<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended September 27, 1998
------------------
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 (I.R.S. Employer
incorporation or organization) Identification No.)
229 WEST 43RD STREET, NEW YORK, NEW YORK
----------------------------------------
(Address of principal executive offices)
10036
----------
(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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
Number of shares of each class of the registrant's common stock outstanding as
of November 1, 1998 (exclusive of treasury shares):
Class A Common Stock 181,516,261 shares
Class B Common Stock 849,602 shares
Exhibit Index is located on page 24 of this document
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------- ------------------------------------
September 27, September 28, September 27, September 28,
1998 1997 1998 1997
------------------------------------- ------------------------------------
(13 Weeks) (39 Weeks)
<S> <C> <C> <C> <C>
Revenues
Advertising ........................ $ 471,166 $ 466,766 $ 1,510,621 $ 1,449,082
Circulation ........................ 167,180 165,819 507,205 503,505
Other .............................. 44,382 50,996 136,654 145,402
----------- ----------- ----------- -----------
Total ........................... 682,728 683,581 2,154,480 2,097,989
----------- ----------- ----------- -----------
Production costs
Raw materials ...................... 83,492 78,266 260,015 228,026
Wages and benefits ................. 139,522 145,633 440,760 453,275
Other .............................. 134,686 126,104 378,408 360,454
----------- ----------- ----------- -----------
Total ........................... 357,700 350,003 1,079,183 1,041,755
Selling, general and administrative
expenses ............................. 223,607 242,243 712,392 736,295
----------- ----------- ----------- -----------
Total ........................... 581,307 592,246 1,791,575 1,778,050
----------- ----------- ----------- -----------
Operating profit ....................... 101,421 91,335 362,905 319,939
Income from joint ventures ............. 5,336 3,359 13,614 7,726
Interest expense - net ................. 10,337 11,699 30,964 31,406
Gains on dispositions of assets ........ -- -- 12,619 --
----------- ----------- ----------- -----------
Income before income taxes and
extraordinary charge ............... 96,420 82,995 358,174 296,259
Income taxes ........................... 41,445 36,767 155,831 113,243
----------- ----------- ----------- -----------
Income before extraordinary charge ..... 54,975 46,228 202,343 183,016
Extraordinary charge, net of tax ....... -- -- 7,716 --
----------- ----------- ----------- -----------
Net income ............................. $ 54,975 $ 46,228 $ 194,627 $ 183,016
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average number of common shares
outstanding:
Basic ................................ 188,546 191,786 190,889 193,262
Diluted .............................. 192,284 195,622 195,082 197,128
Per share of common stock:
Basic earnings before extraordinary
charge ............................. $ 0.29 $ 0.24 $ 1.06 $ 0.95
Extraordinary charge, net of tax ..... -- -- (0.04) --
----------- ----------- ----------- -----------
Basic earnings after extraordinary
charge ............................. $ 0.29 $ 0.24 $ 1.02 $ 0.95
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings before extraordinary
charge ............................. $ 0.29 $ 0.24 $ 1.04 $ 0.93
Extraordinary charge, net of tax ..... -- -- (0.04) --
----------- ----------- ----------- -----------
Diluted earnings after extraordinary
charge ............................. $ 0.29 $ 0.24 $ 1.00 $ 0.93
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends ............................ $ 0.095 $ 0.080 $ 0.275 $ 0.235
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 27, December 28,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and short-term investments .......................... $ 31,825 $ 106,820
Accounts receivable - net ................................ 310,271 331,287
Inventories
Newsprint and magazine paper .......................... 30,021 27,694
Work-in-process, etc .................................. 4,591 4,440
---------- ----------
Total inventories ................................. 34,612 32,134
Deferred income taxes .................................... 44,204 44,204
Other current assets ..................................... 70,802 85,556
---------- ----------
Total current assets .............................. 491,714 600,001
---------- ----------
Other Assets
Investment in joint ventures ............................. 128,301 133,054
Property, plant and equipment (less accumulated
depreciation of $913,490 in 1998 and $868,274
in 1997) .............................................. 1,340,608 1,366,931
Intangible assets acquired
Cost in excess of net assets acquired (less accumulated
amortization of $233,715 in 1998 and $210,815
in 1997) .............................................. 970,419 993,206
Other intangible assets acquired (less accumulated
amortization of $59,142 in 1998 and $43,975 in 1997) .. 369,718 384,499
Miscellaneous assets ..................................... 153,508 145,492
---------- ----------
TOTAL ASSETS ...................................... $3,454,268 $3,623,183
---------- ----------
---------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 27, December 28,
1998 1997
--------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Commercial paper outstanding ................ $ 67,750 $ --
Accounts payable ............................ 174,690 189,580
Accrued payroll and other related liabilities 83,211 103,511
Accrued expenses ............................ 152,873 175,500
Unexpired subscriptions ..................... 82,359 82,621
Current portion of long-term debt and
Capital lease obligations .................. 104,152 104,033
----------- -----------
Total current liabilities ................ 665,035 655,245
----------- -----------
Other Liabilities
Long-term debt .............................. 415,039 490,237
Capital lease obligations ................... 84,007 45,191
Deferred income taxes ....................... 189,383 170,870
Other ....................................... 549,025 533,578
----------- -----------
Total other liabilities .................. 1,237,454 1,239,876
----------- -----------
Total liabilities ........................ 1,902,489 1,895,121
----------- -----------
Stockholders' Equity
Capital stock ............................... 21,358 11,385
Additional paid-in capital .................. 261,753 773,367
Earnings reinvested in the business ......... 1,629,970 1,488,910
Common stock held in treasury, at cost ...... (361,302) (545,600)
----------- -----------
Total stockholders' equity ............... 1,551,779 1,728,062
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $ 3,454,268 $ 3,623,183
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
------------------------------
September 27, September 28,
1998 1997
------------------------------
(39 Weeks)
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operating activities .................................. $ 348,105 $ 309,027
--------- ---------
INVESTING ACTIVITIES:
Additions to property, plant and equipment ................................. (60,458) (126,578)
Net proceeds from dispositions ............................................. 9,934 11,872
Other - net ................................................................ 2,822 (198)
--------- ---------
Net cash used in investing activities ...................................... (47,702) (114,904)
--------- ---------
FINANCING ACTIVITIES:
Net commercial paper borrowings ............................................ 67,750 (26,500)
Long-term debt reduction ................................................... (78,820) (2,827)
Capital shares
Issuance .............................................................. 6,365 6,317
Repurchase ............................................................ (318,336) (127,283)
Dividends paid to stockholders ............................................. (52,357) (45,434)
Other - net ................................................................ -- 344
--------- ---------
Net cash used in financing activities ...................................... (375,398) (195,383)
--------- ---------
Decrease in cash and short-term investments ................................ (74,995) (1,260)
Cash and short-term investments at the beginning of the year ............... 106,820 39,103
--------- ---------
Cash and short-term investments at the end of the quarter .................. $ 31,825 $ 37,843
--------- ---------
--------- ---------
</TABLE>
Amounts in these Statements of Cash Flows are presented on a cash basis and may
differ from those shown in other sections of the financial statements.
See notes to condensed consolidated financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. General
The accompanying Notes to Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated Financial
Statements included in the annual report on Form 10-K for the year ended
December 28, 1997, for The New York Times Company (the "Company") filed with
the Securities and Exchange Commission. In the opinion of management, all
adjustments necessary for a fair presentation of the financial position and
results of operations, as of and for the interim periods ended, have been
included. Due to the seasonal nature of the Company's business, results for
interim periods are not necessarily indicative of a full year's operations.
Certain reclassifications have been made to the 1997 Condensed
Consolidated Financial Statements to conform with classifications used at
September 27, 1998.
2. Dispositions of Assets
During the second quarter of 1998, the Company recorded an $8,000,000
pre-tax gain from the satisfaction of a post-closing requirement related to the
1997 sale of the Company's non-golf magazines. This gain increased basic and
diluted earnings per share by $.02. For further details, see the "Magazine
Group" section in "Management's Discussion and Analysis".
During the first quarter of 1998, the Company recorded a $4,600,000
pre-tax gain resulting from the sale of equipment. The gain increased basic and
diluted earnings per share by $.01.
3. Common Stock Split, Retirement and Dividend Increase
On June 17, 1998, a 2-for-1 split of the Company's Class A and B Common
Stock was effective. Additionally, the Company increased the number of
authorized Class A shares to 300,000,000 and Class B shares to 849,602. The
number of shares of Class A Common Stock outstanding on June 17, 1998, after
giving effect to the split, was 190,193,392; the number of Class B shares was
849,602. All references in the Consolidated Financial Statements referring to
per share, share price and share amounts have been adjusted retroactively for
the 2-for-1 stock split. As a result of the issuance of additional shares,
approximately $9,600,000 was transferred from additional paid-in capital to
capital stock to record the distribution.
On June 17, 1998, the Company retired 16,911,881 shares of Class A
Common Stock and 139,943 shares of Class B Common Stock. The Company accounts
for treasury stock retirements on a first-in-first-out basis. As a result of
this retirement, treasury stock and additional paid-in capital were reduced by
approximately $539,200,000.
On May 21, 1998, the Board of Directors authorized a $.01 increase, on
a post-split basis, in the quarterly dividend payments on both classes of common
stock.
6
<PAGE>
4. Income Taxes
The variances between the effective tax rate on income before income
taxes and the federal statutory rate, exclusive of an extraordinary charge and
gains on dispositions of assets in 1998 and a favorable adjustment resulting
from the completion of the Company's federal tax audits for periods through 1992
("favorable tax adjustment") in 1997, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------------------------------------------
September 27, September 28, September 27, September 28,
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
% of % of % of % of
(Dollars in thousands) Amount Pre-tax Amount Pre-tax Amount Pre-tax Amount Pre-tax
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax at federal statutory rate................ $33,747 35.0% $29,048 35.0% $120,944 35.0% $103,691 35.0%
State and local taxes,
net of federal benefits ................... 6,197 6.4 6,554 7.9 23,014 6.7 22,812 7.7
Amortization of nondeductible
intangible assets acquired................. 1,852 1.9 2,143 2.6 6,704 1.9 7,297 2.5
Other - net ................................. (351) (0.4) (978) (1.2) (344) 0.1 (2,557) (0.9)
-------- -------- -------- -------- -------- -------- -------- ------
Subtotal..................................... $41,445 43.0% $36,767 44.3% $150,318 43.5% $131,243 44.3%
Favorable tax adjustment .................... -- -- -- (18,000)
Gains on dispositions of assets.............. -- -- 5,513 --
-------- -------- -------- -------- -------- -------- -------- ------
Income taxes................................. $41,445 $36,767 $155,831 $113,243
-------- -------- -------- -------- -------- -------- -------- ------
-------- -------- -------- -------- -------- -------- -------- ------
</TABLE>
5. Debt Obligations and Extraordinary Charge
On April 2, 1998, the Company's tender offer for any and all of its
$150,000,000 of outstanding publicly-held 8.25% debentures due March 15, 2025,
expired. The debenture holders tendered approximately $78,100,000 of the
outstanding debentures. As a result, the Company recorded a pre-tax
extraordinary charge of approximately $13,700,000 in the second quarter of 1998
in connection with this early extinguishment of debt. This charge reduced basic
and diluted earnings per share by $.04.
The Company currently maintains $300,000,000 in revolving credit
agreements which require, among other matters, specified levels of
stockholders' equity. The amount of stockholders' equity in excess of the
required levels was approximately $760.0 million at September 27, 1998,
compared with $917.0 million at September 28, 1997. In July 1998, the Company
renewed its $100,000,000 revolving credit agreement, which had a maturity of
July 1998, through July 1999. The remaining $200,000,000 revolving credit
agreement expires in July 2002.
7
<PAGE>
On August 21, 1998, the Company filed a $300,000,000 Shelf Registration
Statement on Form S-3 with the Securities and Exchange Commission for unsecured
debt securities that may be issued by the Company from time to time. This
registration statement became effective August 28, 1998. On September 24, 1998,
the Company filed a prospectus supplement to allow the issuance of up to
$300,000,000 in medium-term notes. On October 8, 1998, the Company borrowed
$49,500,000 under the medium-term note program. These notes mature on October 8,
2003, and pay interest semi-annually at a rate of 5%. The proceeds were utilized
to pay down borrowings under the Company's commercial paper program.
In October of 1993, the Company issued $200,000,000 of senior notes.
