FORM 10-Q
UNITED STATES
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 26, 1999
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Commission file number 1-5837
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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 5, 1999 (exclusive of treasury shares):
Class A Common Stock 170,406,039 shares
Class B Common Stock 849,520 shares
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- ----------------------------------
September 26, September 27, September 26, September 27,
1999 1998 1999 1998
----------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Revenues
Advertising........................................... $513,707 $471,166 $1,598,974 $1,510,621
Circulation........................................... 168,181 167,180 513,741 507,205
Other................................................. 47,770 44,382 135,386 136,654
-------- -------- ---------- ----------
Total.............................................. 729,658 682,728 2,248,101 2,154,480
-------- -------- ---------- ----------
Production costs
Raw materials......................................... 67,462 83,493 237,245 260,016
Wages and benefits.................................... 142,285 137,145 436,584 426,647
Other................................................. 103,240 97,203 306,181 295,646
-------- -------- ---------- ----------
Total.............................................. 312,987 317,841 980,010 982,309
Selling, general and administrative expenses.............. 303,901 263,466 885,219 809,266
-------- -------- ---------- ----------
Total.............................................. 616,888 581,307 1,865,229 1,791,575
-------- -------- ---------- ----------
Operating profit.......................................... 112,770 101,421 382,872 362,905
Income from joint ventures................................ 4,888 5,336 12,356 13,614
Interest expense - net.................................... 12,936 10,337 37,673 30,964
Gain on dispositions of assets............................ -- -- -- 12,619
-------- -------- ---------- ----------
Income before income taxes and
extraordinary item.................................... 104,722 96,420 357,555 358,174
Income taxes.............................................. 44,716 41,445 152,676 155,831
-------- -------- ---------- ----------
Income before extraordinary item.......................... 60,006 54,975 204,879 202,343
Extraordinary item, net of tax
Debt extinguishment................................... -- -- -- 7,716
-------- -------- ---------- ----------
Net Income................................................ $ 60,006 $ 54,975 $ 204,879 $ 194,627
======== ======== ========== ==========
Average number of common shares outstanding
Basic................................................ 173,829 188,546 176,560 190,889
Diluted.............................................. 177,720 192,284 180,068 195,082
Per share of common stock
Basic earnings before extraordinary item............. $ 0.35 $ 0.29 $ 1.16 $ 1.06
Extraordinary item, net of tax....................... -- -- -- (0.04)
-------- -------- ---------- ----------
Basic earnings after extraordinary item.............. $ 0.35 $ 0.29 $ 1.16 $ 1.02
======== ======== ========== ==========
Diluted earnings before extraordinary item........... $ 0.34 $ 0.29 $ 1.14 $ 1.04
Extraordinary item, net of tax....................... -- -- -- (0.04)
-------- -------- ---------- ----------
Diluted earnings after extraordinary item............ $ 0.34 $ 0.29 $ 1.14 $ 1.00
======== ======== ========== ==========
Dividends............................................ $ 0.105 $ 0.095 $ 0.305 $ 0.275
======== ======== ========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
THE NEW YORK TIMES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
September 26, December 27,
1999 1998
------------- ------------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents ....................... $ 43,578 $ 35,991
Accounts receivable-net ........................ 324,235 331,933
Inventories
Newsprint and magazine paper ................. 28,134 27,705
Work-in-process and other .................... 5,780 4,582
---------- ----------
Total inventories ........................ 33,914 32,287
Deferred income taxes ........................... 27,866 40,612
Other current assets ............................ 99,639 76,153
---------- ----------
Total current assets ..................... 529,232 516,976
---------- ----------
Other Assets
Investments in joint ventures ................... 126,212 122,273
Property, plant and equipment (less accumulated
depreciation of $992,720 in 1999
and $897,304 in 1998) ........................ 1,267,686 1,326,196
Intangible assets acquired
Cost in excess of net assets acquired (less
accumulated amortization of $264,078
in 1999 and $240,676 in 1998) ................ 969,700 963,347
Other intangible assets acquired (less
accumulated amortization of $80,384
in 1999 and $64,746 in 1998) ................. 348,588 364,226
Miscellaneous assets ............................ 223,918 172,091
---------- ----------
TOTAL ASSETS ........................................ $3,465,336 $3,465,109
========== ==========
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
THE NEW YORK TIMES COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 26, December 27,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Commercial paper outstanding ......................................... $ 219,500 $ 124,100
Accounts payable ..................................................... 177,839 163,783
Accrued payroll and other related liabilities ........................ 85,149 87,265
Accrued expenses ..................................................... 183,388 166,761
Unexpired subscriptions .............................................. 83,413 81,080
Current portion of long-term debt and
capital lease obligations ......................................... 101,926 1,867
----------- -----------
Total current liabilities ......................................... 851,215 624,856
----------- -----------
Other Liabilities
Long-term debt ....................................................... 414,195 513,695
Capital lease obligations ............................................ 83,138 84,123
Deferred income taxes ................................................ 143,113 165,268
Other ................................................................ 595,307 545,697
----------- -----------
Total other liabilities ........................................... 1,235,753 1,308,783
----------- -----------
Total liabilities ................................................. 2,086,968 1,933,639
----------- -----------
Stockholders' Equity
Capital stock of $.10 par value
Class A - authorized 300,000,000 shares; issued: 1999 - 188,496,309;
1998 - 185,763,418 (including treasury shares: 1999 -
16,680,441; 1998 - 5,000,000) ................................... 18,850 18,575
Class B - convertible - authorized 849,602 shares; issued: 1999 -
849,520; 1998 - 849,602 (including treasury shares: 1999 and
1998 - none) .................................................... 86 86
Additional paid-in capital ........................................... 84,423 --
Accumulated other comprehensive income (loss) ........................ 7,166 (2,609)
Retained earnings .................................................... 1,828,547 1,677,469
