NEW YORK TIMES CO (NYT) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition as of December 31, 2023, and results of operations for the two years ended December 31, 2023. Please read this item together with our Consolidated Financial Statements and the related Notes included in this Annual Report. For comparison of results of operations for the fiscal years ended December 31, 2022 and December 26, 2021, see Part II, Item 7 of our 2022 Annual Report on Form 10-K, filed with the SEC on February 28, 2023.

On February 1, 2022, we acquired The Athletic Media Company, a global digital subscription-based sports media business that provides national and local coverage of clubs and teams in the United States and around the world, and beginning in the first quarter of 2022, the Company has two reportable segments: The New York Times Group and The Athletic. See Note 5 of the Notes to the Consolidated Financial Statements for additional information related to this acquisition.

In 2022, the Company adopted a change to its fiscal calendar and as a result, there were five fewer days in fiscal year 2023 compared with 2022.

Significant components of the management’s discussion and analysis of results of operations and financial condition section include:

EXECUTIVE OVERVIEW

We are a global media organization focused on creating and distributing high-quality news and information that helps our audience understand and engage with the world. We believe that our original, independent and high-quality reporting, storytelling, expertise and journalistic excellence set us apart from other news organizations and are at the heart of what makes our journalism worth paying for. For further information, see “Item 1 — Business – Overview” and “– Our Strategy.”

We generate revenues principally from the sale of subscriptions and advertising. Subscription revenues consist of revenues from standalone and multi-product bundle subscriptions to our digital products and subscriptions to and single-copy and bulk sales of our print products. Advertising revenue is derived from the sale of our advertising products and services. Other revenues primarily consist of revenues from Wirecutter affiliate referrals, licensing, commercial printing, the leasing of floors in our Company Headquarters, television and film, retail commerce, our live events business and our student subscription sponsorship program. Our main operating costs are employee-related costs.

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Beginning with the third quarter of 2023, we have updated our presentation of total operating costs to include operating items that are outside the ordinary course of our operations (“special items”). These items have been previously presented separate from operating costs and included in operating profit. We recast operating costs for the prior periods in order to present comparable financial results. There was no change to consolidated operating profit, net income or cash flows as a result of this change.

In the accompanying analysis of financial information, we present certain information derived from our 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 and certain identified special items, as applicable. In addition, we present our free cash flow, defined as net cash provided by operating activities less capital expenditures. 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.”

This report includes a discussion of the estimated impact of the five fewer days on our year-over-year comparison of revenues where meaningful. Management believes that estimating the impact of the five fewer days on the Company’s operating costs and operating profit presents challenges and, therefore, no such estimate is made with respect to these items. For further detail on the impact of the five fewer days on our results, see the discussion below and “— Results of Operations-Non-GAAP Financial Measures.”

2023 Financial Highlights

•The Company added approximately 880,000 net digital-only subscribers compared with the end of 2022, fueled by bundle and multi-product subscriber additions.

•Total digital-only average revenue per user (“ARPU”) grew 2.6% year-over-year to $9.18 driven primarily by subscribers graduating from promotional to higher prices and price increases on tenured non-bundled subscribers.

•Operating profit increased 36.8% to $276.3 million in 2023 from $202.0 million in 2022. Operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items discussed below under “Non-GAAP Financial Measures” (or “adjusted operating profit,” a non-GAAP measure) increased 12.0% to $389.9 million in 2023 from $347.9 million in 2022. Operating profit margin (operating profit expressed as a percentage of revenues) increased to 11.4% in 2023, compared with 8.7% in 2022. Adjusted operating profit margin (adjusted operating profit expressed as a percentage of revenues) increased to 16.1% in 2023, compared with 15.1% in 2022.

•Total revenues increased 5.1% to $2.43 billion in 2023 from $2.31 billion in 2022.

•Total subscription revenues increased 6.7% to $1.66 billion in 2023 from $1.55 billion in 2022. Digital-only subscription revenues increased 12.4% to $1,099.4 million in 2023 from $978.6 million in 2022. The Company ended 2023 with approximately 10.36 million subscribers across its print and digital products, including approximately 9.70 million digital-only subscribers. Of the 9.70 million digital-only subscribers, approximately 4.22 million were bundle and multiproduct subscribers. Compared with the end of 2022, there was a net increase of 880,000 digital-only subscribers.

•Total advertising revenues decreased 3.5% to $505.2 million in 2023 from $523.3 million in 2022, due to a decrease of 8.5% in print advertising revenues and a decrease of 0.2% in digital advertising revenues.

•Other revenue increased 13.8% year-over-year as a result of continued strength in licensing and Wirecutter affiliate referral revenues.

•Operating costs increased 2.1% to $2.15 billion in 2023 from $2.11 billion in 2022. Operating costs before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or “adjusted operating costs,” a non-GAAP measure) increased 3.9% to $2.04 billion in 2023 from $1.96 billion in 2022.

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•Diluted earnings per share were $1.40 and $1.04 for 2023 and 2022, respectively. Diluted earnings per share excluding amortization of acquired intangible assets, severance, non-operating retirement costs and special items discussed below under “Non-GAAP Financial Measures” (or “adjusted diluted earnings per share,” a non-GAAP measure) were $1.63 and $1.32 for 2023 and 2022, respectively.

•Net cash from operating activities for 2023 was $360.6 million and free cash flow (net cash provided by operating activities less capital expenditures, a non-GAAP measure) was $337.9 million compared with $113.7 million in 2022.

Industry Trends, Economic Conditions, Challenges and Risks

We operate in a highly competitive environment that is subject to rapid change. Companies shaping our competitive environment include content providers and distributors, as well as news aggregators, search engines, social media platforms and emerging products and tools powered by generative AI. Competition among these companies is robust, and new competitors can quickly emerge. We have designed our strategy to take advantage of both the challenges and opportunities presented by this period of transformation in our industry.

