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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 27, 199826, 1999 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 43d43rd Street, New York, N.Y. 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 556-1234
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------------- ------------------------
Class A Common Stock of $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable
(Title of class)
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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
The aggregate market value of Class A Common Stock held by non-affiliates as of
February 24, 1999,28, 2000, was approximately $4.62$5.76 billion. As of such date,
non-affiliates held 95,11493,870 shares of Class B Common Stock. There is no active
market for such stock.
The number of outstanding shares of each class of the registrant's common stock
as of February 24, 1999,28, 2000, was as follows: 178,874,315171,847,239 shares of Class A Common
Stock and 849,520847,158 shares of Class B Common Stock.
Document incorporated by reference Part
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Proxy Statement for the 19992000 Annual Meeting of Stockholders...............Stockholders..... III
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INDEX TO THE NEW YORK TIMES COMPANY
19981999 FORM 10-K
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PART I
Item No. Page
- --------------- ----
1. Business............................................................Business.............................................................. 1
Introduction......................................................Introduction........................................................ 1
Newspapers........................................................Newspapers.......................................................... 1
The New York Times..............................................Times................................................ 1
Circulation....................................................Circulation..................................................... 1
Advertising....................................................Advertising..................................................... 2
Production and Distribution....................................Distribution..................................... 2
Related Businesses.............................................Businesses.............................................. 3
New England Newspaper Group....................................... 4
The Boston Globe................................................ 4
Circulation....................................................Circulation................................................... 4
Advertising.................................................... 5Advertising................................................... 4
Production and Distribution....................................Distribution................................... 5
Regional Newspapers.............................................Newspapers............................................... 5
Times Company Digital............................................. 5
Broadcasting........................................................ 6
New Ventures.................................................... 6
Broadcasting......................................................Magazines........................................................... 7
Magazines......................................................... 8
New Ventures.................................................... 8Investments......................................................... 7
Forest Products Investments and Other Joint Ventures.............. 8Venture................. 7
Forest Product Investments...................................... 8Investments........................................ 7
Other Joint Ventures............................................Venture............................................... 8
Raw Materials....................................................... 8
Competition ....................................................... 9
Raw Materials.....................................................Employees........................................................... 9
Competition.......................................................Labor Relations................................................... 9
Employees......................................................... 10
Labor Relations................................................. 10
2. Properties..........................................................Properties............................................................ 11
3. Legal Proceedings...................................................Proceedings..................................................... 11
4. Submission of Matters to a Vote of Security Holders.................Holders................... 12
Executive Officers of the Registrant..............................Registrant................................ 12
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters.............................................................Matters............................................................... 13
6. Selected Financial Data.............................................Data............................................... 13
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................Operations................................................. 13
8. Financial Statements and Supplementary Data......................... 14Data........................... 13
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................Disclosure.................................................. 14
PART III
10. Directors and Executive Officers of the Registrant..................Registrant.................... 14
11. Executive Compensation..............................................Compensation................................................ 14
12. Security Ownership of Certain Beneficial Owners and Management......Management........ 14
13. Certain Relationships and Related Transactions......................Transactions........................ 14
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....8-K....... 14
1
PART I
ITEM 1. BUSINESS.Business.
INTRODUCTION
The New York Times Company (the "Company") was incorporated on August 26, 1896,
under the laws of the State of New York. The Company is a diversified media
company including newspapers, television and radio stations, magazines,
electronic information and publishing, Internet businesses, and forest products
investments. Financial information about industry segments is incorporated by
reference to Note 17 to the Consolidated Financial Statements on page F-32 of
this report.
The Company currently classifies its businesses into the following segments:
o Newspapers: The New York Times ("The Times"); the New England Newspaper
Group, consisting of The Boston Globe, a daily newspaper, and the Boston
Sunday Globe (both editions, "The Globe") and the Worcester Telegram &
Gazette, in Worcester, Massachusetts (acquired January 7, 2000); 18 other
daily and three non-daily newspapers in Alabama, California, Florida,
Louisiana, North Carolina and South Carolina ("Regional Newspapers");
newspaper distributors in the New York City and Boston metropolitan areas; various newspaper on-line products;
news, photo and graphics services and news and features syndication;
TimesFax; The New York Times Index; and licensing of electronic databases
and microform, CD-ROM products, and the trademarks and copyrights of The
Times and The Globe.
Additionally, Times Company Digital, a division of the Company but not a
separate segment for financial reporting purposes in 1999, operates the
Company's major Internet businesses, which include the following Web
sites: NYTimes.com (www.nytimes.com); Boston.com (www.boston.com),
NYToday.com (www.nytoday.com), WineToday.com (www.winetoday.com),
GolfDigest.com (www.golfdigest.com) and Abuzz (www.abuzz.com). The
financial results of all of these Internet businesses, except
GolfDigest.com, are included in the results of the Newspaper Group. The
financial results of GolfDigest.com are included in the results of the
Magazine Group.
o Broadcasting: television stations WTKR(TV) in Norfolk, Virginia; WREG-TV in Memphis, Tennessee; WTKR-TV
in Norfolk, Virginia; KFOR-TV in Oklahoma City, Oklahoma; WNEP-TV in
Scranton, Pennsylvania; WHO-TV in Des Moines, Iowa; WHNT-TV in Huntsville,
Alabama; WQAD-TV in Moline, Illinois; and KFSM-TV in Fort Smith, Arkansas;
and radio stations WQXR(FM) and WQEW(AM) in New York City.
o Magazines: Golf Digest, Golf World and Golf Shop Operations.
o Forest Products Investments and Other Joint Ventures: Minority equity
interests in a Canadian newsprint company and a supercalendered paper
manufacturing partnership in Maine, and a one-half interest in the
International Herald Tribune.