Common stock held in treasury, at cost ............................... (560,704) (162,051)
----------- -----------
Total stockholders' equity ........................................ 1,378,368 1,531,470
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................... $ 3,465,336 $ 3,465,109
=========== ===========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
THE NEW YORK TIMES COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
----------------------------
September 26, September 27,
1999 1998
----------------------------
OPERATING ACTIVITIES
Net cash provided by operating activities ............ $ 381,934 $ 327,594
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment ........... (47,140) (54,385)
Net proceeds from dispositions ....................... 11,434 9,934
Other-net ............................................ (18,181) 17,260
--------- ---------
Net cash used in investing activities ................ (53,887) (27,191)
--------- ---------
FINANCING ACTIVITIES
Commercial paper borrowings .......................... 95,400 67,750
Debt extinguishment .................................. -- (75,616)
Other long-term debt reduction ....................... (1,151) (3,204)
Capital shares
Issuances ....................................... 13,941 6,365
Repurchases ..................................... (374,849) (318,336)
Dividends paid to stockholders ....................... (53,801) (52,357)
--------- ---------
Net cash used in financing activities ................ (320,460) (375,398)
--------- ---------
Increase/(Decrease) in cash and cash equivalents ..... 7,587 (74,995)
Cash and cash equivalents at the beginning of the year 35,991 106,820
--------- ---------
Cash and cash equivalents at the end of the quarter .. $ 43,578 $ 31,825
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
NONCASH FINANCING AND INVESTING TRANSACTIONS
1. Repurchases of common stock in connection with noncash exercises under the
Company's stock option plans increased treasury stock by $24.3 million in
1999 and $30.2 million in 1998. Additional paid-in capital was increased
by a corresponding amount. The cost of shares reacquired in connection
with taxes due from optionees on noncash exercises under the Company's
stock option plans is included in repurchases in the Consolidated
Condensed Statements of Cash Flows above and amounted to $12.9 million in
the first nine months of 1999 and $21.7 million in the first nine months
of 1998.
2. In February 1999 the Company purchased a minority interest in
TheStreet.com for $15.0 million, of which $3.0 million was in cash and
$12.0 million represents an irrevocable credit for services to be used by
TheStreet.com through February 2003. Investment and deferred revenue
accounts were increased by $12.0 million accordingly.
OTHER
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 Consolidated Condensed Financial Statements.
5
<PAGE>
THE NEW YORK TIMES COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying Notes to Consolidated Condensed 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 27, 1998,
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 period ended, have been included. Due to the seasonal nature
of the Company's business, results for the interim periods are not necessarily
indicative of a full year's operations. The fiscal periods included herein
comprise 13 weeks for the three-month periods and 39 weeks for the nine-month
periods.
Certain reclassifications have been made to the 1998 Consolidated
Condensed Financial Statements to conform with classifications used at September
26, 1999.
2. Income Taxes
Reconciliations between the effective rate on income before income taxes
and extraordinary item, and the federal statutory rate are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
% 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 the federal statutory rate.............. $36,653 35.0% $33,747 35.0% $125,144 35.0% $120,944 35.0%
State and local income taxes-net of federal
benefit...................................... 5,851 5.6 6,197 6.4 19,979 5.6 23,014 6.7
Amortization of nondeductible intangible
assets acquired.............................. 1,909 1.8 1,852 1.9 6,517 1.8 6,704 1.9
Other-net ..................................... 303 0.3 (351) (0.3) 1,036 0.3 (344) (0.1)
---------------------------------------------------------------------------------
Subtotal....................................... $44,716 42.7% $41,445 43.0% $152,676 42.7% $150,318 43.5%
---------------------------------------------------------------------------------
Gain on dispositions of assets................. -- -- -- -- -- -- 5,513 --
---------------------------------------------------------------------------------
Income tax expense............................. $44,716 -- $41,445 -- $152,676 -- $155,831 --
=================================================================================
</TABLE>
The IRS has principally completed its review of the Company's current
federal tax audit cycle for the years 1993 through 1995. This tax audit resulted
in a favorable tax settlement, which was not material to the Company's
Consolidated Condensed Financial Statements.
3. Debt Obligations
In July 1999 the availability of funds under a revolving credit agreement
was increased to $200.0 million from $100.0 million. That agreement expires in
June 2000. An additional $200.0 million revolving credit agreement remains
unchanged and expires in July 2002. The Company has a total of $400.0 million in
revolving credit agreements, which require, among other provisions, specified
levels of stockholders' equity. The amount outstanding under these agreements
was $219.5
6
<PAGE>
million as of September 26, 1999. The amount available under these agreements
was $180.5 million as of September 26, 1999. Approximately $537.6 million of
stockholders' equity was unrestricted under these agreements at September 26,
1999.
The Company currently maintains $599.3 million in long-term debt and
capital leases, of which $100.0 million is due on April 28, 2000, and the
remainder of which generally matures from October 2003 to March 2025. On
November 5, 1999, the Company issued an additional $49.5 million in notes under
its medium-term note program which mature on November 5, 2009.
4. Stock Repurchase Program
During the first nine months of 1999, the Company repurchased 10.6 million
shares of Class A Common Stock at a cost of $362.0 million. The average price of
these repurchases was $34 per share. The effect of these repurchases on diluted
earnings per share for the third quarter was an increase of $.03 and for the
nine months ended September 26, 1999, was an increase of $.09. On June 17, 1999,
the Board of Directors authorized additional repurchase expenditures under the
Company's stock repurchase program for up to $500.0 million. As of November 5,
1999, the remaining amount of repurchase authorizations from the Company's Board
of Directors was $451.4 million.
5. Voluntary Staff Reductions
The Company recorded work force reduction expenses of $6.1 million in the
third quarter of 1999 and $10.1 million for the first nine months of 1999. No
charges were recorded in the first nine months of 1998. Work force reduction
accruals included in accrued expenses on the Company's Consolidated Condensed
Balance Sheets amounted to $17.2 million at September 26, 1999, and $22.0
million at December 27, 1998. Most of the accruals outstanding at September 26,
1999, will be paid within one year.