Five-year notes totaling $100,000,000 were due in October of 1998 while the
remaining six and one-half year $100,000,000 notes are due in April 2000. On
October 28, 1998, the Company repaid $100,000,000 due on its five-year senior
notes.
6. Supplemental Cash Flow Information; Noncash Financing Activities
Repurchases of common stock in connection with certain exercises under the
Company's stock option plans increased treasury stock by $30,155,000 in 1998 and
$36,067,000 in 1997. Additional paid-in capital increased by corresponding
amounts.
In May 1998, the Company amended a lease agreement for its Edison printing
facility. The amendment modifies certain provisions of the lease agreement
including extending its term by an additional 10 years through May 2018 and
reducing rental obligations. As a result, capitalized lease costs and the
related liability were increased by approximately $42,000,000.
7. Common Stock Repurchases
During the first nine months of 1998, the Company repurchased
approximately 9,455,000 shares of its Class A Common Stock at a cost of
approximately $303,000,000. The average price of these repurchases was
approximately $32 per share. To date, approximately $419,000,000 remains from an
August 1998 Board of Directors repurchase authorization of $575,000,000. Stock
repurchases under this program exclude shares reacquired in connection with
certain exercises under the Company's stock option plans at a cost of
approximately $21,700,000 in the first nine months of 1998 and $11,800,000 in
the first nine months of 1997.
8. Voluntary Staff Reductions
At September 27, 1998, and December 28, 1997, approximately $18,000,000
and $25,000,000 of the total amount of prior charges related to voluntary staff
reductions remain unpaid. The $18,000,000 balance is expected to be paid within
two years. No such charges were recorded in the second or third quarters of 1997
or in the first nine months of 1998. In the first quarter of 1997, the Company
recorded approximately $2,500,000 in pre-tax charges, relating to staff
reductions at corporate headquarters and The New York Times. These charges
reduced basic and diluted earnings per share by $.01.
8
<PAGE>
9. Comprehensive Income
In the first quarter of 1998, the Company adopted the provisions of
the Financial Accounting Standards Board's Statement of Accounting Standards
No. 130 ("FAS 130"), Reporting Comprehensive Income. Comprehensive Income for
the Company includes foreign currency translation adjustments in addition to
net income as reported in the Company's Condensed Consolidated Financial
Statements. FAS 130 requires the disclosure of Comprehensive Income, which
was $54,400,000 for the third quarter of 1998 and $193,400,000 for the first
nine months of 1998 and was the same as net income for the third quarter and
first nine months of 1997.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Advertising revenues accounted for approximately 70% of the Company's revenues
in the first nine months of 1998 and circulation revenues accounted for
approximately 24% of its revenues in the same period. Advertising revenues cause
the Company's consolidated revenues to vary by season. Second-quarter and
fourth-quarter advertising volume are usually higher than first and
third-quarter volume since economic activity tends to be lower after the
holidays and in the summer. Quarterly trends are also affected by the overall
economy and by economic conditions in the Company's various markets.
In the first nine months of 1998, raw materials represented
approximately 15% of the Company's total costs. The major component of raw
materials is newsprint. The Company's cost of newsprint has been higher during
all of 1998 than in 1997. A price increase has been announced that could further
increase the Company's cost of newsprint in 1998; however even if it becomes
effective, this increase is not expected to have a material effect on the
Company's operations for the fourth quarter of 1998. The Company expects that
any percentage increase in newsprint costs comparing the fourth quarter of 1998
to the 1997 comparable period will be less than the percentage increase already
experienced in the first nine months of 1998 over the 1997 comparable period.
Results of Operations
Third-quarter net income increased 18.9% to $55.0 million, or $.29
basic and diluted earnings per share, from 1997 third-quarter net income of
$46.2 million, or $.24 basic and diluted earnings per share.* Net income,
excluding special items and an extraordinary charge, for the first nine
months, increased 17.3% to $195.2 million, or $1.03 basic ($1.01 diluted)
earnings per share, from $166.4 million, or $.87 basic ($.85 diluted)
earnings per share, in the first nine months of 1997. For the first nine
months of 1998, the increase in net income was primarily due to higher
advertising revenues and greater cost containment; higher newsprint costs and
depreciation expense reduced somewhat that increase in net income. Including
special items and an extraordinary charge, net income for the first nine months
of 1998 rose 6.3% to $194.6 million from $183.0 million in the comparable
1997 period.
Special Items and Extraordinary Charge
The special items and extraordinary charge that affected the 1998 and 1997
first nine months results were:
1998 - The overall effect of these items reduced both basic and diluted
earnings per share by $.01 for the nine months.
- $7.7 million after-tax extraordinary charge for the first
nine months in connection with the Company's repurchase of
$78.1 million of its $150.0 million, 8.25% notes due in
2025. This charge reduced basic and diluted earnings per
share by $.04.
- $8.0 million pre-tax gain for the first nine months from
the satisfaction of a post-closing requirement related to
the 1997 sale of the Company's non-golf magazines. This
gain increased basic and diluted earnings per share by
$.02.
- $4.6 million pre-tax gain for the first nine months from
the sale of equipment. This gain increased basic and
diluted earnings per share by $.01.
- --------------
* All share and per share amounts are adjusted for the 2-for-1 split that took
effect in June of 1998.
10
<PAGE>
1997 - The overall effect of these items increased both basic and
diluted earnings per share by $.08 for the nine months.
- $18.0 million after-tax gain for the first nine months
resulting from a favorable tax adjustment from the
completion of the Company's federal income tax audits for
the periods through 1992. This gain increased basic and
diluted earnings per share by $.09.
- $2.5 million pre-tax charge for the first nine months for
severance and related costs resulting from work force
reductions. This charge reduced basic and diluted earnings
per share by $.01.
Revenues
Revenues for the third quarter of 1998 were $682.7 million,
approximately equal to the comparable 1997 period. For the first nine months
of 1998, revenues grew 2.7% to $2.2 billion. On a comparable basis, adjusted
for the 1997 disposition of certain properties (primarily six magazines),
1998 third-quarter revenues increased by approximately 1.9% and nine month
revenues increased approximately 4.7% over the comparable 1997 periods.
Expenses
Production costs for the third quarter of 1998 increased 2.2% to
$357.7 million from $350.0 million in the comparable 1997 period. For the
first nine months of 1998, production costs increased 3.6% to $1.08 billion
from $1.04 billion in the first nine months of 1997. The increase for the
nine months was primarily due to higher newsprint costs and depreciation
expense associated with new production facilities. On a comparable basis,
adjusted for the 1997 sale of the Company's non-golf magazines, 1998 third
quarter production costs increased 3.7% and nine month production costs
increased 5.0%.
Selling, general and administrative expenses in the third quarter of
1998 decreased 7.7% to $223.6 million from $242.2 million in the third quarter
of 1997. For the first nine months of 1998, these expenses decreased 2.9% to
$712.4 million from $733.8 million in the first nine months of 1997, exclusive
of the workforce reduction costs described above. The decrease for both periods
was primarily due to lower compensation expenses and a reduction in other
expenses as a result of the disposition of certain properties in 1997. On a
comparable basis, adjusted for the 1997 sale of the Company's non-golf
magazines, 1998 third quarter selling, general and administrative expenses
decreased 5.3% and nine month selling, general and administrative expenses
decreased .9%.
Operating Profit
Operating profit in the third quarter of 1998 increased 11.0% to $101.4
million compared with $91.3 million in the third quarter of 1997. For the first
nine months of 1998, operating profit rose 12.6% to $362.9 million from $322.4
million in the first nine months of 1997, excluding workforce reduction costs.
The improvement in operating profit was principally due to higher advertising
revenues at the Newspaper Group and tighter cost controls. Higher newsprint
costs and depreciation and amortization expense, partly offset the improvement.
11
<PAGE>
EBITDA
"EBITDA" is earnings before interest, income taxes, depreciation and
amortization. EBITDA is a widely accepted indicator of funds available to
service debt, although it is not a measure of liquidity or of financial
performance under generally accepted accounting principles ("GAAP"). EBITDA,
while providing useful information, should not be considered in isolation or as
an alternative to net income or cash flows as determined under GAAP. EBITDA for
the 1998 third quarter rose 11.6% to $155.6 million from $139.4 million in 1997.
For the first nine months of 1998, excluding gains on dispositions of assets and
the extraordinary charge, EBITDA rose 13.5% to $518.2 million from $456.4
million in the first nine months of 1997. Including the special items and the
extraordinary charge, EBITDA for the first nine months of 1998 rose 9.0% to
$517.1 million from $474.4 million in the first nine months of 1997.
Joint Ventures
Income from Joint Ventures increased to $5.3 million from $3.4 million
in the third quarter of 1998 and to $13.6 million from $7.7 million in the first
nine months of 1998. The increase was primarily due to higher income from equity
investments in paper mills.
Interest
Net interest expense, which appears as the line item "Interest
Expense-net", decreased to $10.3 million in the third quarter of 1998, from
$11.7 million in the third quarter of 1997. The decrease, is primarily the
result of a reduction in total indebtedness. Total interest income and
capitalized interest included in the third-quarter amounts were $1.1 million in
1998 and $.8 million in 1997. For the first nine months of 1998, net interest
expense decreased to $31.0 million from $31.4 million in 1997. The decrease for
the first nine months of 1998 is primarily attributable to a reduction in the
amount of total indebtedness as well as increased investment income. Lower
capitalized interest partially offset this decrease in net interest expense.
Total interest income and capitalized interest included in the first nine-month
amounts were $3.3 million in 1998 and $6.7 million in 1997.
Effective Tax Rate
The Company's effective tax rate was 43.0% in the third quarter of
1998, compared with 44.3% in the third quarter of 1997. For the first nine
months of 1998, the effective tax rate was 43.5% compared with 44.3% in the
first nine months of 1997, exclusive of special items and an extraordinary
charge. The decreases in the effective tax rates were primarily the result of
lower state and local income taxes.
12
<PAGE>
Segment Information
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------------------------------------------------------------
September 27, September 28, September 27, September 28,
(Dollars in thousands) 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
(13 Weeks) (39 Weeks)
<S> <C> <C> <C> <C>
Revenues
Newspapers....................................... $620,965 $605,271 $1,950,080 $1,863,330
Broadcast........................................ 34,817 34,933 109,164 105,088
Magazines........................................ 26,947 43,377 95,237 129,571
-------- -------- ---------- ----------
Total.......................................... $682,728 $683,581 $2,154,480 $2,097,989
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Operating Profit (Loss)
Newspapers....................................... $ 95,013 $ 84,830 $ 332,085 $ 302,716
Broadcast........................................ 9,679 9,656 30,573 27,245
Magazines........................................ 4,489 6,603 24,810 21,561
Unallocated Corporate Expenses................... (7,759) (9,754) (24,563) (31,583)
-------- -------- ---------- ----------
Total.......................................... $101,421 $ 91,335 $ 362,905 $ 319,939
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Depreciation and Amortization
Newspapers....................................... $ 42,932 $ 41,773 $ 127,576 $ 118,787
Broadcast........................................ 4,392 3,913 13,258 13,334
Magazines........................................ (467) (2,019) (4,724) (5,492)
Corporate........................................ 1,824 977 5,247 1,831
Joint Ventures................................... 88 89 264 266
-------- -------- ---------- ----------
Total......................................... $ 48,770 $ 44,733 $ 141,621 $ 128,726
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
A discussion of the operating results of the Company's segments follows:
Newspaper Group: The Newspaper Group consists of The New York Times ("The
Times"), The Boston Globe ("The Globe"), 21 Regional Newspapers, newspaper
distributors, a news service, a features syndicate, TimesFax, licensing
operations of The New York Times databases and microfilm and New Ventures. New
Ventures primarily include projects in electronic media.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-----------------------------------------------------------------------
September 27, September 28, September 27, September 28,
(Dollars in thousands) 1998 1997 1998 1997
---------------------------------------------------------------------------------------------------------------
(13 Weeks) (39 Weeks)
<S> <C> <C> <C> <C>
Revenues
Newspapers............................ $615,228 $601,011 $1,934,163 $1,854,152
New Ventures.......................... 5,737 4,260 15,917 9,178
-------- -------- ---------- ----------
Total Revenues........................ $620,965 $605,271 $1,950,080 $1,863,330
-------- -------- ---------- ----------
EBITDA
Newspapers............................ $140,609 $128,206 $ 466,533 $ 425,513
New Ventures.......................... (2,664) (1,603) (6,871) (4,010)
-------- -------- ----------- -----------
Total EBITDA........................... $137,945 $126,603 $ 459,661 $ 421,503
-------- -------- ----------- -----------
Operating Profit (Loss)
Newspapers............................. $ 98,129 $ 86,704 $ 340,184 $ 307,475
New Ventures........................... (3,116) (1,874) (8,099) (4,759)
-------- --------- ----------- -----------
Total Operating Profit................. $ 95,013 $ 84,830 $ 332,085 $ 302,716
-------- --------- ----------- -----------
</TABLE>
13
<PAGE>
The Newspaper Group's operating profit was $95.0 million in the third quarter
of 1998, compared with $84.8 million in the third quarter of 1997. For the
first nine months of 1998, operating profit was $332.1 million, compared with
$304.2 million in the first nine months of 1997, excluding workforce
reductions. Revenues were $621.0 million in the third quarter of 1998,
compared with $605.3 million in the third quarter of 1997. For the first nine
months of 1998, revenues were $1.95 billion, compared with $1.86 billion in
the first nine months of 1997. The increase in the Group's revenues for the
1998 third quarter and first nine months was primarily due to higher
advertising revenues of 3.5% in the third quarter and 6.3% in the nine
months; both increases resulted from higher rates and volume. The Company
currently anticipates that 1998 advertising revenue at the Newspaper Group
will increase in a range between 5.5% and 6.5%. The improvement in operating
profit for the 1998 third quarter and nine months was primarily attributable
to increases in advertising revenue and improved cost containment. Higher
depreciation expense related to new production facilities and unfavorable
increases in newsprint cost of 7.9% for the quarter and 16.4% for the first
nine months, partially offset the improvements. Increases of 3.4% in the
quarter and 4.8% for the first nine months were volume related, principally
due to higher advertising and new sections, and the remainder of the increase
was due to higher prices.