We and the companies with which we do business are subject to risks and uncertainties caused by factors beyond our control, including economic, geopolitical and public health conditions. These include economic weakness, instability, uncertainty and volatility, including the potential for a recession; a competitive labor market and evolving workforce expectations, including for unionized employees; inflation; supply chain disruptions; rising interest rates; and political and sociopolitical uncertainties and conflicts (including the war in Ukraine and the Israel-Hamas war). These factors may result in declines and/or volatility in our results.

We believe the macroeconomic environment has had and may in the future have an adverse impact on both digital and print advertising spending. Additionally, we believe that there may be marketer sensitivity to some news topics, impacting overall advertising spend.

We are experiencing a competitive labor market and pressure on compensation and benefit costs for certain employees, mainly in technology roles. In addition, although we have not seen a significant impact from inflation on our recent financial results to date, if inflation increases for an extended period, our employee-related costs are likely to increase. Our printing and distribution costs also have been impacted in the past and may be further impacted in the future by inflation and higher costs, including those associated with raw materials, delivery costs and/or utilities.

The media industry has transitioned from being primarily print focused to digital, resulting in secular declines in both print subscription and print advertising revenues, and we do not expect this trend to reverse. We actively monitor industry trends, economic conditions, challenges and risks to remain flexible and to optimize and evolve our business as appropriate; however, the full impact they will have on our business, operations and financial results is uncertain and will depend on numerous factors and future developments. The risks related to our business are further described in the section titled “Item 1A — Risk Factors.”

Liquidity

Throughout 2023, we returned capital to shareholders through dividends and share repurchases and continued to manage our pension liability as discussed below. As of December 31, 2023, the Company had cash, cash equivalents and marketable securities of approximately $709 million and was debt-free.

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Capital Return

The Company aims to return at least 50% of free cash flow to stockholders in the form of dividends and share repurchases over the next three to five years.

We have paid quarterly dividends on the Class A and Class B Common Stock each quarter since late 2013. In February 2024, The Board of Directors approved a quarterly dividend of $0.13 per share, an increase of $0.02 per share from the previous quarter. We currently expect to continue to pay comparable cash dividends in the future, although changes in our dividend program will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant.

In February 2022, the Board of Directors approved a $150.0 million Class A share repurchase program. In February 2023, the Board of Directors approved a $250.0 million Class A share repurchase program in addition to the amount remaining under the 2022 authorization. The authorizations provide that shares of Class A Common Stock may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. Through February 14, 2024, we repurchased 4,761,893 shares under these authorizations for an aggregate purchase price of approximately $170.5 million (excluding commissions), fully utilizing the 2022 authorization and leaving approximately $229.5 million remaining under the 2023 authorization. We expect to repurchase shares to offset the impact of dilution from our equity compensation program and to return capital to our stockholders. There is no expiration date with respect to these authorizations.

Managing Pension Liability

We remain focused on managing our pension plan obligations. We have taken steps over the last several years to reduce the size and volatility of our pension obligations, including freezing accruals under all but one of our qualified defined benefit pension plans, making immediate pension benefits offers in the form of lump-sum payments to certain former employees and transferring certain future benefit obligations and administrative costs to insurers.

As of December 31, 2023, our qualified pension plans had plan assets that were approximately $83 million above the present value of future benefits obligations, compared with approximately $70 million as of December 31, 2022. We made contributions of approximately $10 million and $11 million to certain qualified pension plans in 2023 and 2022, respectively. We expect to make contributions in 2024 to satisfy minimum funding requirements of approximately $13 million. We will continue to look for ways to reduce the size and volatility of our pension obligations.

While we have made significant progress in our liability-driven investment strategy to reduce the funding volatility of our qualified pension plans, the size of our pension plan obligations relative to the size of our current operations will continue to have an impact on our reported financial results. We expect to continue to experience volatility in our pension costs, particularly due to the impact of changing discount rates, long-term return on plan assets and mortality assumptions on our qualified and non-qualified pension plans. We may also incur additional withdrawal obligations related to multiemployer plans in which we participate, as well as multiemployer plans from which we previously withdrew.

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RESULTS OF OPERATIONS

Overview

Fiscal year 2023 was composed of 52 weeks, and fiscal year 2022 was composed of 52 weeks and an additional five days. The following table presents our consolidated financial results:

(1) The year ended December 31, 2022 was recast to conform to the current presentation of total operating costs. See “Executive Overview” for more details.

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

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Revenues

Subscription, advertising and other revenues were as follows:

Subscription Revenues

Subscription revenues consist of revenues from subscriptions to our digital and print products (which include our news product, as well as The Athletic and our Cooking, Games and Wirecutter products), and single-copy and bulk sales of our print products (which represent less than 5% of these revenues). Subscription revenues are based on both the number of digital-only subscriptions and copies of the printed newspaper sold, and the rates charged to the respective customers.

We offer a digital-only bundle that includes access to our digital news product (which includes our news website, NYTimes.com, and mobile and Audio applications), as well as The Athletic and our Cooking, Games and Wirecutter products. Our subscriptions also include standalone digital subscriptions to our digital news product, as well as to The Athletic, and to our Cooking, Games and Wirecutter products.

Subscription revenues increased $103.8 million, or 6.7%, in 2023 compared with 2022, primarily due to an increase in digital-only subscription revenues of $120.9 million, or 12.4%, partially offset by a decrease in print subscription revenues of $17.1 million, or 3.0% and the impact of five fewer days in the year. Digital-only subscription revenues increased primarily due to an increase in bundle and multiproduct revenues of $151.5 million and an increase in other single-product subscription revenues of $12.3 million, partially offset by a decrease in news-only subscription revenues of $42.9 million and the impact of five fewer days in the year. Bundle and multiproduct average digital-only subscribers increased 1,350,000, or 67.8%, while bundle and multiproduct ARPU decreased $2.80, or 17.7%. Other single-product average digital-only subscribers increased 420,000, or 20.1%, while other single-product ARPU decreased $0.22, or 5.8%. News-only average digital-only subscribers decreased 860,000, or 20.6%, while news-only ARPU increased $1.30, or 15.8%. Print subscription revenue decreased primarily due to a decrease in home-delivery subscription revenue, which was driven by a lower number of average print subscribers, reflecting secular trends and the impact of five fewer days in the year, partially offset by an increase in domestic home-delivery prices.