6. Comprehensive Income
The Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," established standards for reporting
comprehensive income and requires that all components of comprehensive income be
presented in financial statements.
Comprehensive income for the Company principally includes unrealized
gains/(losses) on available-for-sale securities, as defined under SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," foreign
currency translation adjustments, and net income as reported in the Company's
Consolidated Condensed Statements of Income. The unrealized appreciation on
available-for-sale securities, which were purchased in 1999, was included in
miscellaneous assets on the Company's Consolidated Condensed Balance Sheets and
amounted to $16.4 million as of September 26, 1999. The fair value of the
available-for-sale securities included in miscellaneous assets was $32.0 million
as of September 26, 1999.
Comprehensive income for 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $60,006 $54,975 $204,879 $194,627
Foreign currency translation adjustments (152) (1,009) 1,291 (2,153)
Change in unrealized gains/(losses) on marketable
securities (8,539) -- 16,429 --
Income tax benefit/(charge) 3,907 434 (7,945) 926
- ---------------------------------------------------------------------------------------------------------------------
Comprehensive income $55,222 $54,400 $214,654 $193,400
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
The accumulated other comprehensive income (loss) on the Company's
Consolidated Condensed Balance Sheets was net of a deferred income tax liability
of $5.8 million as of September 26, 1999, and net of a deferred income tax asset
of $2.1 million as of December 27, 1998.
7. Segment Statements of Income
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Newspapers............................. $667,680 $620,964 $2,051,926 $1,950,079
Broadcast.............................. 35,210 34,817 109,107 109,164
Magazines.............................. 26,768 26,947 87,068 95,237
-----------------------------------------------------------------------------------
Total................................ $729,658 $682,728 $2,248,101 $2,154,480
===================================================================================
OPERATING PROFIT (LOSS)
Newspapers............................. $109,029 $ 95,013 $ 365,205 $ 332,085
Broadcast.............................. 9,957 9,679 31,648 30,573
Magazines.............................. 3,975 4,489 16,551 24,810
Unallocated corporate expenses......... (10,191) (7,760) (30,532) (24,563)
-----------------------------------------------------------------------------------
Total................................ 112,770 101,421 382,872 362,905
-----------------------------------------------------------------------------------
Income from joint ventures............ 4,888 5,336 12,356 13,614
Interest expense, net.................. 12,936 10,337 37,673 30,964
Gain on dispositions of assets......... -- -- -- 12,619
-----------------------------------------------------------------------------------
Income before income taxes
and extraordinary item............... 104,722 96,420 357,555 358,174
Income taxes........................... 44,716 41,445 152,676 155,831
-----------------------------------------------------------------------------------
Income before extraordinary item....... 60,006 54,975 204,879 202,343
Extraordinary item, net of tax:
Debt extinguishment.................. -- -- -- 7,716
-----------------------------------------------------------------------------------
NET INCOME............................. $ 60,006 $ 54,975 $ 204,879 $ 194,627
===================================================================================
</TABLE>
See Management's Discussion and Analysis of Financial Condition and
Results of Operations in this Form 10-Q for more information on the Company's
reportable operating segments.
8. Dividend Rate Increase
On April 15, 1999, the Board of Directors authorized a $.01 increase in
the quarterly dividend payments from $.095 per share to $.105 per share on both
Class A and B Common Stock effective with the June 1, 1999, record date.
9. Acquisitions
On October 14, 1999, the Company announced an agreement to acquire the
assets and assume certain liabilities of a daily newspaper, the Worcester
Telegram & Gazette, in Worcester, Massachusetts, for approximately $295.0
million. This acquisition is expected to close prior to the end of the Company's
fiscal year ending December 1999. The cost of this acquisition is expected to be
funded through financing currently available to the Company.
On July 22, 1999, the Company acquired Abuzz Technologies, Inc. ("Abuzz"),
an Internet knowledge management concern. The principal business of Abuzz
involves a software solution that facilitates the building of online communities
of
8
<PAGE>
interest by connecting people with questions to people with answers. This
acquisition is not material to the Company's Consolidated Condensed Financial
Statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Advertising revenues accounted for approximately 71% and circulation
revenues accounted for 23% of the Company's revenues in the third quarter and
first nine months of 1999. Advertising revenues influence the pattern of the
Company's consolidated revenues because they are seasonal in nature.
Traditionally, second-quarter and fourth-quarter advertising volume is higher
than that which occurs in the first and third quarters when economic activity
tends to be lower after the holiday season and in the summer period. Quarterly
trends are also affected by the overall economy and economic conditions that may
exist in specific markets served by each of the Company's business segments.
Newsprint is the major component of the Company's cost of raw materials.
The Company's cost of newsprint was lower in the third quarter and the first
nine months of 1999 than in the comparable 1998 periods. The cost of newsprint
during the remainder of 1999 is expected to be below that of 1998.
The Company's consolidated financial results for the quarter and nine
months ended September 26, 1999, compared with the quarter and nine months ended
September 27, 1998, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands, except per share data) 1999 1998 % Change 1999 1998 % Change
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $729,658 $682,728 6.9% $2,248,101 $2,154,480 4.3%
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit $112,770 $101,421 11.2% $ 382,872 $ 362,905 5.5%
- ------------------------------------------------------------------------------------------------------------------------------
Net Income before special items $ 63,526 $ 54,975 15.6% $ 210,691 $ 195,248 7.9%
Special items (3,520) -- N/A (5,812) (621) N/A
- ------------------------------------------------------------------------------------------------------------------------------
Net Income $ 60,006 $ 54,975 9.2% $ 204,879 $ 194,627 5.3%
- ------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
Net Income before special items $ 0.36 $ 0.29 24.1% $ 1.17 $ 1.01 15.8%
Special items (0.02) -- N/A (0.03) (0.01) N/A
- ------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 0.34 $ 0.29 17.2% $ 1.14 $ 1.00 14.0%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The 1999 third-quarter net income was $63.5 million or $.36 diluted
earnings per share compared with net income of $55.0 million or $.29 diluted
earnings per share in the third quarter of 1998, excluding special items. For
the first nine months, net income was $210.7 million or $1.17 diluted earnings
per share compared with net income of $195.2 million or $1.01 diluted earning
per share for the first nine months of 1998, excluding special items.