Average circulation of daily newspapers for the third quarter and first
nine months ended September 27, 1998, was as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Three Months Ended September 27, 1998
----------------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Paid Circulation
The New York Times 1,063.0 0.2% 1,604.5 (2.3%)
The Boston Globe 471.4 (1.9%) 749.3 (2.3%)
Regional Newspapers 704.2 0.3% 755.7 (0.3%)
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Nine Months Ended September 27, 1998
----------------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Paid Circulation
The New York Times 1,081.6 0.2% 1,627.8 (1.6%)
The Boston Globe 467.3 (1.1%) 749.3 (0.9%)
Regional Newspapers 735.6 0.6% 786.9 0.0%
---------------------------------------------------------------------------------------------
</TABLE>
The average circulation declines for the third quarter and first nine
months, on Sundays, at The Times primarily reflect The Times's continuing
strategy to improve the quality of its home delivered circulation base by
reducing the use of promotional discounts for new subscription orders. Though
this strategy results in fewer new subscribers in the short term, the remaining
subscribers tend to be long-term customers, resulting in higher circulation in
the long term, and a more valuable audience for advertisers. Complementing this
quality strategy are a number of vigorous marketing initiatives to improve
single-copy sales and encourage continued circulation growth by expanding
availability in major markets across the nation. The Times and The Globe have
also added new sections and made improvements in delivery service to attract new
readers and retain existing ones.
14
<PAGE>
Advertising volume on a comparable basis for the third quarter and
first nine months was as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 27, 1998 September 27, 1998
--------------------------- -------------------------
(Inches in thousands) Volume % Change Volume % Change
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advertising Volume (excluding preprints)
The New York Times................................. 889.6 0.1% 2,853.5 0.9%
The Boston Globe................................... 707.1 1.4% 2,205.7 1.4%
Regional Newspapers................................ 3,836.1 1.6% 11,843.7 3.0%
---------------------------------------------------------------------------------------------------------------
</TABLE>
Advertising volume at The Times increased approximately 0.1% for the quarter and
0.9% for the first nine months. Category results were as follows:
<TABLE>
<CAPTION>
------------------------------ ---------------------------- --------------------------
Three Months Ended Nine Months Ended
---------------------------- --------------------------
September 27, 1998 September 27, 1998
---------------------------- --------------------------
% Change % Change
------------------------------ ---------------------------- --------------------------
<S> <C> <C>
Retail......................... (7.4%) (7.5%)
National...................... +4.1% +6.7%
Classified.................... +1.8% +2.8%
Zoned......................... (2.4%) (3.6%)
------------------------------ ---------------------------- --------------------------
Total......................... +0.1% +0.9%
------------------------------ ---------------------------- --------------------------
Preprints..................... (10.0%) +2.3%
------------------------------ ---------------------------- --------------------------
</TABLE>
Advertising volume at The Globe increased approximately 1.4% for both the
quarter and first nine months. Category results were as follows:
<TABLE>
<CAPTION>
------------------------------ ---------------------------- --------------------------
Three Months Ended Nine Months Ended
---------------------------- --------------------------
September 27, 1998 September 27, 1998
---------------------------- --------------------------
% Change % Change
------------------------------ ---------------------------- --------------------------
<S> <C> <C>
Retail........................ (2.6%) (5.1%)
National...................... +20.3% +15.2%
Classified.................... (0.4%) +0.6%
Zoned......................... (15.6%) (8.6%)
------------------------------ ---------------------------- --------------------------
Total......................... +1.4% +1.4%
------------------------------ ---------------------------- --------------------------
Preprints..................... +11.9% +5.5%
------------------------------ ---------------------------- --------------------------
</TABLE>
Advertising volume at the Regionals increased approximately 1.6% for
the quarter and 3.0% for the first nine months. Category results were
as follows:
<TABLE>
<CAPTION>
------------------------------ ---------------------------- --------------------------
Three Months Ended Nine Months Ended
---------------------------- --------------------------
September 27, 1998 September 27, 1998
---------------------------- --------------------------
% Change % Change
------------------------------ ---------------------------- --------------------------
<S> <C> <C>
Retail........................ (1.1%) +0.8%
National...................... (19.7%) (6.6%)
Legal......................... +12.5% +3.9%
Classified.................... +4.7% +5.6%
------------------------------ ---------------------------- --------------------------
Total......................... +1.6% +3.0%
------------------------------ ---------------------------- --------------------------
Preprints..................... +7.5% +7.4%
------------------------------ ---------------------------- --------------------------
</TABLE>
15
<PAGE>
Broadcast Group: The Broadcast Group consists of eight network-affiliated
television stations and two radio stations.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------------------------------------------------------------
September 27, September 28, September 27, September 28,
(Dollars in thousands) 1998 1997 1998 1997
-------------------------------------------------------------------------------------------------------------
(13 Weeks) (39 Weeks)
<S> <C> <C> <C> <C>
Revenues..................... $34,817 $34,933 $109,164 $105,088
-------------------------------------------------------------------------------------------------------------
EBITDA....................... $14,071 $13,569 $ 43,831 $ 40,579
-------------------------------------------------------------------------------------------------------------
Operating Profit............. $ 9,679 $ 9,656 $ 30,573 $ 27,245
-------------------------------------------------------------------------------------------------------------
</TABLE>
The Broadcast Group's operating profit was $9.7 million in the third
quarter of 1998 on revenues of $34.8 million, approximately equal to the 1997
operating profit and revenues for the comparable period. Operating profit was
$30.6 million for the first nine months of 1998 on revenues of $109.2 million,
compared with $27.2 million in the first nine months of 1997 on revenues of
$105.1 million. Stronger advertising revenues were the main reason for the
increase in operating profit. Third quarter advertising revenues were adversely
affected by the General Motors strike, which was recently settled.
Magazine Group: The Magazine Group is comprised of three golf-related
publications and related activities in the golf field, and New Ventures such as
on-line magazine services. The revenues for the Group include the amortization
of a $40.0 million non-compete agreement associated with the divestiture of the
Women's Magazine Division. This amount was recognized on a straight-line basis
over a four-year period ended July 1998.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------------------------------------------------------------
September 27, September 28, September 27, September 28,
(Dollars in thousands) 1998 1997 1998 1997
------------------------------------------------------------------------------------------------------------------
(13 Weeks) (39 Weeks)
<S> <C> <C> <C> <C>
Revenues
Magazines..................... $25,804 $40,062 $88,465 $120,400
Non-Compete................... 833 2,500 5,833 7,500
New Ventures.................. 310 815 939 1,671
------------------------------------------------------------------------------------------------------------------
Total Revenues................ $26,947 $43,377 $95,237 $129,571
------------------------------------------------------------------------------------------------------------------
EBITDA
Magazines..................... $ 4,086 $ 6,465 $20,297 $ 21,869
New Ventures.................. (64) (1,881) (211) (5,800)
------------------------------------------------------------------------------------------------------------------
Total EBITDA.................. $ 4,022 $ 4,584 $20,086 $ 16,069
------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)
Magazines..................... $ 3,720 $ 6,210 $19,188 $ 20,504
Non-Compete................... 833 2,500 5,833 7,500
New Ventures.................. (64) (2,107) (211) (6,443)
------------------------------------------------------------------------------------------------------------------
Total Operating Profit........ $ 4,489 $ 6,603 $24,810 $ 21,561
------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
The Magazine Group's operating profit was $4.5 million in the third
quarter of 1998 on revenues of $26.9 million, compared with $6.6 million in the
third quarter of 1997, on revenues of $43.4 million. Consolidation in the golf
equipment industry and a very competitive rate environment adversely affected
the group's performance. Operating profit was $24.8 million for the first nine
months of 1998 on revenues of $95.2 million, compared with $21.6 million in the
first nine months of 1997, on revenues of $129.6 million. The improvement in
operating profit for the nine months was principally attributable to the
Company's exit from the tee-time reservation business in the fourth quarter of
1997. The Group's revenue decreased for both periods as a result of the sale of
the Company's non-golf magazines in the fourth quarter of 1997. The results of
the magazines that were sold were included in the Group's results for the first
eleven months of 1997. Excluding the magazines that were sold, operating profit
was $4.5 million in the third quarter of 1998 on revenues of $26.9 million,
compared with $5.2 million in the third quarter of 1997, on revenues of $30.6
million. On a comparable basis, operating profit for the first nine months of
1998 was $24.8 million on revenues of $95.2 million, compared with $26.1 million
in the first nine months of 1997, on revenues of $96.8 million.
Liquidity and Capital Resources
Net cash provided by operating activities was $348.1 million in the
first nine months of 1998, compared with $309.0 million in the first nine months
of 1997. The increase of $39.1 million in 1998 was primarily due to an
improvement in operating profit. Net cash used in investing activities was $47.7
million in the first nine months of 1998 compared with $114.9 million in the
first nine months of 1997. The decrease of $67.2 million in 1998 was primarily
due to lower capital expenditures. Net cash used in financing activities was
$375.4 million in the first nine months of 1998 compared with $195.4 million in
the first nine months of 1997. The increase of $180.0 million in 1998 was
primarily related to stock repurchases, and the repurchase of its debentures,
partially offset by an increase in issuances of commercial paper.
Cash generated from the Company's operations and from external sources
should be adequate to cover working capital needs, stock repurchases, planned
capital expenditures, dividend payments to stockholders and other cash
requirements. The ratio of current assets to current liabilities was .74 at
September 27, 1998 and .76 and September 28, 1997. The ratio of long-term debt
and capital lease obligations as a percentage of total capitalization was 28% at
both September 27, 1998 and September 28, 1997.
The Company currently estimates that capital expenditures for 1998 will
range from $90.0 million to $100.0 million. The Company currently anticipates
that depreciation and amortization expense will approximate $190.0 million to
$200.0 million for 1998 compared with $173.9 million in 1997.
17
<PAGE>
The Company currently maintains $300.0 million in revolving credit
agreements, which require, among other matters, specified levels of
stockholders' equity. The amount of stockholders' equity in excess of the
required levels was approximately $760.0 million at September 27, 1998, compared
with $917.0 million at September 28, 1997. The decrease in the level of
unrestricted stockholders' equity is mainly due to the repurchase of Class A
Common Stock. In July 1998, the Company renewed its $100.0 million revolving
credit agreement, which had a maturity of July 1998, through July 1999. The
remaining $200.0 million revolving credit agreement expires in July 2002. The
Company's total long-term debt, including capital leases, was $603.2 million at
September 27, 1998 and $640.1 million at September 28, 1997, respectively. The
decrease is primarily attributable to the Company's repurchase of its debentures
as described below. This decrease was offset somewhat by an increase in
capitalized lease obligations as a result of an amendment to the Company's lease
for the Edison facility.