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The following table summarizes digital and print subscription revenues for the years ended December 31, 2023, and December 31, 2022:

A subscriber is defined as a customer who has subscribed (and provided a valid method of payment) for the right to access one or more of the Company’s products. The Company ended 2023 with approximately 10.36 million subscribers to its print and digital products, including approximately 9.70 million digital-only subscribers. Compared with 2022, there was a net increase of 880,000 digital-only subscribers.

Print domestic home-delivery subscribers totaled approximately 660,000 at the end of 2023, a net decrease of 70,000 subscribers compared with the end of 2022. Subscribers with a domestic home-delivery print subscription to The New York Times, which includes access to our digital products, are excluded from digital-only subscribers.

Beginning with the second quarter of 2023, we report three mutually exclusive digital-only subscriber categories: bundle and multiproduct, news-only and other single-product, which collectively sum to Total digital-only subscribers, as well as the ARPU for each of these categories.

The following table sets forth subscribers as of the end of the five most recent fiscal quarters:

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The following table sets forth the subset of subscribers above who have a paid digital-only standalone subscription or a bundle subscription that includes the ability to access The Athletic as of the end of the five most recent fiscal quarters:

ARPU, a metric we calculate to track the revenue generation of our digital subscriber base, represents the average revenue per subscriber over a 28-day billing cycle during the applicable period. The following table sets forth ARPU metrics relating to the above digital-only subscriber categories for the two most recent fiscal years:

Total digital-only ARPU was $9.18 for December 31, 2023, an increase of 2.6% compared with December 31, 2022. The year-over-year increase was driven primarily by subscribers graduating from promotional to higher prices and price increases on tenured non-bundled subscribers.

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 display ads, audio and video ads, in print in the form of column-inch ads and at live events. 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 open-market programmatic auctions run by third-party ad exchanges. Advertising revenue is primarily determined by the volume (e.g., impressions or column inches), rate and mix 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 (including direct-sold programmatic advertising). 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-market programmatic advertising and creative services fees. NYTG has revenue from all categories discussed above. The Athletic has revenue from direct-sold display advertising (including direct-sold programmatic advertising), podcast, email and video advertisements and open-market programmatic advertising. Print advertising includes revenue from column-inch ads and classified advertising, as well as preprinted advertising, also known as freestanding inserts. There is no print advertising revenue generated from The Athletic, which does not have a print product.

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The following table summarizes digital and print advertising revenues for the years ended December 31, 2023, and December 31, 2022:

Digital advertising revenues, which represented 62.9% of the total advertising revenues in 2023, decreased $0.7 million, or 0.2%, to $317.7 million compared with $318.4 million in 2022. The decrease was primarily a result of the impact of five fewer days in the year and lower other digital revenues of $1.4 million, partially offset by higher revenues in core digital advertising of $6.3 million. Core digital advertising revenues increased due to higher direct-sold display advertising, partially offset by a decrease in podcast advertising revenues and the impact of five fewer days in the year. Direct-sold display impressions increased 17%, while the average rate decrease was de minimis. Other digital advertising revenue decreased primarily due to a decrease in creative services fees as a result of fewer advertising campaigns in 2023, partially offset by an increase in open-market programmatic advertising revenues. Programmatic impressions increased 54%, while the average rate decreased 28%.

Print advertising revenues, which represented 37.1% of total advertising revenues in 2023, decreased $17.4 million, or 8.5%, to $187.5 million compared with $204.8 million in 2022. The decrease in 2023 was due to a 6.3% decrease in print advertising rate and a 2.4% decrease in column-inches. Print advertising revenue in 2023 continues to be impacted by secular trends.

In addition, we believe the macroeconomic environment has had and may in the future have an adverse impact on both digital and print advertising spending. Additionally, we believe that there may be marketer sensitivity to some news topics, impacting overall advertising spend.

Other Revenues

Other revenues primarily consist of revenues from Wirecutter affiliate referrals, licensing, commercial printing, the leasing of floors in our Company Headquarters, television and film, retail commerce, our live events business and our student subscription sponsorship program. Digital other revenues, which consist primarily of Wirecutter affiliate referral revenue, digital licensing revenue and our student subscription sponsorship program, totaled $152.0 million and $114.6 million in 2023 and 2022, respectively. Building rental revenue from the leasing of floors in the Company Headquarters totaled $27.2 million and $28.5 million in 2023 and 2022, respectively.

Other revenues increased $32.1 million, or 13.8% in 2023 compared with 2022, primarily as a result of an increase in licensing revenues of $16.0 million, primarily related to a Google commercial agreement, partially offset by licensing revenue related to the Facebook News agreement, which ended in the fourth quarter of 2022; growth in Wirecutter revenues of $15.8 million driven by affiliate referral revenues, and an increase in books; television and film revenues of $5.4 million, partially offset by the impact of five fewer days in the year.

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Operating Costs

Operating costs were as follows:

The components of operating costs as a percentage of total operating costs were as follows:

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The components of operating costs as a percentage of total revenues were as follows:

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 that infrastructure.

Cost of revenue in 2023 increased $40.1 million, or 3.3%, compared with 2022, largely due to higher journalism costs of $54.4 million, higher digital content delivery costs of $6.5 million, and higher subscriber servicing costs of $3.1 million, partially offset by lower advertising servicing costs of $14.7 million and lower print production and distribution costs of $9.2 million. The increase in journalism costs was largely due to higher compensation and benefits, which was driven by growth in the number of employees who work in our newsrooms, merit increases and higher content creation costs as a result of additional television episodes in 2023. The increase in digital content delivery costs was largely due to higher compensation and benefits driven by growth in the number of employees and higher cloud-related costs. The increase in subscriber servicing costs was largely due to higher credit card processing fees and third-party commissions due to increased subscriptions and an increase in the number of employees, partially offset by lower customer care costs. Advertising servicing costs decreased primarily due to fewer live events in 2023 and a decrease in the number of employees. The decrease in print production and distribution costs was primarily due to fewer print copies produced and lower compensation driven by production staffing efficiencies, partially offset by higher paper pricing.