Including special items, the 1999 third-quarter net income was $60.0
million or $.34 diluted earnings per share compared with net income of $55.0
million or $.29 diluted earnings per share in the third quarter of 1998. For the
first nine months net income, including special items, was $204.9 million or
$1.14 diluted earnings per share compared with the net income of $194.6 million
or $1.00 diluted earnings per share for the first nine months of 1998.
Revenues for the third quarter of 1999 were $729.7 million, a 6.9%
increase over 1998 third-quarter revenues of $682.7 million. Revenues for the
first nine months of 1999 were $2,248.1 million, a 4.3% increase from $2,154.5
million for the same period in 1998. The increase was primarily from higher
advertising rates and an improved advertising mix.
9
<PAGE>
Operating profit in the third quarter of 1999 increased 17.2% to a record
$118.9 million from $101.4 million in the 1998 third quarter, excluding special
items. On the same basis, operating profit for the first nine months of the year
rose 8.3% to $393.0 million from $362.9 million in the corresponding period of
1998.
Operating profit in the third quarter of 1999 increased 11.2% to $112.8
million from $101.4 million in the third quarter of 1998, including special
items. For the first nine months of 1999, operating profit rose 5.5% to $382.9
million from $362.9 million in the corresponding period of 1998.
Special items included a $6.1 million pre-tax charge for work force
reduction expenses primarily at The Boston Globe ($.02 diluted earnings per
share) in the third quarter of 1999. No special items were recorded in the third
quarter of 1998. For the first nine months of 1999, there were work force
reduction expenses of $10.1 million before taxes ($.03 diluted earnings per
share), primarily at The Boston Globe. For the first nine months of 1998,
special items included a debt extinguishment charge, a gain on the sale of
magazine properties, and a gain on the sale of equipment, which together totaled
a $1.1 million charge before taxes ($.01 diluted earnings per share).
Excluding special items, EBITDA (earnings before interest, taxes,
depreciation and amortization) in the third quarter rose to $172.5 million from
$155.6 million in the 1998 third quarter. On the same basis, EBITDA for the
first nine months of 1999 was $551.2 million compared with $518.2 million in the
same period of 1998. The 1999 third-quarter EBITDA rose to $166.4 million from
$155.6 million in the comparable 1998 period, including special items. On the
same basis, EBITDA for the first nine months of 1999 was $541.0 million compared
with $518.2 million in the same period of 1998.
EBITDA is presented since it 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").
The Company believes that 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.
Consolidated operating expenses for 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 % Change 1999 1998 % Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Production costs
Raw materials $ 67,462 $ 83,493 -19.2% $ 237,245 $ 260,016 -8.8%
Wages and benefits 142,285 137,145 3.7% 436,584 426,647 2.3%
Other 103,240 97,203 6.2% 306,181 295,646 3.6%
- ----------------------------------------------------------------------------------------------------------------------------
Total production costs 312,987 317,841 -1.5% 980,010 982,309 -0.2%
Selling, general and
administrative expenses 303,901 263,466 15.3% 885,219 809,266 9.4%
- ----------------------------------------------------------------------------------------------------------------------------
Total expenses $616,888 $581,307 6.1% $1,865,229 $1,791,575 4.1%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Production costs for the third quarter of 1999 were $313.0 million, a 1.5%
decrease from 1998 third-quarter production costs of $317.8 million. For the
first nine months of 1999, production costs were $980.0 million, a 0.2% decrease
from $982.3 million in the comparable period of 1998. For the third quarter and
first nine months of 1999 lower newsprint prices favorably affected costs.
Selling, general and administrative expenses ("SGA expenses") in the third
quarter of 1999 were $303.9 million, a 15.3% increase over the 1998
third-quarter SGA expenses of $263.5 million. For the first nine months of 1999,
SGA expenses were $885.2 million, a 9.4% increase, compared with $809.3 million
for the same period in 1998. The higher level
10
<PAGE>
of SGA expenses is partly attributable to increased national distribution and
promotion costs at The New York Times newspaper, as well as higher total salary
costs and work force reduction expenses. Work force reduction expenses included
in the third quarter and nine months of 1999 were $6.1 million and $10.1
million, primarily at The Boston Globe.
Other Items
Interest expense-net increased to $12.9 million in the 1999 third quarter
and $37.7 million in the first nine months of 1999 compared with $10.3 million
and $31.0 million in the comparable 1998 periods, principally due to additional
borrowings to fund the Company's share repurchase program.
The effective income tax rate for the third quarter and first nine months
of 1999 was 42.7% compared with 43.0% in the 1998 third quarter and 43.5% in the
first nine months of 1998. The decreases in the effective income tax rates were
primarily due to lower state and local income taxes.