On August 21, 1998, the Company filed a $300.0 million Shelf
Registration on Form S-3 with the Securities and Exchange Commission for
unsecured debt securities that may be issued by the Company from time to time.
The registration statement became effective August 28, 1998. On September 24,
1998, the Company filed a prospectus supplement to allow the issuance of up to
$300.0 million in medium term notes. On October 8, 1998, the Company borrowed
$49.5 million under the medium-term note program. These notes mature on October
8, 2003 and pay interest semi-annually at a rate of 5%. The proceeds were
utilized to pay down borrowings under the Company's commercial paper program.
In October of 1993, the Company issued $200.0 million of senior notes.
Five-year notes totaling $100.0 million were due in October of 1998 while the
remaining six and one-half year $100.0 million notes are due in April 2000. On
October 28, 1998, the Company repaid $100.0 million due on its five-year senior
notes.
The Company's tender offer for any and all of its $150.0 million of
outstanding publicly-held 8.25% debentures due March 15, 2025, expired on April
2, 1998. The debenture holders tendered $78.1 million of the outstanding
debentures. The Company financed the purchase of the debentures with available
cash and through its existing commercial paper facility. By replacing higher
rate long-term borrowings with lower-rate short-term alternatives, the Company
expects to reduce interest expense and generate a positive return on a net
present value basis. Total cash paid in connection with the tender offer was
$89.3 million.
Year 2000 Readiness Disclosure
The Company has evaluated the potential impact of the situation
commonly referred to as the "Year 2000 problem." The Year 2000 problem, which is
common to most corporations, concerns the ability of information systems,
primarily computer software programs, to properly recognize and process date
sensitive information related to the Year 2000.
18
<PAGE>
The Company's State of Readiness
In April 1997, the Company began an initiative to identify all of its
Year 2000 concerns for all facets of its operations. A Year 2000 Program Office
was established, and a detailed inventory of all systems issues required to be
addressed in connection with the Year 2000 was created. Information was gathered
for each system including location, type of system, its relative importance,
probable method and cost of remediation, and targeted start and end dates for
addressing the issue. This inventory includes systems in the following areas:
(1) systems used to create the Company's publications;
(2) systems used in the operation of the Company's production and
distribution facilities;
(3) systems used in the operation of the Company's broadcast
operations;
(4) business and financial applications systems; and
(5) facility and infrastructure systems (building systems, utilities,
security systems, etc.).
The systems identified in the inventory were further categorized into five
priority classifications:
Shutdown -- highest priority. If these systems (e.g., editorial
systems, presses, utilities) were to fail, the Company's ability
to continue its operations would be seriously impaired.
Approximately 9% of the identified systems are in this category.
Impractical Workaround -- while alternatives exist, it is too
expensive to implement if these systems were to fail.
Approximately 9%.
Costly Workaround -- if these systems were to fail, a feasible
but costly alternative exists. Approximately 29%.
Additional But Manageable Cost -- If these systems fail, and
alternative solution exists at a moderate cost. Approximately
22%.
No Impact -- little if any consequence to the business if these
systems fail. Approximately 31%.
By October 1997, the Company had completed the inventory phase and turned
its attention to the remediation phase. Target dates for each item in the
inventory were identified and are continually monitored to ensure timely
resolution of the issues. The remediation strategy involves a mix of purchasing
new systems, modifying existing systems, retiring obsolete systems and
confirming vendor compliance. As of October 13, 1998, 64% of all systems had
been remediated and tested. Testing systems for Year 2000 compliance includes
the use of dates which simulate transactions and environments, both prior and
subsequent to the Year 2000, including specific testing for leap year.
The Company has communicated with most of its suppliers and other vendors,
and is contacting its significant advertisers, seeking assurances that they will
be Year 2000 compliant. Although no method exists for achieving certainty that
any significant business partners will function without disruption in the Year
2000, the Company's goal is to obtain as much detailed information as possible
about its advertisers' and suppliers' Year 2000 plans and to identify those
companies which could pose a significant risk of failure. The Company will make
alternate arrangements where necessary.
Generally, the Company is not dependent on a single source for any products
or services, except for products or services supplied by public utilities. In
the event a significant supplier or other vendor is unable to provide products
or services to the Company due to a Year 2000 failure, the Company believes it
has adequate alternate sources for such products or services. There is no
guarantee, however, that such alternate products or services would be available
at the same terms and conditions or that the Company would not experience some
adverse effects as a result of switching to alternate sources.
19
<PAGE>
The Costs to Address the Company's Year 2000 Issues
To date, the Company has identified total estimated costs in connection
with the Year 2000 problem of between $15 million and $20 million. This estimate
does not include systems previously scheduled for replacement without regard to
the Year 2000 issue. Of this amount, approximately $10 million will be for
systems replacements involving capital outlays (which are not deducted as an
expense on the Company's Condensed Consolidated Statements of Income), and the
remaining amount is being deducted as an expense on the Company's Condensed
Consolidated Statements of Income through mid-1999. Approximately 75% of this
expense total is attributable to the use of currently available internal
resources. The cost of the Company's Year 2000 remediation efforts is being
funded with cash flows from operations.
Risks of Year 2000 Issues
With respect to its internal operations, those over which the Company has
direct control, the Company believes that all of its critical systems (i.e.,
those categorized in the shutdown or impractical workaround categories described
above) will be remediated and tested by the end of the second quarter of 1999.
Like most large business enterprises, the Company is reliant upon certain
critical vendors. Certain of these vendors have yet to provide a Year 2000
compliant product, while services that are provided by certain other vendors
cannot be tested (i.e., power and telecommunications). The Company believes the
possibility of critical vendor failures to be remote based on the information
supplied to date by such critical vendors.
Contingency Plans
The Company's Year 2000 strategies include contingency planning,
encompassing business continuity both within the Company and in the external
business environment. The planning effort encompasses all critical Company
areas. The Company's contingency planning for the Year 2000 will address a
variety of scenarios that could occur.
While no assurances can be given, because of the Company's extensive
efforts to formulate and carry out an effective Year 2000 remediation program,
the Company believes that such remediation will be completed on a timely basis
and should effectively minimize any disruption to the Company's operations due
to Year 2000 issues. The Company does not expect Year 2000 issues to have a
material effect on its results of operations, liquidity or financial condition.
New Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 132, Employer's
Disclosures about Pensions and Other Postretirement Benefits ("SFAS 132"), which
is effective for fiscal years beginning after December 15, 1997. SFAS 132
standardizes the disclosure requirements for pension and other postretirement
benefits, requires additional information on changes in the benefit obligations
and fair values of plan assets that will facilitate financial analysis, and
eliminates certain disclosures. SFAS 132 does not change the measurement or
recognition of pension or other postretirement benefits. The adoption of SFAS
132 will not have a material effect on the Company's Consolidated Financial
Statements.
20
<PAGE>
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 98-5, Reporting on the Costs of
Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that entities expense
start-up costs and organization costs as they are incurred. The Company's
accounting practices are currently in compliance with SOP 98-5. In March 1998,
the AICPA issued SOP No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance
on expensing versus capitalization of software-related costs incurred for
internal use, as well as the amortization of capitalized software costs. SOP
98-1 requires computer software costs that are incurred in the preliminary
project stage to be expensed as incurred. The adoption of SOP 98-1 is not
expected to have a material effect on the Company's Consolidated Financial
Statements. SOP 98-5 and SOP 98-1 are effective for fiscal years beginning after
December 15, 1998.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"), which is effective for all
quarters of fiscal years beginning after June 15, 1999. SFAS 133 requires that
an entity recognize all derivatives as either assets or liabilities and measure
those instruments at fair value. Unless the entity can treat the derivative as a
hedge according to certain criteria, the entity may be required to deduct any
changes in the derivative's fair value from its operating income. The adoption
of SFAS 133 is not expected to have a material effect on the Company's
Consolidated Financial Statements.
Factors That Could Affect Operating Results
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those predicted by such forward-looking statements. These risks and
uncertainties include national and local conditions, as well as competition,
that could influence the levels (rate and volume) of retail, national and
classified advertising and circulation generated by the Company's various
markets and material increases in newsprint and magazine paper prices. They also
include other risks detailed from time to time in the Company's publicly-filed
documents, including this Quarterly Report on Form 10-Q and the Company's Annual
Report on Form 10-K for the period ended December 28, 1997.
21
<PAGE>
Item 4. Exhibits and Reports on Form 8-K
(a) Exhibits
10.7.1 Amendment to Lease between the Company and Z Edison
Limited Partnership, dated May 14, 1997.
10.7.2 Second Amendment to Lease between the Company and Z
Edison Limited Partnership, dated June 30, 1998.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
On September 24, 1998, the Company filed a Report on Form 8-K which is
reported under Item 5 the Company's entry into the following agreements on that
day: (i) a U.S. Distribution Agreement with Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Salomon Smith Barney Inc., (ii) an Exchange Rate
Agency Agreement with Morgan Stanley Dean Witter, and (iii) a Calculation Agent
Agreement with The Chase Manhattan Bank. These Agreements relate to the
Company's registration of up to $300,000,000 (or the equivalent in other
currencies) of Medium-Term Notes (the "Notes"), pursuant to (1) a Registration
Statement filed with the Securities and Exchange Commission (the "SEC") on Form
S-3 (File No. 333-62023) on August 21, 1998, and declared effective by the SEC
on August 28, 1998, and (2) a Prospectus Supplement, dated and filed with the
SEC on September 24, 1998.
22
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEW YORK TIMES COMPANY
--------------------------------
(Registrant)
Date: November 9, 1998 /S/ John M. O'Brien
---------------- -------------------------------
John M. O'Brien
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
23
<PAGE>
Exhibit Index to Quarterly Report Form 10-Q
Quarter Ended September 27, 1998
Exhibit No. Exhibit
10.7.1 Amendment to Lease between the Company and Z Edison Limited
Partnership, dated May 14, 1997.
10.7.2 Second Amendment to Lease between the Company and Z Edison Limited
Partnership, dated June 30, 1998.
12 Ratio of Earning to Fixed Charges.
27 Financial Data Schedule.
<PAGE>
Exhibit 10.7.1
AMENDMENT TO INDENTURE OF LEASE (the "Amendment") made as of this 14th day
of May, 1997, between Z EDISON LIMITED PARTNERSHIP, a New Jersey limited
partnership, having an office at 60 East 56th Street, New York, New York 10022,
hereinafter referred to as "Landlord" and THE NEW YORK TIMES NEWSPAPER DIVISION
OF THE NEW YORK TIMES COMPANY, a New York corporation, with its principal office
at 229 West 43rd Street, New York, New York 10036, hereinafter referred to as
"Tenant."
WITNESSETH
WHEREAS:
A. Landlord and Tenant entered into that certain Indenture of Lease dated
April 8, 1987 (the "Lease") by which Landlord leased to Tenant and Tenant leased
from Landlord certain property with improvements thereon commonly known as Lot
22-B-8, Block 795-D on the Edison Township Tax Map in the Township of Edison,
County of Middlesex, State of New Jersey (the "Demised Premises"); and
B. Crossroads Holding Corporation ("Crossroads"), an affiliate of Tenant
which directly or indirectly is wholly owned by Tenant, has requested that
Landlord grant it a license, inter alia, to construct, operate and maintain on
the Demised Premises a clubhouse and a portion of the driving tees structure
(the "Golf Center Improvements") at the locations designated on the site plan
attached hereto as Exhibit A and hereby made a part hereof, to be used in
conjunction with a golf center being constructed and to be operated by
Crossroads or another wholly-owned affiliate of Tenant on property owned by
Crossroads adjoining the Demised Premises and commonly known as Lot 22-B-9,
Block 795-D on the Edison Township Tax Map (the "Golf Center Premises"); and
C. Landlord is agreeable to granting a license to Crossroads for the Golf
Center Improvements only on condition that, if requested by Landlord, Tenant
agrees to demolish and remove or cause to be demolished and removed the Golf
Center Improvements from the Demised Premises upon the expiration or other
termination of the Lease. Upon request, Tenant is agreeable to so demolishing
and removing the Golf Center Improvements and restoring the Golf Center Premises
to substantially their condition and state of repair prior to construction of
the Golf Center Improvements.