Sales and Marketing

Sales and marketing include costs related to the Company’s subscription and brand marketing efforts as well as advertising sales costs.

Sales and marketing costs in 2023 decreased $7.3 million, or 2.7%, compared with 2022, primarily due to lower marketing costs of $14.9 million, offset by higher sales costs of $7.6 million. The decrease in marketing costs was primarily due to lower media expenses. The increase in sales costs was primarily due to higher compensation and benefits, largely driven by an increase in the number of sales employees.

Media expenses, a component of sales and marketing costs that represents the cost to promote our subscription business, decreased 12.3% to $117.7 million in 2023 from $134.1 million in 2022. The decrease was largely a result of lower brand marketing expenses.

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Product Development

Product development includes costs associated with the Company’s investment in developing and enhancing new and existing product technology, including engineering, product development and data insights.

Product development costs in 2023 increased $24.6 million, or 12.1%, compared with 2022, largely due to growth in the number of digital product development employees in connection with digital subscription strategic initiatives.

General and Administrative Costs

General and administrative costs include general management, corporate enterprise technology, building operations, unallocated overhead, severance and multiemployer pension plan withdrawal costs.

General and administrative costs in 2023 increased $21.8 million, or 7.5%, compared with 2022, primarily due to higher compensation and benefits of $14.1 million driven by merit increases and incentive compensation, stock price appreciation on stock-based awards of $4.6 million as well as higher cybersecurity costs and software licenses of $3.1 million.

Depreciation and Amortization

Depreciation and amortization costs in 2023 increased $3.5 million, or 4.2%, compared with 2022. The increase was due to the impact from the additional month of The Athletic costs in 2023, as well as assets placed in service in connection with the improvements in our Company Headquarters in 2022.

Acquisition-Related Costs

In the second quarter of 2022, the Company recorded $34.7 million of acquisition-related costs, which primarily included expenses paid in connection with the acceleration of The Athletic stock options and legal, accounting, financial advisory and integration planning expenses. There were no such costs recorded in 2023.

Impairment Charges

In 2023, the Company recorded a $12.7 million impairment charge related to excess leased office space that is being marketed for sublet (the “lease-related impairment”).

In 2023 and 2022, the Company recorded impairment charges of $2.5 million and $4.1 million, respectively, related to an indefinite-lived intangible asset.

Multiemployer Pension Plan Liability Adjustment

In 2023 and 2022, the Company recorded favorable adjustments related to a reduction in its multiemployer pension plan liability of $2.3 million and $7.1 million, respectively.

In 2023 and 2022, the Company recorded charges of $1.7 million and $22.1 million, respectively, in connection with its withdrawal from multiemployer pension plans.

Segment Information

Since the acquisition of The Athletic in the first quarter of 2022, we have had two reportable segments: The New York Times Group (“NYTG”) and The Athletic. Management uses adjusted operating profit (loss) by segment in assessing performance and allocating resources. The Company includes in its presentation revenues and adjusted operating costs to arrive at adjusted operating profit (loss) by segment. Adjusted operating costs are defined as operating costs before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items. Adjusted operating profit is defined as operating profit before depreciation and amortization, severance, multiemployer pension plan withdrawal costs and special items. Adjusted operating profit expressed as a percentage of revenues is referred to as adjusted operating profit margin.

Subscription revenues from and expenses associated with our bundle are allocated to NYTG and The Athletic. The Athletic was first introduced into our bundle in June 2022. Therefore, The Athletic’s results for 2022 include bundle revenues and expenses for only six months of the year, whereas 2023 includes bundle revenue and expenses for the entire year.

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Prior to April 1, 2023, we allocated bundle revenues first to our digital news product based on its standalone list price and then the remaining bundle revenues were allocated to the other products in the bundle, including The Athletic, based on their relative standalone list prices. Starting April 1, 2023, we allocate 10% of bundle revenues to The Athletic based on management’s view of The Athletic’s relative value to the bundle, which is derived based on analysis of various metrics, and allocate the remaining bundle revenues to NYTG.

Prior to April 1, 2023, we allocated to NYTG and The Athletic direct variable expenses associated with the bundle, which include credit card fees, third-party fees and sales taxes, based on a historical actual percentage of these costs to bundle revenues. Starting April 1, 2023, we allocate 10% of product development, marketing and subscriber servicing expenses (including the direct variable expenses referenced above) associated with the bundle to The Athletic, and the remaining costs are allocated to NYTG, in each case, in line with the revenues allocations.

For comparison purposes, the Company has recast segment results for 2022 to reflect the updated allocation methodology.

The results of The Athletic have been included in our Consolidated Financial Statements beginning February 1, 2022, the date of the acquisition. Results for the 12 months of 2022 included The Athletic for approximately 11 months, while results for the 12 months of 2023 included the Athletic for the full 12 months.

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The New York Times Group

NYTG revenues increased in 2023 to $2.3 billion from $2.2 billion in 2022. Subscription revenues increased 5.1% in 2023 to $1.6 billion from $1.5 billion in 2022 due to growth in subscription revenues from digital-only products, partially offset by decreases in print subscription revenues. Both digital and print subscription revenues were impacted by the five fewer days in 2023. Advertising revenues decreased 6.7% in 2023 to $477.3 million from $511.3 million in 2022 due to lower print advertising revenue, as well as lower digital advertising revenues, primarily as a result of lower revenues from podcasts, creative services and the impact of five fewer days in the year, which were partially offset by higher programmatic advertising. Print advertising revenue was impacted by secular trends. In addition, we believe the macroeconomic environment adversely impacted both digital and print advertising spending.