Consolidated revenues, EBITDA, depreciation and amortization and operating
profit by business segment were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
----------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 % Change 1999 1998 % Change
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Newspapers ................... $ 667,680 $ 620,964 7.5% $ 2,051,926 $ 1,950,079 5.2%
Broadcast .................... 35,210 34,817 1.1% 109,107 109,164 -0.1%
Magazines .................... 26,768 26,947 -0.7% 87,068 95,237 -8.6%
---------------------------------------------------------------------------------
Total ...................... $ 729,658 $ 682,728 6.9% $ 2,248,101 $ 2,154,480 4.3%
=================================================================================
EBITDA
Newspapers ................... $ 150,868 $ 137,945 9.4% $ 489,260 $ 459,661 6.4%
Broadcast .................... 14,329 14,071 1.8% 44,751 43,831 2.1%
Magazine ..................... 4,339 4,022 7.9% 17,601 20,086 -12.4%
Unallocated corporate expenses (8,125) (5,905) -37.6% (23,218) (19,286) -20.4%
Joint ventures ............... 4,976 5,424 -8.3% 12,620 13,878 -9.1%
---------------------------------------------------------------------------------
Total ...................... $ 166,387 $ 155,557 7.0% $ 541,014 $ 518,170 4.4%
=================================================================================
DEPRECIATION AND AMORTIZATION
Newspapers ................... $ 41,839 $ 42,932 -2.5% $ 124,055 $ 127,576 -2.8%
Broadcast .................... 4,372 4,392 -0.5% 13,103 13,258 -1.2%
Magazine ..................... 364 (467) N/A 1,050 (4,724) N/A
Corporate .................... 2,066 1,824 13.3% 7,313 5,247 39.4%
Joint ventures ............... 88 88 -- 264 264 --
---------------------------------------------------------------------------------
Total ...................... $ 48,729 $ 48,769 -0.1% $ 145,785 $ 141,621 2.9%
=================================================================================
OPERATING PROFIT (LOSS)
Newspapers ................... $ 109,029 $ 95,013 14.8% $ 365,205 $ 332,085 10.0%
Broadcast .................... 9,957 9,679 2.9% 31,648 30,573 3.5%
Magazines .................... 3,975 4,489 -11.5% 16,551 24,810 -33.3%
Unallocated corporate expenses (10,191) (7,760) -31.3% (30,532) (24,563) -24.3%
---------------------------------------------------------------------------------
Total ...................... $ 112,770 $ 101,421 11.2% $ 382,872 $ 362,905 5.5%
=================================================================================
</TABLE>
11
<PAGE>
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 Internet-related
ventures.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
1999 1998 % Change 1999 1998 % Change
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $667,680 $620,964 7.5% $2,051,926 $1,950,079 5.2%
- --------------------------------------------------------------------------------------------------------------------------------
EBITDA $150,868 $137,945 9.4% $ 489,260 $ 459,661 6.4%
- --------------------------------------------------------------------------------------------------------------------------------
Operating Profit $109,029 $95,013 14.8% $ 365,205 $ 332,085 10.0%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total Newspaper Group revenues in the third quarter were $667.7 million
compared with $621.0 million in the third quarter of 1998. For the first nine
months of 1999, revenues were $2,051.9 million compared with $1,950.1 million in
the first nine months of 1998. The increase in 1999 revenues for the first nine
months was primarily due to higher advertising rates and an improved advertising
mix. Performance was strongest at The Times and The Globe where advertising
revenues increased 10.9% and 9.8% for the third quarter. At the Regional
Newspaper Group, advertising revenues were also strong, increasing 6.9% for the
third quarter, due in part to the success of Celebrate 2000, a comprehensive
program of millennium-related advertising, circulation and promotion
initiatives. Third-quarter operating profit for the Newspaper Group increased
21.1% to $115.1 million from $95.0 million in the 1998 third quarter, excluding
special items. For the first nine months of the year, operating profit increased
13.0% to $375.3 million from $332.1 million in the comparable 1998 period,
excluding special items.
Advertising, circulation and other revenue, by major product of the
Newspaper Group, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 % Change 1999 1998 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The New York Times
Advertising $260,451 $234,859 10.9% $ 828,687 $ 765,355 8.3%
Circulation 110,397 107,767 2.4% 337,991 328,161 3.0%
Other 37,642 35,463 6.1% 105,777 103,613 2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Total $408,490 $378,089 8.0% $1,272,455 $1,197,129 6.3%
- ------------------------------------------------------------------------------------------------------------------------------------
The Boston Globe
Advertising $114,432 $104,207 9.8% $ 339,668 $ 330,117 2.9%
Circulation 34,414 34,294 0.3% 100,317 100,817 -0.5%
Other 2,216 2,139 3.6% 6,538 6,215 5.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Total $151,062 $140,640 7.4% $ 446,523 $ 437,149 2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Regional Newspapers
Advertising $ 86,006 $ 80,448 6.9% $ 263,673 $ 247,490 6.5%
Circulation 18,318 18,462 -0.8% 57,665 58,010 -0.6%
Other 3,804 3,325 14.4% 11,610 10,301 12.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Total $108,128 $102,235 5.8% $ 332,948 $ 315,801 5.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Newspaper Group
Advertising $460,889 $419,514 9.9% $1,432,028 $1,342,962 6.6%
Circulation 163,129 160,523 1.6% 495,973 486,988 1.8%
Other 43,662 40,927 6.7% 123,925 120,129 3.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Total $667,680 $620,964 7.5% $2,051,926 $1,950,079 5.2%
====================================================================================================================================
</TABLE>
12
<PAGE>
Advertising volume was as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine months Ended
---------------------------------------------------------------------------------------------
(Inches in thousands, preprints in September 26, September 27, September 26, September 27,
thousands of copies) 1999 1998 % Change 1999 1998 % Change
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The New York Times
Retail 112.6 123.6 -8.9% 375.1 383.6 -2.2%
National 330.8 301.1 9.9% 1,061.9 993.8 6.9%
Classified 235.4 243.3 -3.2% 748.7 761.7 -1.7%
Zoned 214.3 222.8 -3.8% 720.3 715.6 0.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Total 893.1 890.8 0.3% 2,906.0 2,854.7 1.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Preprints 95,501 74,598 28.0% 288,557 226,586 27.3%
- -----------------------------------------------------------------------------------------------------------------------------------