NOW, THEREFORE, in consideration of the premises, the sum of Ten and 00/100
($10.00) Dollars and other good and valuable consideration in hand paid by each
party to the other, the receipt of which is hereby acknowledged, Landlord and
Tenant hereby amend the Lease as follows:
1. AMENDMENT OF SECTION 7.01.A. Section 7.01.A. is hereby amended by
adding at the end of the first sentence thereof on the sixth line, the words ",
except as provided in Section 7.02.C hereinafter set forth."
<PAGE>
2. ADDITION OF SECTION 7.02.C. A new section is hereby added to the
Lease as Section 7.02.C. as follows:
C. Upon the expiration or other termination of the term of this
Lease, if requested by Landlord, Tenant shall remove all of
Crossroad's (or those of such other wholly-owned affiliate of Tenant
as may operate the Golf Center Premises) personal property, equipment
and fixtures located in and on the Golf Center Improvements (the "Golf
Center Personalty"), demolish and remove the Golf Center Improvements
and restore that portion of the Demised Premises affected thereby to
substantially their condition and state of repair prior to the
construction of the Golf Center Improvements, said obligation to be
enforceable by an action for specific performance. The provisions of
this Section shall survive the expiration or sooner termination of
this Lease.
3. RATIFICATION OF LEASE. The Lease, as amended by this Amendment, is in
all respects ratified and confirmed.
-2-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively duly executed
this Amendment as of the date first above written.
WITNESS: Z EDISON LIMITED PARTNERSHIP,
a New Jersey limited partnership
/s/Linda R. Lebensold
- ------------------------ By: Z Investment Corp., its
general partner
By: /s/JOHN ZIRINSKY
-----------------------
John Zirinsky
President
THE NEW YORK TIMES COMPANY
/s/Linda R. Lebensold By: /s/RHONDA L. BRAUER
- ------------------------ ------------------------
Rhonda L. Brauer
Assistant Secretary
-3-
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on May 14, 1997, before me, the subscriber, a Notary
Public of the State of New York, personally appeared JOHN ZIRINSKY, the
President of Z Investment Corp., the General Partner of Z EDISON LIMITED
PARTNERSHIP, a New Jersey limited partnership, the Landlord in the within Lease,
who signed this Amendment by authority of the board of directors of Z Investment
Corp. as such General Partner, and he thereupon acknowledged that the execution
of this Amendment has been duly authorized by the Limited Partnership and that
this Amendment was signed and delivered by him on behalf of such General
Partner, as and for act and deed of Z Investment Corp. and as and for the act
and deed of the Limited Partnership.
/s/ Shien Chiou
-------------------------
A Notary Public of the
State of New York
[SEAL] My Commission Expires
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on May 14, 1997, before me, the subscriber, a Notary
Public of the State of New York, personally appeared Rhonda L. Brauer, who, I
am satisfied, is the person who signed the within document as Assistant
Secretary of THE NEW YORK TIMES COMPANY, a New York corporation, the Tenant
in the within document, and he thereupon acknowledged that the said document
made by the Corporation and sealed with its corporate seal and delivered by
him as such officer and as the voluntary act and deed of the Corporation,
made by virtue of authority from its Board of Directors.
/s/ Shien Chiou
-------------------------
A Notary Public of the
State of New York
[SEAL] My Commission Expires
-4-
<PAGE>
Exhibit 10.7.2
SECOND AMENDMENT TO INDENTURE OF LEASE ("Second Amendment") dated June 30,
1998, by and between Z EDISON LIMITED PARTNERSHIP, a New Jersey limited
partnership, having an office at 60 East 56th St., New York, NY 10022
(hereinafter called "Landlord") and NEW YORK TIMES NEWSPAPER DIVISION OF THE NEW
YORK TIMES COMPANY, a New York corporation, with its principal office at 279 W.
43rd St., New York, NY 10036 (hereinafter called "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have heretofore entered into a certain
Indenture of Lease dated April 8, 1987 (such Lease, as amended, is hereinafter
collectively referred to as the "Lease") pursuant to which Landlord leased to
Tenant and Tenant leased from Landlord certain property with improvements
thereon commonly known as Lot 22-B-8, Block 795-D on the Edison Township Tax Map
in the Township of Edison, County of Middlesex, State of New Jersey (the
"Demised Premises"); and
WHEREAS, Landlord and Tenant have agreed to extend the initial term of the
Lease and, in connection therewith, have agreed to modify and amend certain
options and other provisions of the Lease, all as more particularly set forth
herein.
NOW, THEREFORE, in consideration of the Premises and mutual covenants
hereinafter contained, the parties hereto hereby agree to supplement and amend
the Lease as follows:
1. All capitalized terms contained in this Second Amendment (and not
otherwise defined herein) shall, for the purposes hereof, have the same meaning
ascribed to them in the Lease.
2. The initial term of the Lease is hereby extended until May 31, 2018
upon and subject to all of the terms, covenants, agreements, provisions and
conditions set forth in the Lease as hereby modified, all with the same force
and effect as if said term, as hereby extended, were the term originally granted
with respect to the Demised Premises. Accordingly, the definition of
"Expiration Date" as set forth in Section 1.02 of the Lease is hereby modified
and amended to mean May 31, 2018, unless the term shall terminate sooner
pursuant to any of the provisions of the Lease or pursuant to law.
3. Section 1.03 of the Lease is hereby deemed deleted in its entirety.
4. Effective as of June 1, 1998 the annual Fixed Rent specified in the
Lease with respect to the initial term thereof shall be as follows:
(a) Six Million Four Hundred Thousand Dollars ($6,400,000) per annum
during the period from June 1, 1998 through May 31, 2007;
(b) Seven Million Seven Hundred and Fifty Thousand Dollars
($7,750,000)
<PAGE>
per annum during the period from June 1, 2007 through May 31, 2008;
(c) Nine Million Dollars ($9,000,000) per annum during the period
from June 1, 2008 through May 31, 2013; and
(d) Ten Million Dollars ($10,000,000) per annum during the period
June 1, 2013 through May 31, 2018.
The words "in the amount of $533,333.33" set forth in the third line of Section
3.01.B. shall be deemed deleted.
5. Article 25 of the Lease entitled "RIGHT TO EXTEND" is hereby deleted
in its entirety and is replaced with the following:
ARTICLE 25
RIGHT TO EXTEND
25.01. FIRST RENEWAL OPTION. Provided this Lease is in full force and
effect on such date, Tenant shall have the right by written notice (the
"First Renewal Notice") given to Landlord not later than eighteen (18)
months prior to the Expiration Date (i.e. by November 30, 2016) to elect to
extend the term of this Lease for a single twenty (20) year period (the
"First Renewal Option Period") commencing on June 1, 2018 and ending on May
31, 2038. In such event, the last day of the First Renewal Option Period
(i.e., May 31, 2038) shall be deemed the Expiration Date.
25.02. A. SECOND RENEWAL OPTION. Provided this Lease is in full force and
effect on such date, and Tenant has elected to extend this Lease for (i)
the First Renewal Option Period or (ii) the First and Second Rolling
Renewal Option Periods, Tenant shall have the right by written notice (the
"Second Renewal Notice") given to Landlord not later than eighteen months
prior to the then Expiration Date (i.e., by November 30, 2036) to elect to
extend the term of this Lease for a ten (10) year period (the "Second
Renewal Option Period") commencing on June 1, 2038 and ending on May 31,
2048. In such event, the last day of the Second Renewal Option Period
(i.e., May 31, 2048) shall be deemed the Expiration Date.
B. SECOND TWENTY YEAR RENEWAL OPTION. Provided this Lease is in full
force and effect on such date, and Tenant has elected to extend this Lease
for the First Rolling Renewal Option Period (as hereinafter defined),
Tenant shall have the right by written notice (the "Second 20 Year Notice")
given to Landlord not later than November 30, 2026, to elect to extend the
term of this Lease for a single twenty (20) year period (the "Second 20
Year Renewal Option Period") commencing on June 1, 2028 and ending on May
31, 2048. In the event Tenant extends the term of the Lease for the Second
20 Year
-2-
Renewal Option Period, the last day of the Second 20 Year Renewal
Option Period (i.e., May 31, 2048) shall be the Expiration Date.
C. FIRST ROLLING RENEWAL OPTION. Provided this Lease is in full
force and effect on such date, Tenant (as an alternative to the First
Renewal Option set forth in Section 25.01) shall have the right by written
notice (the "First Rolling Renewal Notice") given to Landlord not later
than ten (10) years and nine (9) months prior to the Expiration Date
(i.e., by August 31, 2007) to elect to extend the term of this lease for
a single ten (10) year period (the "First Rolling Renewal Option
Period") commencing on June 1, 2018 and ending on May 31, 2028. In such
event, the last day of the First Rolling Renewal Option Period (i.e.,
May 31, 2028) shall be the Expiration Date.
D. SECOND ROLLING RENEWAL OPTION. Provided (i) this Lease is in
full force and effect on such date, and (ii) Tenant has elected to extend
this Lease for the First Rolling Renewal Option Period, Tenant shall have
the right by written notice (the "Second Rolling Renewal Notice") given to
Landlord not later than ten (10) years and nine (9) months prior to
May 31, 2028 (i.e. by August 31, 2017), to elect to extend the term of this
Lease for a single ten (10) year period (the "Second Rolling Renewal
Option Period") commencing on June 1, 2028 and ending on May 31, 2038.
In event Tenant extends the term of the Lease for the Second Rolling
Renewal Option Period, the last day of the Second Rolling Renewal Option
Period (i.e., May 31, 2038) shall be the Expiration Date.
25.03. RENEWAL PERIOD TERMS. In each of the First Renewal Option Period,
Second Renewal Option Period, First Rolling Renewal Option Period, Second
Rolling Renewal Option Period and Second 20 Year Option Period, as the case
may be, Landlord and Tenant shall be bound by all the terms, covenants and
conditions of this Lease, except that the annual Fixed Rent for and during
the years covered by any such Option Periods shall be as follows:
(a) During the period June 1, 2018 through May 31, 2023 the annual
Fixed Rent shall be Eleven Million Dollars ($11,000,000) per annum;
(b) During the period June 1, 2023 through May 31, 2028 the annual
Fixed Rent shall be Twelve Million Dollars ($12,000,000) per annum;
(c) During the period June 1, 2028 through May 31, 2033 the annual
Fixed Rent shall be Thirteen Million Dollars ($13,000,000) per annum;
(d) During the period June 1, 2033 through May 31, 2038 the annual
Fixed Rent shall be Fourteen Million Dollars ($14,000,000) per annum;
(e) During the period June 1, 2038 through May 31, 2043 the annual
Fixed Rent shall be Fifteen Million Dollars ($15,000,000) per annum;
and
-3-
<PAGE>
(f) During the period June 1, 2043 through May 31, 2048 the annual
Fixed Rent shall be Sixteen Million Dollars ($16,000,000) per annum.
"25.04. NO FURTHER RENEWALS. Notwithstanding anything contained herein to
the contrary, in no event shall Tenant have the right to extend or renew
this Lease beyond May 31, 2048."
"25.05. TIME OF THE ESSENCE FOR RENEWAL NOTICE. Time shall be of the
essence in Tenant's giving each of the First Renewal Notice, the Second
Renewal Notice, the First Rolling Renewal Notice, the Second 20 Year Notice
and the Second Rolling Renewal Notice and may not be extended or
abbreviated for any reason, provided Tenant's right to exercise its option
for the First Renewal Option Period, the Second Renewal Option Period, the
First Rolling Renewal Option Period, the Second 20 Year Renewal Option
Period and the Second Rolling Renewal Option Period, as the case may be,
shall in no event expire prior to the Expiration Date until Landlord shall
have given to Tenant not less than thirty (30) days prior notice (which
notice may not be given (i) more than twenty (20) months prior to the
Expiration Date, with respect to the First Renewal Option Period, the
Second Renewal Option Period and the Second 20 Year Renewal Option Period,
(ii) prior to June 30, 2007, with respect to First Rolling Renewal Option
Period, and (iii) prior to June 30, 2017, with respect to the Second
Rolling Renewal Option Period ) of the prospective lapse of time to give
said First Renewal Notice, Second Renewal Notice, First Rolling Renewal
Notice, Second 20 Year Notice or Second Rolling Renewal Notice, as the case
may be (during which time Tenant may exercise the same) before Tenant loses
its rights to extend this Lease in accordance with Sections 25.01 and/or
Section 25.02 hereof."