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NYTG adjusted operating costs increased 2.2% in 2023 to $1.9 billion from $1.8 billion in 2022. The increase in costs in both periods was primarily related to growth in the numbers of employees who work in the newsroom as well as higher general and administrative and product development costs, partially offset by lower sales and marketing costs as well as advertising servicing costs.

NYTG adjusted operating profit increased 8.3% in 2023 to $421.3 million from $389.0 million in 2022. The increase in 2023 was primarily as a result of higher digital subscription and other revenues, partially offset by higher adjusted operating costs and lower advertising revenues.

The Athletic

The results of The Athletic have been included in our Consolidated Financial Statements beginning February 1, 2022, the date of the acquisition. Results for 2022 included The Athletic for approximately 11 months, while results for 2023 included the Athletic for the full 12 months.

The Athletic’s revenues increased 55.1% in 2023 to $131.3 million from $84.6 million in 2022. Subscription revenues increased 39.4% in 2023 to $100.4 million from $72.1 million in 2022, primarily due to the impact from the additional month of revenues in 2023, as well as the impact of additional months of bundle-related revenues in 2023 and growth in digital-only subscribers with The Athletic. Advertising revenues increased to $27.9 million from $12.0 million in 2022, primarily due to the launch of display advertising in the third quarter of 2022.

The Athletic’s adjusted operating costs increased 29.4% in 2023 to $162.7 million from $125.8 million in 2022. The increase in costs in 2023 was primarily due to higher sales and marketing costs, journalism costs and product development costs, primarily due to the impact from the additional month of costs in 2023, as well as the impact of the additional months of bundle-related costs.

The Athletic’s adjusted operating loss decreased 23.6% to $31.4 million in 2023 from $41.1 million in 2022, primarily as a result of higher digital subscription and advertising revenues partially offset by higher adjusted operating costs.

Other Items

See Note 7 of the Notes to the Consolidated Financial Statements for more information regarding other items.

NON-OPERATING AND NON-GAAP ITEMS

Interest Income and Other, Net

See Note 7 of the Notes to the Consolidated Financial Statements for information regarding interest income and other.

Income Taxes

See Note 12 of the Notes to the Consolidated Financial Statements for information regarding income taxes.

Other Components of Net Periodic Benefit Costs

See Notes 9 and 10 of the Notes to the Consolidated Financial Statements for information regarding other components of net periodic benefit costs.

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 excluding amortization of acquired intangible assets, severance, non-operating retirement costs and the impact of special items (or adjusted diluted earnings per share);

•operating profit before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating profit, and as a percentage of revenues, adjusted operating profit margin);

•operating costs before depreciation, amortization, severance, multiemployer pension plan withdrawal costs and special items (or adjusted operating costs); and

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•free cash flow (defined as net cash provided by operating activities less capital expenditures).

The special items in 2023 consisted of:

•a $12.7 million impairment charge ($9.3 million or $0.06 per share after tax) related to excess leased office space that is being marketed for sublet (the “lease-related impairment”);

•a $2.5 million charge ($1.8 million or $0.01 per share after tax) related to an impairment of an indefinite-lived intangible asset;

•a $1.7 million charge ($1.2 million or $0.01 per share after tax) in connection with the Company’s withdrawal from a multiemployer pension plan;

•a $2.3 million favorable adjustment ($1.7 million or $0.01 per share after tax) related to a reduction in a multiemployer pension plan liability; and

•a $2.5 million gain ($1.8 million or $0.01 per share after tax) reflecting our proportionate share of a distribution from the liquidation of Madison Paper Industries (“Madison”), a partnership that previously operated a paper mill, in which the Company had an investment through a subsidiary.

The special items in 2022 consisted of:

•a $22.1 million charge ($16.2 million or $0.10 per share after tax) in connection with the Company’s withdrawal from a multiemployer pension plan;

•a $4.1 million charge ($3.0 million or $0.02 per share after tax) related to an impairment of an indefinite-lived intangible asset;

•a $7.1 million gain ($5.2 million or $0.03 per share after tax) related to a multiemployer pension liability adjustment;

•a $34.2 million gain ($24.9 million or $0.15 per share after tax) related to an agreement to lease and subsequently sell approximately four acres of land at our printing and distribution facility in College Point, N.Y. The gain is included in Interest income and other, net in our Consolidated Statements of Operations; and

•a $34.7 million of pre-tax costs ($25.4 million or $0.15 per share after tax) related to the acquisition of The Athletic Media Company. Acquisition-related costs primarily include expenses paid in connection with the acceleration of The Athletic Media Company stock options, and legal, accounting, financial advisory and integration planning expenses.

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, 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 and adjusted operating profit margin are useful in evaluating the ongoing performance of the Company’s businesses as they exclude 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 and special items. 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, acquisition-related costs 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.

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Excluded from our non-GAAP financial measures are non-operating retirement costs that 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 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 and GAAP operating results, provide increased transparency and a better understanding of the underlying trends in the Company’s operating business performance.

The Company considers free cash flow, which is defined as net cash provided by operating activities less capital expenditures, to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. See “Liquidity and Capital Resources — Free Cash Flow” below for more information and a reconciliation of free cash flow to net cash provided by operating activities.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are set out in the tables below.

In addition, the Company adopted a change to its fiscal calendar and as a result, its 2023 fiscal year included five fewer days compared with 2022. Included below is the estimated impact of the five fewer days on fiscal year revenue. Management believes that estimating the impact of the five fewer days on the Company’s operating costs and operating profit presents challenges and, therefore, no such estimate is made with respect to these items.

(1) Twelve months ended December 31, 2022, includes a loss of $0.13 related to an estimated charge for a withdrawal from a multiemployer pension plan, partially offset by a gain of $0.04 resulting from a multiemployer pension liability adjustment.

