of revenue is sinking.
Despite the profit, the results released Thursday by the publisher of The New York Times, The Boston Globe, the International Herald Tribune and 15 other daily newspapers weren't rosy.
The advertising revenue that pays most of the Times Co.'s bills plummeted by 30 percent, or $137 million. That was even worse than in the first quarter, when ad sales fell 27 percent.
The Times Co. said the severity of the decline began to ease in June. Other major newspaper publishers, including Gannett Co. and McClatchy Co., recently reported a similar pattern. That could be an early sign that the newspaper industry's financial distress is easing.
Or it could be a mathematical illusion, because the year-over-year comparisons are getting easier. Ad sales started to fall off a cliff at the end of last year's second quarter. Janet Robinson, the Times Co.'s chief executive, acknowledged that the industry will likely stay in a trough and predicted the ad market will remain "challenging."
The Times Co. has braced for lean times by reducing its staff. It employs 19 percent fewer people than it did at the same time in 2008, though the total wasn't revealed. The company had 9,346 full-time employees at the beginning of this year.
The company also has lowered wages and eliminated some benefits in sometimes prickly negotiations, particularly at The Boston Globe, where a closure was threatened before workers finally agreed to $20 million in annual cost concessions.
Management expects such sacrifices, coupled with falling newsprint prices, to save the company about $450 million this year, marking a 16 percent reduction from last year's expense levels.
The cost cutting helped the Times Co. earn $39.1 million, or 27 cents per share, in the second quarter. That was up 85 percent from a profit of $21.1 million, or 15 cents per share, in the same quarter a year ago.
The company got an even bigger boost from a one-time tax benefit, which lifted earnings by $37.7 million, or 26 cents per share.
Even after one-time events, the company said it would have earned 8 cents per share. That's better than the adjusted loss of 4 cents a share analysts polled by Thomson Reuters were expecting.
Times Co. shares lost 12 cents, or 1.8 percent, to close at $6.50 in Thursday trading.
The second-quarter performance didn't impress media analyst Ed Atorino of Benchmark Co. "Cost cutting is fine," he said. "But revenues aren't looking too great – pretty much across the sector. And Times revenue was worse than expected."
Times Co.'s total revenue fell 20 percent to $584 million. Analysts were expecting $603 million.
Besides cutting costs to offset falling ad revenue, newspaper publishers have been charging their readers higher prices. Recent price increases at the Times Co. boosted second-quarter circulation revenue by 1.5 percent, or about $3 million.
Fewer readers have canceled their subscriptions than the Times Co. anticipated, Robinson told analysts in a Thursday conference call. She didn't offer any specifics.
Like other publishers, the Times Co. also is considering charging readers for access to some of their stories online – content that so far has been mostly provided for free. Robinson said Thursday that more details about online fees will be provided in the fall.
Although online advertising has been rising in recent years, that didn't happen in the second quarter. The Times Co. said its digital ad revenue dropped 22 percent in the quarter, largely because fewer employers were looking for people to hire.
The Times Co. whittled its outstanding debt to $1 billion in the second quarter, down from $1.3 billion when the quarter began. Managing the debt is vital – several newspaper publishers with insufficient cash to repay their loans have been driven into bankruptcy protection in the past eight months.
Most of the Times Co.'s debt isn't due to be repaid until 2015 and beyond, giving its newspapers more time to drum up new sources of revenue and hope for a revival in advertising.
The Times Co. plans to lower its debt even further by selling its 17.8 percent stake in a New England sports venture that owns the Boston Red Sox. Robinson said the company is taking bids and hopes to close a sale by the end of the year. The company also has been seeking buyers for The Boston Globe and the Worcester Telegram & Gazette.
AP Business Writer Andrew Vanacore in New York contributed to this story.