6. (a) The first ten lines of Section 26.01. A. are hereby deleted and
are replaced as follows:
"26.01. A. FIRST OPTION NOTICE. Provided the Lease is then in full force
and effect and Tenant is not then in default in the payment of Fixed Rent,
Taxes and insurance premiums hereunder beyond any applicable cure period,
and Tenant shall not have extended the term of this Lease beyond May 31,
2018, Tenant shall have the option to purchase the Demised Premises ("First
Option") on a date to be designated by Tenant in the First Option Notice,
which date shall be within the 90 day period commencing on June 1, 2018 and
ending on August 31, 2018 (the "First Option Purchase Date") for a purchase
price of One Hundred Twenty Million Dollars ($120,000,000). The First
Option may be exercised only by Tenant (a) by delivering notice ("First
Option Notice") to Landlord or its assignee or transferee, not earlier
than June 1, 2014 and not later than November 30, 2016, . . ."
(b) The first ten lines of Section 26.01. B. of the Lease are hereby
deleted and
-4-
<PAGE>
shall be replaced as follows:
"26.01. B. SECOND OPTION NOTICE. Provided the Lease is then in full
force and effect and Tenant is not then in default in the payment of
Fixed Rent, Taxes and insurance premiums hereunder beyond any
applicable cure period, and Tenant shall have extended the term of
this Lease through (but not beyond) May 31, 2028, Tenant shall have
the option to purchase the Demised Premises ("Second Option") on a
date to be designated by Tenant in the Second Option Notice, which
date shall be within the 90 day period commencing on June 1, 2028 and
ending on August 31, 2028 (the "Second Option Purchase Date") for a
purchase price of One Hundred Forty Million Dollars ($140,000,000).
The Second Option may be exercised only by Tenant (a) by delivering
notice thereof ("Second Option Notice") to Landlord or its assignee or
transferee, not earlier than June 1, 2024 and not later than November
30, 2026, and (b) delivering to Landlord's . . ."
(c) The first ten lines of Section 26.01. C. of the Lease are
hereby deleted and shall be replaced as follows:
"26.01. C. I. THIRD OPTION NOTICE. Provided the Lease is then in
full force and effect and Tenant is not then in default in the payment
of Fixed Rent, Taxes and insurance premiums hereunder beyond any
applicable cure period, and Tenant shall have extended the term of the
Lease through (but not beyond) May 30, 2038, Tenant shall have the
option to purchase the Demised Premises ("Third Option") on a date to
be designated by Tenant in the Third Option Notice, which date shall
be within the 90 day period commencing on June 1, 2038 and ending on
August 31, 2038 (the "Third Option Purchase Date") for a purchase
price of One Hundred Sixty Million Dollars ($160,000,000). The Third
Option may be exercised only by Tenant (a) by delivering notice
thereof ("Third Option Notice") to Landlord or its assignees or
transferee, not earlier than forty eight (48) months prior to June 1,
2034 and not later than November 30, 2036, and (b) delivering to
Landlord's attorneys. . .".
(d) The following Section 26.01. C. II shall be added to the
Lease:
"26.01. C. II. FOURTH OPTION NOTICE. Provided the Lease is then in
full force and effect and Tenant is not then in default in the payment
of Fixed Rent, Taxes and insurance premiums hereunder beyond any
applicable cure period, and Tenant shall have extended the term of the
Lease through May 30, 2048, Tenant shall have the option to purchase
the Demised Premises ("Fourth Option") on a date to be designated by
Tenant in the Fourth Option Notice, which date shall be within the 90
day period commencing on June 1, 2048 and ending on August 31, 2048
(the "Fourth Option Purchase Date") for a purchase price of One
Hundred Eighty Million Dollars ($180,000,000). The Fourth Option may
be exercised only by Tenant (a) by delivering notice thereof ("Fourth
Option Notice") to Landlord or its assignees or transferee, not
earlier than June 1, 2044 and not later than
-5-
<PAGE>
November 30, 2046, and (b) delivering to Landlord's attorneys,
simultaneously with the Fourth Option Notice, a bank or certified
check to the order of Landlord's attorneys in the amount of
$5,000,000.00, which amount shall be held in escrow by Landlord's
attorneys pending closing of title and applied to the purchase price
or disbursed as otherwise hereinafter provided.
(e) The first seven lines of Section 26.01. D. of the Lease are
hereby deleted and shall be replaced as follows:
"26.01. D. EXERCISE OF OPTION. For purposes of this Article 26, the
term "Option(s)" shall refer to the First Option, Second Option, Third
Option and Fourth Option, as the case may be. Exercise of the First
Option shall automatically be deemed an extension by Tenant of the
term of the Lease for the First Renewal Option Period, exercise of the
Second Option shall automatically be deemed an extension by Tenant of
the term of this Lease for the Second 20 Year Rolling Renewal Option
Period, exercise of the Third Option shall automatically be deemed an
extension by Tenant of the term of this Lease for the Second Renewal
Option Period. In the event that... .
(f) Section 26.02 of the Lease shall be deleted in its entirety
and shall be replaced as follows:
"26.02. DATE OF CLOSING. The closing of Title shall occur at the
office of Landlord's attorneys on the First Option Purchase Date,
Second Option Purchase Date, Third Option Purchase Date or Fourth
Option Purchase Date, as the case may be, which date may be extended
in accordance with the provisions of the Contract of Sale (it being
agreed that during the period between the Expiration Date and the
Fourth Option Purchase Date (as so extended), the Lease shall be
deemed extended on the same terms and conditions as were in effect
during the Second Renewal Period or the Second 20 Year Renewal Option
Period, as the case may be).
(g) The following items shall be added to the list of "Permitted
Exceptions" as set forth on Exhibit B to the Contract of Sale attached to
the Lease as Exhibit VII (as well as the list of "Liens and Encumbrances"
attached to the Lease as Exhibit II):
9. Deed of Temporary Easement dated May 14, 1997 between and
among Landlord, Crossroads Holding Corporation and Middlesex
County Improvement Authority.
10. Deed of Permanent Easement and Maintenance Agreement dated
May 14, 1997 between Landlord, Crossroads Holding
Corporation and the County of Middlesex.
11. License Agreement dated May 14, 1997, as amended, between
and
-6-
<PAGE>
among, Landlord, Crossroads Holding Corporation, Tenant and
the New York Branch of Fuji Bank Limited.
12. Any easement granted by Landlord to an Offeror Purchaser
pursuant Section 11 of this Second Amendment.
7. (A) Landlord and Tenant acknowledge that pursuant to Section 7.01
A and Section 7.02 of the Lease, Tenant has certain obligations to repair
and restore the Demised Premises at the Expiration Date or sooner
termination of the term of the Lease and to return such Demised Premises to
the Landlord free of certain property and equipment set forth in said
Section 7.01 A and Section 7.02 and otherwise in the condition required in
said Sections 7.01 A and 7.02 (the "Required Condition"). Tenant agrees
that (except with respect to the Absolute Obligations, which shall be
affirmative obligations of Tenant to perform prior to the Expiration Date
or sooner termination of the term of the Lease in accordance with the terms
set forth below), if at the Expiration Date or sooner termination of the
term of this Lease, the Demised Premises is in other than the Required
Condition, Tenant shall be required to pay to Landlord the amount
("Restoration Amount") required to place the Demised Premises in the
"Required Condition"; provided, however, that with respect to any
Restoration Amount that may be due to Landlord at the end of the term of
this Lease on account of the existing conditions in the Premises (e.g. the
improvements, additions and alterations currently existing in the Demised
Premises) as of the date hereof (the "Current Conditions"), if Tenant
elects to extend the term of the Lease (pursuant to the option provisions
set forth in the Lease) though May 28, 2028 and the Lease is in full force
and effect as of May 31, 2028, then such Restoration Amount on account of
the Current Conditions (exclusive of the Absolute Obligations of Tenant
which shall in no event be affected or reduced) shall be reduced by 25%; if
Tenant elects to extend the term of the Lease (pursuant to the option
provisions set forth in the Lease) through May 31, 2038 and the Lease is in
full force and effect as of May 31, 2038, then such Restoration Amount on
account of the Current Conditions (excluding the Absolute Obligations of
Tenant, which shall in no event be affected or reduced) shall be reduced by
50%; and if Tenant elects to extend the term of the Lease (pursuant to the
option provisions set forth in the Lease) through May 31, 2048 and the
Lease is in full force and effect as of May 31, 2048, then such Restoration
Amount on account of the Current Conditions (exclusive of the Absolute
Obligations of Tenant, which shall in no event be affected or reduced)
shall be reduced by 75%. Tenant agrees to provide Landlord with "as built"
drawing showing the Current Conditions of the Demised Premises within
twenty (20) days following the date hereof. The Restoration Amount (as
reduced hereby) shall be paid by Tenant to Landlord no later than the date
Tenant vacates the Demised Premises and delivers same to Landlord hereunder
(but in no event subsequent to the Expiration Date). Landlord, as part of
Landlord's repair/restoration notice(s) that Landlord sends to Tenant
pursuant to Sections 7.01 A and 7.02 of the Lease, shall provide Tenant
with Landlord's estimate of the Restoration Amount (including a reasonable
breakdown of the COSTS of the work required under the Lease, as amended
hereby) that Landlord believes will be due by Tenant based on the
conditions then existing in the Demised Premises at the time of such
notice(s) (subject to adjustment based on changed conditions at the end of
the term). (In connection therewith, Tenant agrees to cooperate with
Landlord in providing Landlord with (i) access to the Demised Premises and
(ii) up-to-date
-7-
<PAGE>
"as built" drawings showing the then existing conditions of the Demised
Premises, if and to the extent same are in the possession of Tenant or its
affiliates.) In the event Tenant shall disagree with Landlord's estimate
of the Restoration Amount, Tenant shall deliver to Landlord its written
notice ("Tenant's Statement") of such disagreement within thirty (30) days,
specifying in reasonable detail the basis for Tenant's disagreement and the
amount of the Restoration Amount that Tenant believes is due. In the event
Landlord and Tenant shall be unable to agree on the COST of any work
required to put the Demised Premises in the Required Condition (as opposed
to any disagreement as to whether or not any removal or work is part of the
Required Conditions (e.g. the constituent components of the Required
Conditions) or whether the then existing condition meets the Required
Conditions, which disputes shall be decided by a court of law), then either
party may submit such COST dispute to arbitration for determination in New
York County, State of New York in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then prevailing
in such jurisdiction. Landlord and Tenant agree that any determination as
to such COST dispute made by the arbiter designated in such proceeding
shall not exceed the amount of the total COST as determined by Landlord in
Landlord's estimate, nor shall such determination be less than the total
COST as determined by Tenant in Tenant's Statement. Any determination or
award (as to such cost items) made in such arbitration shall be final and
binding on the parties and shall not add to, or subtract from, or otherwise
modify the provisions of the Lease (as modified hereby). Judgment upon
any such determination or award which may be arbitrated hereunder may be
entered in any court having jurisdiction hereunder. Pending the resolution
of any disputes between the parties (by way of arbitration or court action,
as the case may be) relating to the Restoration Amount, Tenant shall pay to
Landlord, no later than the date Tenant vacates the Demised Premises and
delivers same to Landlord, fifty percent of the sum of (i) the estimated
Restoration Amount as determined by Landlord, plus (ii) the estimated
Restoration Amount as set forth in Tenant's Statement (and upon the
resolution of such dispute(s), suitable adjustment, with interest at the
Prime Rate, shall be made in accordance therewith with appropriate refund
or additional payments, as the case may be, being made by the relevant
party to the other).
(B) The Landlord acknowledges that no Restoration Amount shall be
due and payable by Tenant to Landlord in the event that the Demised
Premises is purchased by Tenant pursuant to the exercise by Tenant of (I)
the First Option, Second Option, Third Option or Fourth Option pursuant to
Article 26 of the Lease, or (ii) the right of first offer or first refusal
pursuant to Article 27 of the Lease.