The Boston Globe
Retail 145.8 151.1 -3.5% 441.1 461.0 -4.3%
National 170.2 156.6 8.6% 524.3 511.7 2.5%
Classified 347.2 340.6 1.9% 1,041.8 1,033.6 0.8%
Zoned 54.9 58.7 -6.5% 185.7 199.4 -6.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Total 718.1 707.0 1.6% 2,192.9 2,205.7 -0.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Preprints 181,565 185,041 -1.9% 558,763 536,654 4.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Regional Newspapers
Retail 1,732.6 1,793.3 -3.4% 5,438.6 5,657.6 -3.9%
National 62.4 54.2 15.1% 203.3 186.7 8.9%
Classified 2,001.4 1,893.2 5.7% 5,956.2 5,608.0 6.2%
Legal 89.3 95.4 -6.4% 362.7 391.4 -7.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Total 3,885.7 3,836.1 1.3% 11,960.8 11,843.7 1.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Preprints 251,086 245,466 2.3% 790,942 765,852 3.3%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Average circulation for The Times, The Globe and the Regional Newspapers
(excluding non-dailies) for the third quarter and nine months ended September
26, 1999, compared with the third quarter and nine months ended September 27,
1998, was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended
September 26, 1999
--------------------------------------------------------------------
% Change % Change
(Copies in thousands) Weekday Sunday
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Paid Circulation
The New York Times 1,070.1 0.8% 1,637.7 1.0%
The Boston Globe 463.6 -1.9% 737.5 -1.5%
Regional Newspapers 698.6 -0.8% 747.4 -1.1%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 26, 1999
--------------------------------------------------------------------
% Change % Change
(Copies in thousands) Weekday Sunday
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Net Paid Circulation
The New York Times 1,100.3 2.0% 1,672.7 2.2%
The Boston Globe 462.6 -1.1% 729.2 -2.7%
Regional Newspapers 732.8 -0.4% 779.8 -0.9%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Circulation growth for The Times was primarily due to additional
availability in major markets across the nation combined with programs to
improve the quality and levels of its home-delivery circulation base.
Additionally, The Times and The Globe have continued to make improvements in
delivery service to attract new readers and retain existing ones.
13
<PAGE>
Internet-related revenues and the operating loss in the Newspaper Group
were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 % Change 1999 1998 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Advertising $ 6,319 $ 3,604 75.3% $ 15,292 $ 9,835 55.5%
Circulation and Other 1.053 614 71.5% 2,683 2,522 6.4%
------------------------------------------------------------------------------------------------------
Total $ 7,372 $ 4,218 74.8% $ 17,975 $12,357 45.5%
======================================================================================================
Operating Loss $(6,150) $(3,164) -94.4% $(13,450) $(7,286) -84.6%
======================================================================================================
</TABLE>
Revenues from Internet-related ventures in the Newspaper Group grew 74.8%
in the third quarter to $7.4 million versus $4.2 million in the 1998 third
quarter. For the first nine months of 1999 revenue increased 45.5% to $18.0
million from $12.4 million in the comparable 1998 period.
Internet-related revenues and the operating loss include The New York
Times on the Web, New York Today, boston.com and the Regional Newspapers' Web
sites. In July 1998 The New York Times on the Web stopped charging users outside
the United States for subscription fees.
Broadcast Group: The Broadcast Group is comprised of eight
network-affiliated television stations and two radio stations.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-----------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 % Change 1999 1998 % Change
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $35,210 $34,817 1.1% $109,107 $109,164 -0.1%
- -----------------------------------------------------------------------------------------------------------------
EBITDA $14,329 $14,071 1.8% $ 44,751 $ 43,831 2.1%
- -----------------------------------------------------------------------------------------------------------------
Operating Profit $ 9,957 $ 9,679 2.9% $ 31,648 $ 30,573 3.5%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues increased 1.1% in the third quarter to $35.2 million from $34.8
million in the 1998 third quarter, while operating profit improved 2.9% to $10.0
million from $9.7 million last year. Year-to-date, revenues and operating profit
totaled $109.1 million and $31.6 million compared with $109.2 million and $30.6
million in the same period of 1998, when the Company's eight television stations
benefited from broadcasting political advertising, and four of the eight
television stations benefited from the Winter Olympics. Year-to-date, revenues
and operating profit were adversely affected by tornado coverage at the
Company's Oklahoma City station.
14
<PAGE>
Magazine Group: The Magazine Group is comprised of three golf publications and
related activities in the golf field.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-------------------------------------------------------------------------------------------------------
September 26, September 27, September 26, September 27,
(Dollars in thousands) 1999 1998 % Change 1999 1998 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
(13 Weeks) (39 Weeks)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Magazines $26,768 $26,114 2.5% $87,068 $89,404 -2.6%
Non-Compete Agreement -- 833 N/A -- 5,833 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenues $26,768 $26,947 -0.7% $87,068 $95,237 -8.6%
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA $ 4,339 $ 4,022 7.9% $17,601 $20,086 -12.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)
Magazines $ 3,975 $ 3,656 8.7% $16,551 $18,977 -12.8%
Non-Compete Agreement -- 833 N/A -- 5,833 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Profit $ 3,975 $ 4,489 -11.5% $16,551 $24,810 -33.3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenue increased 2.5% in the third quarter to $26.8 million compared with
$26.1 million in the third quarter last year. Operating profit increased 8.7% to
$4.0 million from $3.7 million in the third quarter last year. Revenue and
operating profit rose as the Group's largest publication, Golf Digest, increased
its advertising volume and base. For the first nine months of 1999, revenues and
operating profit were $87.1 million and $16.6 million compared with $89.4
million and $19.0 million in the same period in 1998. Excluded from the results
are revenue and operating profit from the amortization of a non-compete
agreement that ended in July 1998. Consolidation in the golf equipment industry
and a competitive rate environment adversely affected the Group's performance.