NEWSPAPERS
The Newspaper Group segment consists of two categories: Newspapers (consisting
of The Times, The Globe,the New England Newspaper Group, 21 Regional Newspapers, newspaper
distributors, and certain related businesses) and New Ventures (consistingTimes Company Digital, of
projects developedwhich the following Web sites are included in electronic media by The Times, The Globethe results of the Newspaper Group
for 1999: NYTimes.com, Boston.com, NYToday.com, WineToday.com, and the Regional Newspapers, as well
as various new media investments).Abuzz.com.
The New York Times
Circulation
The Times is a standard-size weekdaydaily (Monday through Friday)Saturday) and Sunday
newspaper which commenced publication in 1851. In 1997 The Times introduced a
daily color New York edition with separate daily culture and sports sections, as
well as other new features. The Times is circulated in each
of the 50 states, the District of Columbia and worldwide. Approximately 61%60% of
the weekday (Monday through Friday) circulation is sold in the 31 counties that
make up the greater New York City area, which
2
includes New York City, Westchester and parts of upstate New York, Connecticut
and New Jersey; 39%40% is sold elsewhere. On Sundays, approximately 58%56% of the
circulation is sold in the greater New York City area and 42%44% elsewhere.
According to reports offiled with the Audit Bureau of Circulations ("ABC"), an
independent agency that audits the circulation of most U.S. newspapers and
magazines, for the six-month period ended September 30, 1998,1999, of all seven-day
United States newspapers, The Times's weekdaydaily circulation was the second largest and its
Sunday circulation was the largest.
2
The Times's average weekday and Sunday circulations for the two 12-month periods
ended September 30, 1998, and September 30, 1999, as audited by ABC (except as
indicated), are shown in the table below:
Weekday (Mon. - Fri.) Sunday
---------------------------- ------
(Thousands of copies)
19981999 (unaudited)....................................................... 1,109.7 1,671.2
1998................................. 1,088.1 1,638.9
1997.............................................. 1,090.9 1,651.4
Approximately 58%60% of the weekday circulation and 53%55% of the larger Sunday
circulation were sold through home and office delivery in 1998.1999. During the year
ended December 27, 1998,26, 1999, the average weekday circulation of The Times increased
approximately 4,70016,100 copies above 19971998 to approximately 1,094,1001,110,200 copies and the
average Sunday circulation decreasedincreased by approximately 6,50023,300 copies below 1997above 1998
to approximately 1,644,8001,668,100 copies.
Advertising
Total advertising volume in The Times for the two years ended December 27, 1998,
and December 26, 1999, as measured by The Times, is shown in the table below.
The "National" heading in the table below includes such categories as
entertainment, financial, magazine and general advertising.
Full Run
------------------------------ Preprint
Retail National Classified Zoned Total(1) Copies
Inches Inches Inches Inches Inches Distributed
------ ------- -------- ------ ------ ---------
(Inches and Preprints in Thousands)
1998
Full Run
------------------------------------ Preprint
Retail National Classified Zoned Total(1) Copies
Inches Inches Inches Inches Inches Distributed
------ -------- ---------- ------- -------- -----------
(Inches and Preprints in Thousands)
1999....................... 567.3 1,582.1 984.1 1,015.7 4,149.2 427,857
1998....................... 587.2 1,392.7 996.9 1,019.6 3,996.4 343,070
1997 606.8 1,330.8 971.1 1,034.6 3,943.3 318,490
The table includes volume for The New York Times Magazine, which published 3,1763,651
pages of advertising in 1998,1999, compared with 3,1163,176 pages in 1997.1998.
Advertising rates for The Times increased an average of 6% in January 1998,1999, and
6%7% in January 1999.2000.
Based on recent data provided by Competitive Media Reporting, Inc., an
independent agency that measures advertising sales volume and estimates
advertising revenue, and The Times's internal analysis, The Times believes that
it ranks first by a substantial margin in advertising revenue in the general
weekday and Sunday newspaper field in the New York City metropolitan area.
Production and Distribution
Generally, The Times is printed at its production and distribution facilities in
Edison, New Jersey, and College Point,Flushing, New York.York, as well as the regional print sites
described below.
The Edison and College PointFlushing facilities print all sections of the weekday and Sunday
newspapers (except The New York Times Magazine and the Sunday Television
section) for distribution in the New York metropolitan area. Both facilities
have the capacity to print in color and have modern, automated presses,
packaging and distribution equipment.
- ----------
(1) All totals exclude preprint inches.