(C) Notwithstanding anything contained herein or in the Lease to
the contrary, it is understood and agreed that, in addition to the
Restoration Amount (as reduced hereby) payable by Tenant to Landlord
hereunder, Tenant, before surrendering the Demised Premises to Landlord,
shall be required (herein collectively the "Absolute Obligations") to (i)
remove any and all equipment pads, equipment footings, equipment
foundations, tracks (including the railroad tracks installed by Tenant and
the restoration of the slab which was removed in connection with the
installation of same) and pits and shall backfill same with a concrete slab
level with the original floor slab of the Demised Premises and otherwise
shall repair and flash
-8-
<PAGE>
patch (with concrete floor topping) the entire floor surface of the Demised
Premises so as to leave same with a level concrete floor slab without
holes, troughs, pads, foundations, pits, tracks or any other non-level
floor conditions created by Tenant during the term of this Lease (herein
referred to as the "Floor Slab Work"), (ii) perform all work necessary
and/or required to place the existing office portion ("Office Portion") of
the Demised Premises (including, without limitation, the HVAC equipment and
other systems relating thereto) in the Required Condition and (iii) remove
all of Tenant's personal property, equipment and fixtures, (including,
without limitation all pulleys and conveyors, printing presses, printing
press installations, paper feeding equipment, and other production and
ancillary equipment) and repair any damage caused by such removal,
(including filling in any holes created by the equipment removal),
provided, however, that Tenant shall not (as part of such removal
requirement set forth in this subclause (iii)) be required to remove the
mezzanine levels or catwalks ("Mezzanine") within the warehouse portion of
the Demised Premises or the HVAC and air withdrawal systems or the piping
related to the printing presses, it being agreed, however, that the removal
of these items shall be items that are required of Tenant in order to put
the Demised Premises in the Required Condition and, accordingly, shall be
included in the cost analyses in determining the Restoration Amount (as
reduced hereby) payable by Tenant to Landlord hereunder. It is understood
and agreed that the obligation of Tenant to perform the Absolute
Obligations shall in no way be affected or reduced on account of any
extension of the term of the Lease by Tenant as set forth above.
(D) Landlord acknowledges and agrees that (notwithstanding
anything herein to the contrary) at the Expiration Date or sooner
termination of the term of the Lease, Tenant shall not be obligated to (i)
remove the currently existing drive-in truck loading docks installed by
Tenant, (ii) perform any restoration of the slab removed by Tenant to
install such currently existing truck loading docks, (iii) perform any
backfill or regrading of land affected by the installation of such
currently existing loading docks, (iv) remove the loading dock doors (and
related mechanical equipment to open and close such loading dock doors)
relating to such currently existing loading docks, or (v) restore any
exterior or interior walls which were removed to install such currently
existing loading dock doors, and, accordingly, the removal and performance
thereof shall not be taken into account in determining the Restoration
Amount; provided however, that the foregoing shall in on way affect or
prejudice the interpretation and/or construction of the provisions of
Article 7 of the Lease with respect to the installation or construction of
any future loading docks, truck bays or other floor area/slab removals as
may be installed or performed by Tenant in the Demised Premises after the
date hereof.
(E) The provisions set forth above in this Section 7 (relating to
the Tenant's restoration and/or removal obligations at the end of the term
of the Lease) shall in no way effect or limit the obligations of Tenant
(including, without limitation, its repair obligations) with respect to
Demised Premises during the term of the Lease.
8. Section 17.05.B. of the Lease is hereby deleted in its entirety
and is replaced with the following:
-9-
<PAGE>
B. If the Demised Premises should be damaged or destroyed by fire to such
an extent that Tenant in its reasonable judgment cannot operate its
business in the balance of the Demised Premises and the term of this Lease
(as previously extended hereunder pursuant to Article 25 hereof) is
scheduled to expire within a period of three years after such damage or
destruction, Tenant shall have the right to terminate this Lease by giving
Landlord notice of such election within ninety (90) days after such damage
or destruction, and if such notice is given, the term of this Lease shall
terminate thirty (30) days following such notice provided, Tenant (i)
delivers all insurance proceeds with respect to the Building (exclusive of
those proceeds covering Tenants fixtures, equipment and personal property)
or assigns its rights to such insurance proceeds to the Landlord and (ii)
pays to the Landlord Rent which would otherwise become due and payable
through the expiration of the term of the Lease (as extended hereunder
pursuant to Article 25 hereof) except for the last two years thereof.
Notwithstanding the above, in no event shall Tenant have the right to
terminate the Lease if Tenant has exercised any of the Options to purchase
the Demised Premises as provided for in Article 26 hereof.
9. The first ten lines of Section 18.03 of the Lease is hereby deleted
and are replaced as follows:
"18.03. PAYMENT OF CONDEMNATION AWARD - TERMINATION. In the event of any
condemnation or taking which results in the termination of this Lease as
provided for in Section 18.01 above, Tenant shall have the right,
exercisable by notice of its election to Landlord delivered within thirty
days following such condemnation or taking to elect to purchase the Demised
Premises pursuant to the next immediately available Option that is
available to Tenant pursuant to the provisions of Article 26 hereof (i.e. ,
if such condemnation or taking shall occur prior to May 30, 2018, the First
Option, if the condemnation , or taking occurs prior to May 30, 2028, the
Second Option, etc.). Such purchase shall take place in accordance with
the provisions of Article 26 hereof, except that the closing of the
purchase thereof shall take place on the earlier to occur of (i) the date
of vesting of title or (ii) within sixty (60) days following the date on
which notice of vesting of title shall have been received by Tenant.
Tenant shall be required to pay to the Landlord the purchase price as
required pursuant to the Option exercise by the Tenant as set forth in
Article 26 hereof, together with Rent through the earlier to occur..."
10. RIGHT OF FIRST REFUSAL - GOLF CENTER PREMISES. Crossroads Holding
Corporation ("Crossroads"), a wholly owned subsidiary of Tenant, is the owner of
the property (adjoining the Demised Premises) commonly known as Lot 22-B-9,
Block 795-D on the Edison Township Tax Map (the "Adjacent Golf Premises"), which
Adjacent Golf Premises is currently being operated by Crossroads/Tenant as a
golf training, learning and recreational center for use by Tenant or Tenant's
affiliates, business invitees, guests, employees and customers. If Crossroads
(or Tenant or any Affiliate of Tenant who shall then own the Adjacent Golf
Premises) (collectively the "Seller") shall at any time wish to sell the
Adjacent Golf Premises (which, for purposes hereof, shall include the sale of
its ownership interests in Crossroads or such other structure that would
-10-
effectively transfer the beneficial ownership of the Adjacent Golf Premises) to
a non-affiliated entity, Seller must first comply with the following provisions.
Seller hereby grants to Landlord (or its designated affiliate) a right
of first refusal with respect to any bona fide offer Seller receives to purchase
the Adjacent Golf Premises from any non-affiliated entity. Upon receipt of an
offer to purchase, Seller shall deliver notice to Landlord (or its designated
affiliate) ("Refusal Notice"), together with the agreement of sale and all other
agreements containing the purchase price and other material terms, covenants and
conditions contained in the offer to purchase (hereinafter collectively referred
to as the "Agreement of Sale"). Landlord (or its designated affiliate) shall
have a period of ten (10) days following delivery of the Refusal Notice to
exercise its right to purchase and shall exercise that right to purchase by
executing and delivering the Agreement of Sale together with a certified or bank
check in an amount equal to the amount of the cash deposit required thereunder
to Seller's attorney or Seller, as such Agreement of Sale provides. In the
event that the Agreement of Sale provides terms, covenants or conditions which
are unique or non-monetary (e.g., an exchange of specified property or personal
liability obligation) then acceptance thereof by Landlord (or its designated
affiliate) may be accomplished by terms that provide equal or better economic
benefit to Seller. If Landlord (or its designated affiliate) exercises its
right to purchase under this provision, title shall close in accordance with the
terms and conditions set forth in the Agreement of Sale. If Landlord (or its
designated affiliate) fails to exercise its right of first refusal within the
ten (10 ) day period, Seller shall be free to consummate the sale of the
Adjacent Golf Premises with the offeror (the "Offeror Purchaser") pursuant to
the terms, covenants and conditions set forth in the Agreement of Sale and in
any event not later than six (6) months following of the Refusal Notice
11. In the event (i) Tenant shall have complied with the provisions
of Section 10 hereof (relating to Landlord's right of first refusal with respect
to the proposed sale of the Adjacent Golf Premises to the Offeror Purchaser in
question) and Landlord has elected not to exercise its right of first refusal
with respect thereto, and (ii) so long as this Lease is in full force and effect
and Tenant is not in monetary default thereunder beyond any applicable notice
and cure periods, Landlord agrees, at the request of Tenant, to grant and convey
to such Offeror Purchaser who purchases the Adjacent Golf Premises during the
term of this Lease (at the closing of such sale to such Offeror Purchaser), an
Exit Only Easement (as defined below) crossing over certain portions of the
Land. In consideration of Landlord conveying the Exit Only Easement to the
Offeror Purchaser as set forth above, Tenant agrees to pay to Landlord the "fair
market value" of the Exit Only Easement upon the granting thereof (or, if such
fair market value shall not, as of such granting, have been agreed upon or
established, then within ten (10) days of the date such fair market value shall
have been agreed upon or established). Within thirty (30) days following
Tenant's request of Landlord for a determination of the "fair market value" of
the Exit Only Easement (which notice by Tenant may be given to Landlord at any
time Tenant has a bona fide intention to sell the Adjacent Golf Premises in
good faith regardless of whether Tenant has identified the Offeror Purchaser
and/or has negotiated the Agreement of Sale with such Offeror Purchaser or has
yet to comply with Section 10 of this Second
-11-
<PAGE>
Amendment), Landlord shall advise Tenant of its determination of the "fair
market value" of the Exit Only Easement ("Landlord's FMV Determination");
provided, however, that Landlord's FMV Determination shall only remain valid for
up to nine (9) months following the giving thereof, and if Tenant shall request
Landlord for Landlord's FMV Determination more than once in any thirty (30)
month period, Tenant shall be required to reimburse Landlord for all costs and
expenses incurred by Landlord in determining Landlord's FMV Determination and
the "fair market value" of the Exit Only Easement for all such additional
requests (after the first) within such thirty month period (including, without
limitation, Landlord's costs of any outside appraisers or experts as well as
Landlord's costs incurred in any arbitration relating to such request(s).
Tenant shall have a period of twenty (20) days after receipt of Landlord's FMV
Determination to either (i) accept Landlord's FMV Determination or (ii) notify
Landlord that it disputes Landlord's FMV Determination of the Exit Only Easement
and submit to Landlord Tenant's determination of the "fair market value" of the
Exit Only Easement ("Tenant's FMV Response"). If Tenant shall fail to so
dispute such Landlord's FMV Determination within such twenty (20) day period,
Tenant shall be deemed to have irrevocably accepted such Landlord's FMV
Determination (provided Landlord's FMV Determination also advises Tenant that
failure to dispute such Landlord's FMV Determination within such twenty (20) day
period shall constitute Tenant's acceptance thereof). If Landlord fails to
respond to Tenant's original request for Landlord's FMV Determination within the
thirty (30) day period set forth above, Tenant may submit to Landlord, within
twenty days thereof, Tenant's determination of the "fair market value" of the
Exit Only Easement ("Tenant's FMV Determination"). In such event, Landlord
shall thereafter have a period of twenty (20) days following the receipt of
Tenant's FMV Determination to either (i) accept Tenant's FMV Determination or
(ii) notify Landlord that it disputes Tenant's FMV Determination of the Exit
Only Easement and submit to Tenant Landlord's FMV Determination. If Landlord
shall fail to so dispute such Tenant's FMV Determination within such twenty day
period, Landlord shall be deemed to have irrevocably accepted such Tenant's FMV
Determination of the Exit Only Easement (provided Tenant's FMV Determination
also advises Landlord that failure to dispute such Tenant's FMV Determination
within such twenty (20) day period shall constitute Landlord's acceptance
thereof). If the Tenant timely disputes Landlord's FMV Determination with
Tenant's FMV Response, or if the Landlord timely disputes Tenant's FMV
Determination with Landlord's FMV Determination, as the case may be, the parties
shall attempt to agree upon the fair market value for such Exit Only Easement
within twenty (20) days thereafter. If the parties are unable to reach such an
agreement within such twenty (20) days, then either party may submit such
dispute to arbitration for determination in Middlesex County, State of New
Jersey in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then prevailing in such jurisdiction. The arbitrator
selected to arbitrate such dispute shall have at least ten (10) years of
experience in the determination of values of commercial real estate in the State
of New Jersey. Within thirty days following the appointment of the arbitrator,
the arbitrator shall schedule a hearing where the parties and their advocates
shall have the right to present evidence, call witnesses and experts and cross
examine the other parties witnesses and experts, and the arbitrator shall within
fifteen days thereafter submit its final determination of the "fair market
value" of the Exit Only Easement. Landlord and Tenant agree that any
determination of the "fair market value" of the Exit Only
-12-
<PAGE>
Easement made by the arbitrator designated in such proceeding shall not exceed
Landlord's determination of the "fair market value" as set forth in Landlord's
FMV Determination nor shall such determination be less than the "fair market
value" as determined by Tenant in its Tenant's FMV Response or Tenant's FMV
Determination, as the case may be. Any determination or ruling made in such
arbitration by the arbitrator shall be final and binding on the parties and the
arbitrator shall not add to, or subtract from, or otherwise modify the
provisions of this Second Amendment. Each party shall pay one half of the fees
and expenses of the arbitrator appointed in such arbitration and any attorneys
fees, witness fees and similar expenses of the parties shall be borne separately
by each of the parties. In the event the fair market value of the Exit Only
Easement shall not have been determined by the time that the Offeror Purchaser
is purchasing the Adjacent Golf Premises, Landlord agrees not to withhold the
granting of such Exit Only Easement in conjunction with such sale to the Offeror
Purchaser, provided, however, that Tenant shall remain liable and responsible
for the payment of the fair market value of the Exit Only Easement and shall
execute and acknowledge such liability and obligation in writing to Landlord at
the time of the granting of the Exit Only Easement.