Liquidity and Capital Resources
Net cash provided by operating activities was $381.9 million for the first
nine months of 1999 compared with $327.6 million for the first nine months of
1998. The increase of $54.3 million in 1999 was primarily due to improved
earnings, as well as improvements in working capital. Net cash used in investing
activities was $53.9 million in the first nine months of 1999 compared with
$27.2 million in the 1998 comparable period. The increase of $26.7 million in
1999 was primarily due to additional minority interest investments in
Internet-related companies. This increase was partially offset by reduced levels
of capital expenditures. Net cash used in financing activities was $320.5
million in the first nine months of 1999 compared with $375.4 million in the
1998 comparable period. The decrease of $54.9 million in 1999 was primarily
related to the debt extinguishment in 1998, partially offset by an increase in
commercial paper borrowings to fund increased levels of stock repurchases.
The Company believes that cash generated from its operations and the
availability of funds from external sources should be adequate to cover all cash
requirements, including working capital needs, stock repurchases, planned
capital expenditures and acquisitions, and dividend payments to stockholders.
The ratio of current assets to current liabilities was 62% at September 26,
1999, and 74% at September 27, 1998. This decrease is principally due to an
increase in commercial paper outstanding at September 26, 1999, mostly resulting
from the funding of stock repurchases, as well as an increase of $100.0 million
in the current portion of long-term debt. The ratio of long-term debt and
capital lease obligations as a percentage of total capitalization was 27% at
September 26, 1999, compared with 24% at September 27, 1998.
Financing: The Company's total debt, including commercial paper and capital
leases, was $818.8 million at September 26, 1999, and $670.9 million at
September 27, 1998. The increase in total debt was primarily from an increase in
commercial paper. On April 28, 2000, $100.0 million of long-term debt will be
due; the remainder of the Company's long-term
15
<PAGE>
debt and capital leases generally matures between October 2003 and March 2025.
On November 5, 1999, the Company issued an additional $49.5 million in notes
under its medium-term note program, which mature on November 5, 2009. Effective
July 1999 the Company increased the funds available under its revolving credit
agreements from $300.0 million to $400.0 million. These agreements require,
among other provisions, specified levels of stockholders' equity. A revolving
credit agreement for $200.0 million expires in June 2000, and an additional
revolving credit agreement for $200.0 million expires in July 2002. The Company
had $219.5 million in commercial paper outstanding at September 26, 1999, and
$67.8 million at September 27, 1998, which obligations are supported by these
revolving credit agreements. The amount available under these agreements is
$180.5 million as of September 26, 1999. Approximately $537.6 million of
stockholders' equity was unrestricted under these agreements at September 26,
1999, and $759.6 million was unrestricted at September 27, 1998. This decrease
was principally due to stock repurchases.
On October 14, 1999, the Company announced an agreement to acquire the
assets and assume certain liabilities of a daily newspaper, the Worcester
Telegram & Gazette, in Worcester, Massachusetts, for approximately $295.0
million. This acquisition is expected to close prior to the end of the Company's
fiscal year ending December 1999. The cost of this acquisition is expected to be
funded through financing currently available to the Company.
Capital Expenditures: The Company currently estimates that capital
expenditures for 1999 will range from $80.0 million to $90.0 million. The
Company currently anticipates that depreciation and amortization expense will
approximate $195.0 million for 1999 compared with $188.2 million in 1998.
Year 2000 Readiness Disclosure: The Company has evaluated the potential
impact of the situation commonly known 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.
In April 1997 the Company began 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:
o type of system and its relative importance
o probable method and cost of remediation and
o targeted start and end dates for addressing Year 2000 issues.
This inventory includes systems to:
o create the Company's publications
o operate the Company's production and distribution facilities
o operate the Company's broadcast stations
o operate the Company's business and financial applications and
o control facility and infrastructure areas (building systems, utilities,
security systems, etc.).
16
<PAGE>
The systems identified in the inventory were further categorized into five
priority classifications:
o Shutdown - highest priority. If these systems (e.g., editorial systems,
presses, and utilities) were to fail, the Company's ability to continue
its operations would be seriously impaired. Approximately 8% of the
identified systems are in this category.
o Impractical Workaround - If these systems were to fail, the available
alternatives are too expensive to implement. Approximately 9%.
o Costly Workaround - If these systems were to fail, a feasible but costly
alternative exists. Approximately 28%.
o Additional But Manageable Cost - If these systems fail, an alternative
solution exists at a moderate cost. Approximately 22%.
o No Impact - Little if any consequence to the business if these systems
fail. Approximately 33%.
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 September 26, 1999, 99% of all systems had
been remediated and tested. Testing systems for Year 2000 compliance includes
the use of dates that 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 there is no certainty that any major business
partner will function without disruption in the Year 2000, the Company's goal is
to obtain detailed information about its advertisers' and suppliers' Year 2000
plans and to identify those companies that 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.
To date, the Company has identified total estimated costs in connection
with the Year 2000 problem of between $15.0 million and $20.0 million. This
estimate does not include systems previously scheduled for replacement without
regard to the Year 2000 issue. Of this amount, approximately $10.0 million will
be for systems replacements involving capital outlays (which are not deducted as
an expense on the Company's Consolidated Statements of Income). The remaining
amount is being deducted as an expense on the Company's Consolidated Statements
of Income through 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.
17
<PAGE>
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 fourth 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.
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.
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.
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 or 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 the Company's Annual Report on Form 10-K for the period
ended December 27, 1998.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's quantitative and qualitative market risk is principally
associated with market interest rate fluctuations related to its debt
obligations. The Company does not consider such market risk significant.
18
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.18.1 Amendment No.3, dated as of June 17, 1999, to the Company's
Deferred Executive Compensation Plan
10.19.1 Amendment No. 2, dated as of June 17,1999, to The New York Times
Designated Employees Deferred Earnings Plan
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the period for which this
report is filed.