(2) Amounts may not add due to rounding.

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

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

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

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(1) Represents the five-day period included in fiscal 2022 between December 27, 2021, and December 31, 2021.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

The following table presents information about our financial position:

Financial Position Summary

(1) Approximately $550.0 million of cash and marketable securities were used in February 2022 to fund the purchase price of The Athletic Media Company (refer to commentary below).

Our primary sources of cash from operations were revenues from subscription and advertising sales. Subscription and advertising revenues provided about 68% and 21%, respectively, of total revenues in 2023. The remaining cash inflows were primarily from other revenue sources such as Wirecutter affiliate referrals, licensing, commercial printing, the leasing of floors in the Company Headquarters, books, television and film, retail commerce, our live events business, and our student subscription sponsorship program.

Our primary uses of cash from operations were for employee compensation and benefits and other operating expenses. We believe our cash and cash equivalents, marketable securities 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 and beyond.

As of December 31, 2023, we had cash and cash equivalents and marketable securities of $709.2 million and approximately $350 million in available borrowings, and no amounts were outstanding under the Credit Facility. Our cash and cash equivalents and marketable securities balances increased in 2023, primarily due to cash proceeds from operating activities, partially offset by cash used for dividend payments, share repurchases, capital expenditures, and taxes paid on behalf of employees resulting from share-based compensation tax withholding.

We have paid quarterly dividends on the Class A and Class B Common Stock since late 2013. In February 2024, the Board of Directors approved a quarterly dividend of $0.13 per share, an increase of $0.02 per share from the previous quarter (see Note 19 of the Notes to the Consolidated Financial Statements for additional information). We currently expect to continue to pay comparable cash dividends in the future, although changes in our dividend program will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant.

In February 2022, the Board of Directors approved a $150.0 million Class A share repurchase program. In February 2023, the Board of Directors approved a $250.0 million Class A share repurchase program in addition to the amount remaining under the 2022 authorization. The authorizations provide that shares of Class A Common Stock may be purchased from time to time as market conditions warrant, through open market purchases, privately negotiated transactions or other means, including Rule 10b5-1 trading plans. Through February 14, 2024, the aggregate purchase price of repurchases under these programs totaled approximately $170.5 million (excluding commissions), fully utilizing the 2022 authorization and leaving approximately $229.5 million remaining under the 2023 authorization. We expect to repurchase shares to offset the impact of dilution from our equity compensation program and to return capital to our stockholders. There is no expiration date with respect to these authorizations.

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During 2023, we made contributions of $10.5 million to certain qualified pension plans funded by cash on hand. As of December 31, 2023, our qualified pension plans had plan assets that were $83.0 million above the present value of future benefits obligations, an increase of $13.5 million from $69.5 million as of December 31, 2022. We expect contributions made to satisfy minimum funding requirements to total approximately $13 million in 2023.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and instead requires taxpayers to capitalize and amortize such expenditures over five years. In 2023 and 2022, our cash from operations decreased by approximately $12 million and $60 million, respectively, and our net deferred tax assets increased by similar amounts as a result of this legislation.

The Inflation Reduction Act of 2022 was signed into law in August 2022. The tax-related provisions of this legislation did not have a material impact on our consolidated financial statements.

Capital Resources

Sources and Uses of Cash

Cash flows provided by/(used in) by category were as follows:

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, retirement and other benefits, raw materials, marketing expenses, interest and income taxes.

Net cash provided by operating activities increased in 2023 compared with 2022 due to higher net income (which in 2022 was impacted by a payment related to the acceleration of The Athletic stock options in connection with the acquisition), lower tax payments and lower cash payments for incentive compensation, partially offset by lower cash collections from accounts receivable.

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 2023 was primarily related to $144.3 million in net purchases of marketable securities and $22.7 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 capital lease obligations, and stock-based compensation tax withholding.

Net cash used in financing activities in 2023 was primarily related to dividend payments of $69.5 million, share repurchases of $44.6 million (excluding commissions) and share-based compensation tax withholding payments of $14.9 million.

See “— Third-Party Financing” below and our Consolidated Statements of Cash Flows for additional information on our sources and uses of cash.

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Free Cash Flow

Free cash flow is a non-GAAP financial measure defined as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. In addition, management uses free cash flow to set targets for return of capital to stockholders in the form of dividends and share repurchases.

The Company aims to return at least 50% of free cash flow to stockholders in the form of dividends and share repurchases over the next three to five years.

The following table presents a reconciliation of net cash provided by operating activities to free cash flow:

Free cash flow for 2023 was $337.9 million compared with $113.7 million in 2022. Free cash flow increased primarily due to higher cash provided by operating activities, as discussed above.

Restricted Cash

We were required to maintain $13.7 million of restricted cash as of December 31, 2023, and $13.8 million as of December 31, 2022, substantially all of which is set aside to collateralize workers’ compensation obligations.

Capital Expenditures

Capital expenditures totaled approximately $23 million and $36 million in 2023 and 2022, respectively. The decrease in capital expenditures in 2023 was primarily driven by higher expenditures in the prior year related to improvements in our Company Headquarters. The expenditures in 2022 were intended to address growth in the number of employees and support hybrid work. The cash payments related to the capital expenditures totaled approximately $23 million and $27 million in 2023 and 2022, respectively, due to the timing of the payments. In 2024, we expect capital expenditures of approximately $50 million, which will be funded from cash on hand. The capital expenditures will be primarily driven by expenditures related to our College Point, N.Y., printing and distribution facility, investments in technology to support our strategic initiatives and improvements in our Company Headquarters.

Acquisition of The Athletic Media Company

On February 1, 2022, we completed the acquisition of The Athletic Media Company, a global digital subscription-based sports media business that provides national and local coverage of clubs and teams in the United States and around the world, for an all-cash purchase price of $550.0 million, subject to customary closing adjustments (see Note 5 of the Notes to the Consolidated Financial Statements for additional information related to this acquisition). The purchase price was funded from cash on hand.

