Revenues On the Rise, But So Are Costs at New York Times Co.

The New York Times Co. has stabilized overall revenues, grown digital advertising more than 20 percent and doubled its operating profits to $61 million in the second quarter of 2010 compared to the same period a year ago. 
But in an earnings conference call with analysts, CEO Janet Robinson cautioned that rising costs are likely to make the third quarter tougher. Some of the factors are particular to the Times, others general to the industry.
Newsprint prices, way down in 2009 and still falling the first half of this year, are now headed higher. That will have a negative impact of $25 million through the rest of the year, the company calculates.
In addition, salary rollbacks instituted as an emergency measure in mid-2009 have come off, kicking up personnel costs.
Somewhat surprisingly, Robinson mentioned the development and marketing of the much-discussed metered model for New York Times paid digital content to be launched in 2011 as expensive enough to impact earnings. CFO James Follo declined to give an exact figure, but in answering an analyst's question said that it would run upwards of $15 million over the rest of the year.
The Times Co. has been able to grow circulation revenue for a year now with price increases more than making up for circulation declines. Next quarter, the price increases will have cycled through, Robinson said, and circulation revenues will probably decline 3 to 5 percent year to year.
The Times Co. continues to benefit from strong growth and profitability of its subsidiary.  Revenues grew 24 percent compared to the second period in 2009, and's operating profit margin has risen to 46 percent.
In answer to analysts' questions, Robinson said that the New York edition of The Wall Street Journal, with discounted advertising for the launch, has had no impact on the Times' ad rates or on its circulation trend in the New York metropolitan area.
For investors, the positives in the report outweighed the cautions for the rest of the year. New York Times shares were up 2.2 percent in midday trading and about 5 percent for the week.


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