For purposes of this Section 11, the "fair market value" of the Exit Only
Easement shall mean the amount that a willing owner of land under no compulsion
would agree to accept from a purchaser and what such willing purchaser under no
compulsion would agree to pay to the owner of such land for the right to utilize
the Exit Only Easement, taking into account the highest and best use of the
Adjacent Golf Premises (and the increased value thereof) as well as any
diminution in the value of the Demised Premises on account of the granting of
the Exit Only Easement and all other relevant factors pertaining thereto.
For purposes hereof, the "Exit Only Easement" shall mean a non-exclusive
easement (but only for the benefit of the Offeror Purchaser and it successors
and assigns who shall then own the Adjacent Golf Premises) for the exiting of
vehicular travel running from the Adjacent Golf Premises over and above certain
roadways or parking areas on the Demised Premises to the existing main entrance
driveway of the Demised Premises (herein the "Connecting Road"), and the right
to proceed therefrom by way of a left turn into such existing main driveway
(utilizing only one lane thereof) ( the"Driveway Easement Portion") for left
turn egress only onto Woodbridge Avenue at the traffic light fronting Woodbridge
Avenue in a manner which will not interfere with Landlord's (and Landlord's
tenants) ability to make a left turn onto Woodbridge Avenue from its egress
lanes. The location and dimensions of the Exit Only Easement shall be as
specifically shown and plotted on Exhibit A attached hereto and made part hereof
and such Offeror Purchaser shall have no right to access or use any other
portion of Landlord's property except as specifically plotted thereon. Tenant
acknowledges and agrees that said Exit Only Easement, as shown on the attached
Exhibit A, has been approved by Tenant and is satisfactory to Tenant in all
respects. Owner makes no representations or warranties of any kind with respect
to the utilization or sufficiency of the Exit Only Easement. All costs and
expenses to construct and/or permit Tenant to utilize the Exit Only Easement for
left turn egress onto Woodbridge Avenue, including, without limitation, the
cost of constructing the Connecting Road and the Alternate Driveway Easement
Portion (as defined below), shall be at Tenant's sole cost and
-13-
<PAGE>
expense. If (i) all necessary permits for a third lane of egress onto
Woodbridge Avenue (i.e. the right to add one additional outgoing lane onto
Woodbridge Avenue to the two already existing) are obtained, and (ii) Landlord
(and its tenants) will be permitted to make a left turn onto Woodbridge Avenue
from the two lanes that will remain for Landlord's (or its tenant's) use, then
(A) Landlord agrees to segregate the Driveway Easement Portion from the
remaining two egress lanes utilizing a method chosen by Landlord, at Landlord's
sole cost and expense, and (B) Landlord shall have the right to remove the
existing meridian divider at the entrance to the Demised Premises and the
location of the Driveway Easement Portion of the Exit Only Easement may be moved
by Landlord to a new lane created over the existing meridian divider ("Alternate
Driveway Easement Portion"), as more particularly set forth on Exhibit B
attached hereto and made part hereof. Control of traffic on and over the
Demised Premises shall be in the sole discretion of the Landlord, but the
Landlord agrees to act in good faith and not to unreasonably restrict egress
from the Adjacent Golf Premises over the Exit Only Easement, consistent with and
subject to the Landlord's own needs for smooth ingress and egress of traffic to
and from to the Demised Premises and its right to an orderly and prompt traffic
flow of vehicles to and from the Demised Premises and the business coming into
and going out of the Demised Premises. The form of the agreement memorializing
the granting of the Exit Only Easement shall (A) specifically provide that the
Offeror Purchaser (and its successors and assigns who shall then own the
Adjacent Golf Premises) shall (i) repair and maintain the Exit Only Easement
(and shall reimburse Landlord for the cost thereof if such Offeror Purchaser
shall fail to do so), (ii) indemnify, defend and hold Landlord and its partners,
shareholders, officers, employees, agents and representatives harmless from and
against any and all liabilities, costs (including reasonable attorneys fees),
liens, actions, claims, damages and obligations arising from or in connection
with the Exit Only Easement or any act, omission, breach or default by such
Offeror Purchaser (or such successors and assigns), and (iii) specifically
restrict Offeror Purchaser (and its successors and assigns) from using (x) the
Exit Only Easement for incoming traffic onto the Adjacent Golf Premises or for
outgoing right hand turns onto Woodbridge Avenue and (y) any lanes of the
existing main driveway other than the left-most lane thereof (from the
standpoint of someone exiting the property) as the Driveway Easement Portion of
the Exit Only Easement; and (B) in all other respects shall be reasonably
satisfactory to Landlord (and, subject to the foregoing provisions of this
Section 11, the Tenant).
12. The first nine (9) lines of subclause (b) of Section 2.04 of the
Contract of Sale attached to the Lease as Exhibit VII, shall be modified to
read as follows: " (b) terminate the Agreement by written notice to Seller in
which event the Net Lease shall be reinstated and in full force and effect and
the provisions of Article 25 of the Net Lease shall be deemed to be amended to
provide for two additional renewal options of twenty years and eighteen years,
respectively, which may be exercised in the same manner as set forth in Section
25.02 of the Net Lease (so long as Tenant has previously elected to extend the
term of the Net Lease to the date immediately preceding the additional renewal
period in question) and the annual Fixed Rent for each such additional renewal
period shall be $16,000,000 and the Deposit and interest earned thereon, if . .
."
-14-
<PAGE>
13. The Bank of New York shall be added to the list of entities who may
be chosen by Tenant as "Insurance Trustee" pursuant to Section 17.02 of the
Lease.
14. All references in the Lease (and the Exhibits attached thereto) to
ECRA shall be deemed to refer to ECRA as same has been replaced and modified by
the Industrial Site Recovery Act, (N.J.S.A. Section 13:K-6 ET. SEQ.) ("ISRA").
15. From and after the date hereof, all notices under the Lease
hereinafter delivered by Tenant to Landlord pursuant to Article 22 of the Lease
shall be sent to Landlord at the following addresses:
Z Edison Limited Partnership
60 East 56th Street
New York, NY 10022
Attn: John Zirinsky
With a copy to:
Lewis R. Kaster, Esq.
Robinson Silverman Pearce
Aronsohn & Berman, LLP
1290 Avenue of the Americas
New York, NY 10104
16. Landlord and Tenant each covenant and represent to the other that this
Second Amendment was not brought about or procured through the use or
instrumentality of any broker and that all negotiations with respect to the
terms of this Second Amendment were conducted between Landlord and Tenant.
Tenant covenants and agrees that should any claim be made by any broker or other
person for a brokerage commission or other compensation in connection with the
negotiation, execution or procurement of this Second Amendment by, through or on
account of any acts of Tenant or its representatives, Tenant will indemnify and
hold harmless Landlord from any and all liabilities and expenses in connection
therewith. Landlord covenants and agrees that should any claim be made by any
broker or other person for a brokerage commission or other compensation in
connection with the negotiation, execution or procurement of this Second
Amendment by, through or on account of any acts of Landlord or its
representatives, Landlord will indemnify and hold harmless Tenant from any and
all liabilities and expenses in connection therewith.
17. Except as extended and modified by this Second Amendment, the Lease
and all covenants, agreements, terms and conditions contained therein shall
remain in full force and effect and are hereby in all respects ratified and
confirmed.
-15-
<PAGE>
18. This Second Amendment shall not be binding upon Landlord or Tenant
unless and until it is signed by both Landlord and Tenant.
19. The covenants, agreements, terms, provisions and conditions contained
in this Second Amendment shall bind and inure to the benefit of the parties
hereto and their respective successors and, except as otherwise provided in the
Lease as extended and modified by this Second Amendment, their respective legal
successors and assigns.
20. This Second Amendment contains the entire agreement between the
parties with respect to the subject matter hereof and may not be changed orally
but only by a writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
21. This Second Amendment shall be governed by and interpreted in
accordance with the laws of the State of New Jersey.
22. Landlord and Tenant agree that, at the request of either, each will
execute a memorandum of this Second Amendment in form satisfactory for recording
in the offices of the Middlesex County Clerk. In no event shall this Second
Amendment be recorded by either party without the consent of both parties
hereto.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the day and year first above written.
LANDLORD:
Z EDISON LIMITED PARTNERSHIP
By: Z Investment Corp.
Witness:
/s/ Kecia Wilson By: /s/ John Zirinsky
- --------------------- -----------------------
John Zirinsky, Pres.
- -------------
TENANT:
THE NEW YORK TIMES COMPANY
Witness:
/s/ James W. Sapp BY: /s/ Rhonda L. Brauer
- ------------------- --------------------------
Rhonda L. Brauer, Assistant Secretary
/s/ Rosie Cubero
- --------------------
-17-
<PAGE>
Exhibit 12
THE NEW YORK TIMES COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands, except ratio)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EARNINGS FROM CONTINUING OPERATIONS BEFORE FIXED CHARGES
Income before income taxes, income from joint ventures and
an extrordinary item (A) $ 91,084 $ 79,636 $ 344,560 $ 288,533
Less net gain of dispositions of assets - - (12,619) -
Distributed earnings from less-than-fifty-percent-owned affiliates 4,480 4,013 11,336 9,774
--------- --------- --------- ---------
Adjusted pretax earnings from continuing operations 95,564 83,649 343,277 298,307
Fixed charges less capitalized interest 13,515 15,270 41,166 41,756
--------- --------- --------- ---------
EARNINGS FROM CONTINUING OPERATIONS BEFORE FIXED CHARGES $ 109,079 $ 98,919 $ 384,443 $ 340,063
========= ========= ========= =========
FIXED CHARGES
Interest expense, net of capitalized interest $ 11,164 $ 12,639 $ 34,114 $ 33,864
Capitalized interest 243 260 173 5,293
Portion of rentals representative of interest factor 2,351 2,631 7,052 7,892
--------- --------- --------- ---------
TOTAL FIXED CHARGES $ 13,758 $ 15,530 $ 41,339 $ 47,049
========= ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES 7.93 6.37 9.30 7.23
========= ========= ========= =========
</TABLE>
(A) 1998 excludes a $13.7 million pretax extraordinary item in April resulting
from the early extinguishment of certain long term debt.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> SEP-27-1998
<CASH> 31,825
<SECURITIES> 0
<RECEIVABLES> 332,184
<ALLOWANCES> 21,913
<INVENTORY> 34,612
<CURRENT-ASSETS> 491,606
<PP&E> 2,254,098
<DEPRECIATION> 913,490
<TOTAL-ASSETS> 3,454,160
<CURRENT-LIABILITIES> 664,927
<BONDS> 0
0
0
<COMMON> 21,358
<OTHER-SE> 1,530,421
<TOTAL-LIABILITY-AND-EQUITY> 3,454,160
<SALES> 0
<TOTAL-REVENUES> 2,154,480
<CGS> 0
<TOTAL-COSTS> 1,079,183
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,964
<INCOME-PRETAX> 358,174
<INCOME-TAX> 155,831
<INCOME-CONTINUING> 202,343
<DISCONTINUED> 0
<EXTRAORDINARY> 7,716
<CHANGES> 0
<NET-INCOME> 194,627
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.00
</TABLE>