Third-Party Financing

On July 27, 2022, we entered into a $350.0 million five-year unsecured Credit Facility that amended and restated a prior facility. Certain of our domestic subsidiaries have guaranteed our obligations under the Credit Facility. As of December 31, 2023, there was approximately $0.6 million in outstanding letters of credit and the remaining committed amount remains available. As of December 31, 2023, there were no outstanding borrowings under the Credit Facility and the Company was in compliance with the financial covenants contained in the Credit Facility. See Note 7 of the Notes to the Consolidated Financial Statements for information regarding the Credit Facility.

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Contractual Obligations

The information provided is based on management’s best estimate and assumptions of our contractual obligations as of December 31, 2023. Actual payments in future periods may vary from those reflected in the table.

(1) See Note 17 of the Notes to the Consolidated Financial Statements for additional information related to our operating leases.

(2) Represents purchase commitments for the use of digital content delivery services from August 1, 2023 through July 31, 2028.

(3) The Company’s general funding policy with respect to qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations and Guild contracts. Contributions for our qualified pension plans and future benefit payments for our unfunded pension and other postretirement benefit payments have been estimated over a 10-year period; therefore, the amounts included in the “Later Years” column only include payments for the period of 2029-2033. For our funded qualified pension plans, estimating funding depends on several variables, including the performance of the plans’ investments, assumptions for discount rates, expected long-term rates of return on assets, rates of compensation increases (applicable only for the Guild-Times Adjustable Pension Plan that has not been frozen) and other factors. Thus, our actual contributions could vary substantially from these estimates. While benefit payments under these plans are expected to continue beyond 2033, we have included in this table only those benefit payments estimated over the next 10 years. Benefit plans in the table above also include estimated payments for multiemployer pension plan withdrawal liabilities. See Notes 9 and 10 of the Notes to the Consolidated Financial Statements for additional information related to our pension and other postretirement benefits plans.

Other Liabilities — Other in our Consolidated Balance Sheets include liabilities related to (1) deferred compensation, primarily related to our deferred executive compensation plan (the “DEC”) and (2) various other liabilities, including our contingent tax liability for uncertain tax positions and contingent consideration. These liabilities are not included in the table above primarily because the timing of the future payments is not determinable. See Note 11 of the Notes to the Consolidated Financial Statements for additional information.

The DEC 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. The fair value of deferred compensation was $13.8 million as of December 31, 2023. The DEC was frozen effective December 31, 2015, and no new contributions may be made into the plan. See Note 11 of the Notes to the Consolidated Financial Statements for additional information on Other Liabilities — Other.

Our liability for uncertain tax positions was approximately $9 million, including approximately $2 million of accrued interest as of December 31, 2023. Until formal resolutions are reached between us and the taxing authorities, determining the timing and amount of possible audit settlements relating to uncertain tax positions is not practicable. Therefore, we do not include this obligation in the table of contractual obligations. See Note 12 of the Notes to the Consolidated Financial Statements for additional information regarding income taxes.

The contingent consideration represents contingent payments in connection with the acquisition of substantially all the assets and certain liabilities of Serial Productions, LLC. 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. The contingent consideration balance of $5.0 million as of December 31, 2023, is included in Accrued expenses and other, for the current portion of the liability, and Other Liabilities — Other, for the long-term portion of the liability, in our Consolidated Balance Sheets. See Note 8 of the Notes to the Consolidated Financial Statements for more information.

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We have a contract through the end of 2025 with Resolute FP US Inc., a subsidiary of Resolute Forest Products Inc., a major paper supplier, to purchase newsprint. The contract requires us to purchase annually the lesser of a fixed number of tons or a percentage of our total newsprint requirement at market rate in an arm’s-length transaction. Since the quantities of newsprint purchased annually under this contract are based on our total newsprint requirement, the amount of the related payments for these purchases is excluded from the table above.

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements for the periods presented.

We continually evaluate the policies and estimates we use to prepare our Consolidated Financial Statements. In general, management’s estimates are based on historical experience, information from third-party professionals and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results may differ from those estimates made by management.

Our critical accounting estimates include our accounting for goodwill and intangibles, retirement benefits and revenue recognition. Specific risks related to our critical accounting estimates are discussed below. For a description of our related accounting policies, see Note 2 of the Notes to the Consolidated Financial Statements.

Goodwill and Intangibles

We evaluate whether there has been an impairment of goodwill or indefinite-lived intangible assets on an annual basis or in an interim period if certain circumstances indicate that a possible impairment may exist.

The impairment analysis is considered critical because of the significance of goodwill and intangibles to our Consolidated Balance Sheets.

We test goodwill for impairment at a reporting unit level. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we compare the fair value of a reporting unit with its carrying amount, including goodwill. Fair value is calculated by a combination of a discounted cash flow model and a market approach model.

We test indefinite-lived intangible assets for impairment at the asset level. We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the asset is less than its carrying value. If we determine that it is more likely than not that the intangible asset is impaired, we perform a quantitative assessment by comparing the fair value of the asset with its carrying amount. If the fair value, which is based on future cash flows, exceeds the carrying value, the asset is not considered impaired. If the carrying amount exceeds the fair value, an impairment loss would be recognized in an amount equal to the excess of the carrying amount of the asset over the fair value of the asset.

Intangible assets that are amortized are tested for impairment at the asset level associated with the lowest level of cash flows whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment exists if the carrying value of the asset (1) is not recoverable (the carrying value of the asset is greater than the sum of undiscounted cash flows) and (2) is greater than its fair value.

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The discounted cash flow analysis requires us to make various judgments, estimates and assumptions, many of which are interdependent, about future revenues, operating margins, growth rates, capital expenditures, working capital, discount rates and royalty rates. The starting point for the assumptions used in our discounted cash flow analysis is the annual long-range financial forecast. The annual planning process that we undertake to prepare the long-range financial forecast takes into consideration a multitude of factors, including historical growth rates and operating performance, related industry trends, macroeconomic conditions, and marketplace data, among others. Assumptions are also made for perpetual growth rates for periods beyond the long-range financial forecast period. Our estimates of fair value are sensitive to changes in all of these variables, certain of which relate to broader macroeconomic conditions outside our control.