19
<PAGE>
SIGNATURES
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 10, 1999 /s/ John M. O'Brien
----------------- -----------------------------
John M. O'Brien
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
20
<PAGE>
Exhibit Index to Quarterly Report Form 10-Q
Quarter Ended September 26, 1999
Exhibit No. Exhibit
- ----------- -------
10.18.1 Amendment No.3, dated as of June 17, 1999, to the Company's Deferred
Executive Compensation Plan
10.19.1 Amendment No. 2, dated as of June 17,1999, to The New York Times
Designated Employees Deferred Earnings Plan
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
21
Exhibit 10.18.1
THE NEW YORK TIMES COMPANY
DEFERRED EXECUTIVE COMPENSATION PLAN
Amendment No. 3
THIS INSTRUMENT made as of June 17, 1999, by The New York Times Company
(the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains The New York Times Company Deferred
Executive Compensation Plan, as amended from time to time (the "Plan");
WHEREAS, pursuant to Article IX of the Plan, the Company has reserved the
right, by action of the ERISA Board Committee, to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows:
FIRST: Effective immediately, Section 9.1 of the Plan is hereby amended by
adding the following paragraph at the end thereof:
The above notwithstanding, effective June 17, 1999, the Employer
shall have right to amend the Plan from time to time by an action of
the ERISA Management Committee. All amendments shall be subject to
the provisions of Section 9.3 of the Plan.
SECOND: Effective immediately, Section 9.2 of the Plan is hereby amended
by adding the following paragraph at the end thereof:
The above notwithstanding, effective June 17, 1999, the Employer
shall have the right to terminate the Plan at any time by an action
of the ERISA Management Committee. Such termination shall be subject
to the provisions of Section 9.3 of the Plan.
IN WITNESS WHEREOF, The New York Times Company has caused this Amendment
to be executed by its duly authorized officer and its corporate seal to be
affixed hereto as of the date first set forth above.
1
<PAGE>
THE NEW YORK TIMES COMPANY
By: /s/ Laura J. Corwin
------------------------------------
Laura J. Corwin, Secretary
2
Exhibit 10.19.1
THE NEW YORK TIMES
DESIGNATED EMPLOYEES DEFERRED EARNINGS PLAN
Amendment No. 2
THIS INSTRUMENT made as of June 17, 1999, by The New York Times Company
(the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains The New York Times Designated Employees
Deferred Earnings Plan, as amended from time to time (the "Plan");
WHEREAS, pursuant to Article IX of the Plan, the Company has reserved the
right, by action of the ERISA Board Committee, to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows:
FIRST: Effective immediately, Section 9.1 of the Plan is hereby amended by
adding the following paragraph at the end thereof:
The above notwithstanding, effective June 17, 1999, the Employer
shall have right to amend the Plan from time to time by an action of
the ERISA Management Committee. All amendments shall be subject to
the provisions of Section 9.3 of the Plan.
SECOND: Effective immediately, Section 9.2 of the Plan is hereby amended
by adding the following paragraph at the end thereof:
The above notwithstanding, effective June 17, 1999, the Employer
shall have the right to terminate the Plan at any time by an action
of the ERISA Management Committee. Such termination shall be subject
to the provisions of Section 9.3 of the Plan.
IN WITNESS WHEREOF, The New York Times Company has caused this Amendment
to be executed by its duly authorized officer and its corporate seal to be
affixed hereto as of the date first set forth above.
1
<PAGE>
THE NEW YORK TIMES COMPANY
By: /s/ Laura J. Corwin
------------------------------------
Laura J. Corwin, Secretary
2
THE NEW YORK TIMES COMPANY
Ratio of Earnings to Fixed Charges
(Dollars in thousands, except ratio)
(Unaudited)
Exhibit 12
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 26, September 26, September 26, September 26,
1999 1998 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings from continuing operations before
fixed charges
Income before income taxes, income from joint ventures and
an extraordinary item (A) $ 99,834 $ 91,084 $ 345,199 $ 344,560
Less net gain on dispositions of assets -- -- -- (12,619)
Distributed earnings from less than fifty percent owned affiliates 3,941 4,480 7,416 11,336
---------------------------------------------------------
Adjusted pre-tax earnings from continuing operations 103,775 95,564 352,615 343,277
Fixed charges less capitalized interest 16,253 13,585 47,186 41,239
---------------------------------------------------------
Earnings from continuing operations before fixed charges $ 120,028 $ 109,149 $ 399,801 $ 384,516
=========================================================
Fixed charges
Interest expense, net of capitalized interest $ 13,485 $ 11,164 $ 39,208 $ 34,117
Capitalized interest -- -- -- 173
Portion of rentals representative of interest factor 2,768 2,421 7,978 7,122
---------------------------------------------------------
Total fixed charges $ 16,253 $ 13,585 $ 47,186 $ 41,412
=========================================================
Ratio of earnings to fixed charges 7.38 8.03 8.47 9.29
=========================================================
</TABLE>
A. 1998 excludes a $13.7 million pre-tax extraordinary item in April
resulting from the early extinguishment of certain long term debt.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Financial Statements as of and for the quarter ended
September 26, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-28-1998
<PERIOD-END> SEP-26-1999
<CASH> 43,578
<SECURITIES> 0
<RECEIVABLES> 367,198
<ALLOWANCES> 42,963
<INVENTORY> 33,914
<CURRENT-ASSETS> 529,232
<PP&E> 2,260,406
<DEPRECIATION> 992,720
<TOTAL-ASSETS> 3,465,336
<CURRENT-LIABILITIES> 851,215
<BONDS> 0
0
0
<COMMON> 18,936
<OTHER-SE> 1,359,432
<TOTAL-LIABILITY-AND-EQUITY> 3,465,336
<SALES> 0
<TOTAL-REVENUES> 2,248,101
<CGS> 0
<TOTAL-COSTS> 980,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,673
<INCOME-PRETAX> 357,555
<INCOME-TAX> 152,676
<INCOME-CONTINUING> 204,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204,879
<EPS-BASIC> 1.16
<EPS-DILUTED> 1.14
</TABLE>