The market approach analysis includes applying a multiple, based on comparable market transactions, to certain operating metrics of a reporting unit.

The significant estimates and assumptions used by management in assessing the recoverability of goodwill and intangibles are estimated future cash flows, discount rates, growth rates and other factors. Any changes in these estimates or assumptions could result in an impairment charge. The estimates, based on reasonable and supportable assumptions and projections, require management’s subjective judgment. Depending on the assumptions and estimates used, the estimated results of the impairment tests can vary within a range of outcomes.

In September 2023, we performed a quantitative assessment of our indefinite-lived intangible asset and recorded a $2.5 million impairment. See Notes 2 and 5 of the Notes to the Consolidated Financial Statements for more information regarding our impairment testing. In our 2023 annual impairment testing, based on our qualitative assessment, we concluded that goodwill is not impaired. In 2023, we did not identify any impairment related to intangible assets with definite lives.

Pension Benefits

We sponsor a frozen single-employer defined benefit pension plan. The Company and The NewsGuild of New York (the “Guild”) jointly sponsor the Guild-Times Adjustable Pension Plan (the “APP”), which continues to accrue active benefits. Our pension liability also includes our multiemployer pension plan withdrawal obligations.

The table below includes the liability for all of our pension plans.

Our Company-sponsored defined benefit pension plans include qualified plans (funded) as well as non-qualified plans (unfunded). These plans provide participating employees with retirement benefits in accordance with benefit formulas detailed in each plan. All of our non-qualified plans, which provide enhanced retirement benefits to select employees, are frozen, except for a foreign-based pension plan discussed below.

Our joint Company and Guild-sponsored plan is a qualified plan and is included in the table below.

We also have a foreign-based pension plan for certain non-U.S. 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.

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The funded status of our qualified and non-qualified pension plans as of December 31, 2023, is as follows:

We made contributions of approximately $10 million to the APP in 2023. We expect contributions made to satisfy minimum funding requirements to total approximately $13 million in 2024.

Pension expense is calculated using a number of actuarial assumptions, including an expected long-term rate of return on assets (for qualified plans) and a discount rate. Our methodology in selecting these actuarial assumptions is discussed below.

In determining the expected long-term rate of return on assets, we evaluated input from our investment consultants and investment management firms, including our review of asset class return expectations, as well as long-term historical asset class returns. Projected returns by such consultants are based on broad equity and bond indices. Our objective is to select an average rate of earnings expected on existing plan assets and expected contributions to the plan (less plan expenses to be incurred) during the year. The expected long-term rate of return determined on this basis was 5.60% at the beginning of 2023. Our plan assets had an average rate of return of approximately 9.92% in 2023 and an average annual return of approximately -4.37% over the three-year period 2021–2023. We regularly review our actual asset allocation and periodically rebalance our investments to meet our investment strategy.

The market-related value of plan assets is multiplied by the expected long-term rate of return on assets to compute the expected return on plan assets, a component of net periodic pension cost. The market-related value of plan assets is a calculated value that recognizes changes in fair value over three years.

Based on the composition of our assets at the end of the year, we estimated our 2024 expected long-term rate of return to be 5.90%. If we had decreased our expected long-term rate of return on our plan assets by 50 basis points in 2023, pension expense would have increased by approximately $7 million for our qualified pension plans. Our funding requirements would not have been materially affected.

We determined our discount rate using a Ryan ALM, Inc. Curve (the “Ryan Curve”). The Ryan Curve provides the bonds included in the curve and allows adjustments for certain outliers (i.e., bonds on “watch”). We believe the Ryan Curve allows us to calculate an appropriate discount rate.

To determine our discount rate, we project a cash flow based on annual accrued benefits. For active participants, the benefits under the respective pension plans are projected to the date of termination. The projected plan cash flow is discounted to the measurement date, which is the last day of our fiscal year, using the annual spot rates provided in the Ryan Curve. A single discount rate is then computed so that the present value of the benefit cash flow equals the present value computed using the Ryan Curve rates.

The weighted-average discount rate determined on this basis was 5.25% for our qualified plans and 5.21% for our non-qualified plans as of December 31, 2023.

If we had decreased the expected discount rate by 50 basis points for our qualified plans and our non-qualified plans in 2023, pension expense would have increased by approximately $0.6 million and our pension obligation would have increased by approximately $63 million as of December 31, 2023.

We will continue to evaluate all of our actuarial assumptions, generally on an annual basis, and will adjust as necessary. Actual pension expense will depend on future investment performance, changes in future discount rates, the level of contributions we make and various other factors.

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We also recognize the present value of pension liabilities associated with the withdrawal from multiemployer pension plans. Our multiemployer pension plan withdrawal liability was approximately $68 million as of December 31, 2023. This liability represents the present value of the obligations related to complete and partial withdrawals that have already occurred as well as an estimate of future withdrawals that we considered probable and reasonably estimable. For those plans that have yet to provide us with a demand letter, the actual liability will not be known until they complete a final assessment of the withdrawal liability and issue a demand to us. Therefore, the estimate of our multiemployer pension plan liability will be adjusted as more information becomes available that allows us to refine our estimates.

See Note 9 of the Notes to the Consolidated Financial Statements for additional information regarding our pension plans.

Revenue Recognition

Our contracts with customers sometimes include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. We use an observable price to determine the standalone selling price for separate performance obligations if available or, when not available, an estimate that maximizes the use of observable inputs and faithfully depicts the selling price of the promised goods or services if we sold those goods or services separately to a similar customer in similar circumstances.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 of the Notes to the Consolidated Financial Statements for information regarding recent accounting pronouncements.