3
The Times has agreements with two commercial printing companies to print its
Sunday Television section and The New York Times Magazine.
- ----------
(1) All totals exclude preprint inches.
3
The editions of The Times distributed outside of the New York City area are
printed under contract at the following sites:
Region(1) Print Sites
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Midwest Chicago, IL; Canton, OH
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Northeast Boston,Billerica, MA(2); Springfield, VA
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Southeast Atlanta, GA; Ft. Lauderdale, FL; Lakeland, FL(3)
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Southwest Austin, TX; Phoenix, AZ(4)
------------------------------------------------------AZ
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West Torrance and Concord, CA; Tacoma, WA
------------------------------------------------------WA; Denver, CO(4)
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The Times currently has agreements with various newspapers and other delivery
agents located in the United States and Canada to deliver The Times in their
respective markets and, in some cases, to expand current markets. The agreements
include various arrangements for delivery on Sundays and weekdaysdaily to homes and
newsstands.
A subsidiary of the Company, City & Suburban Delivery Systems, Inc. ("City &
Suburban"), operates a wholesale newspaper distribution business that
distributes The Times and other newspapers and periodicals in New York City,
Long Island (New York), the counties of Westchester (New York) and Fairfield
(Connecticut) and central and northern New Jersey. Approximately 86%85% of The Times's single-copy daily
circulation and 73%82% of its single-copy Sunday circulation in the New York City
metropolitan area are delivered to retail
outlets by City & Suburban. Approximately 87%86% of The
Times's daily home-delivered circulation and 90% of its Sunday home-delivered
circulation in the New York City metropolitan area are delivered to depots by
City & Suburban.
- ----------
(1) Most advance sections of the Sunday newspaper distributed in these areas
are printed at Edison, New Jersey, and College Point, New York.
(2) At The Globe.
(3) At the Company's regional newspaper, The Ledger.
(4) Commenced in 1999.
4
Related Businesses
Name Description of Business
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The New York Times Electronic Media Company:
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NYT Business Information Services Produces on-lineonline computer databases and The
New York Times Index, a print publication
Licenses LEXIS/NEXIS, Dow Jones Business
Information Services, UMI,Bell & Howell
Information and Learning, The Dialog Corp.,
Online Computer Library Center and Reuters
to store, market and distribute the
Company's on-lineonline computer databases
Also licenses UMIBell & Howell Information and
Learning to produce and sell The New York
Times Index and The Times on microfilm and
CD-ROM
- --------------------------------------------------------------------------------
Consumer On-line Products The New York Times on America
Online
The New York Times on the Web
(nytimes.com)
New York Today (nytoday.com)
The New York Times Learning
Network (nytimes.com/learning)
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NYT Television Pursues certain programming
ventures utilizing The Times and
other content
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The New York Times News Services:Services
Division:
- --------------------------------------------------------------------------------
The New York Times News Service Transmits articles, graphics and photographs
from The Times, The Globe and other
publications to approximately 650 newspapers
and magazines in the United States and in
more than 50 countries worldwide
- --------------------------------------------------------------------------------
The New York Times Syndicate Markets other supplemental news services and
feature material, graphics and photographs
from The Times and other leading news
sources to newspapers and magazines around
the world
- --------------------------------------------------------------------------------
NYT Television Pursues certain programming ventures
utilizing The Times and other content
- --------------------------------------------------------------------------------
- ----------
(1) Most advance sections of the Sunday newspaper distributed in these areas
are printed at Edison, New Jersey, Flushing, New York, and Concord,
California.
(2) At The Globe.
(3) At the Company's regional newspaper, The Ledger.
(4) Commenced in 2000.
4
New England Newspaper Group
The Boston Globe
The Globe is owned and published by the Company's subsidiary, Globe Newspaper
Company, Inc. ("The Globe" may also be used to refer to Globe Newspaper Company,
Inc.).
On January 7, 2000, the Company acquired the Worcester Telegram & Gazette
("Worcester"), in Worcester, Massachusetts. Commencing in the year 2000, The
Globe and Worcester will be divisions of the Company's New England Newspaper
Group.
Circulation
The Globe is a standard-size weekdaydaily (Monday through Saturday) and Sunday
newspaper which commenced publication in 1872, and was acquired by the Company
in 1993. The Globe is distributed throughout New England, although its
circulation is concentrated in the Boston metropolitan area. According to ABC
reports, as of September 27,
1998,26, 1999, the weekday (Monday through Friday)
circulation of The Globe was the 14th largest of any weekday newspaper;
circulation of the Sunday edition was the ninthtenth largest of any Sunday newspaper
published in the United States; and its weekdaydaily and Sunday circulation was the
largest of all newspapers published in either Boston or New England.
5
The Globe's average weekday and Sunday paid circulation for the two 12-month
periods ended March 29, 1998,28, 1999, and March 30, 1997,29, 1998, as audited by ABC, are shown
in the table below:
Weekday (Mon. - Fri.) Sunday
---------------------------- ------
(Thousands of copies)
1998.............................................1999...................................... 470.0 741.2
1998...................................... 474.9 754.0
1997............................................. 468.8 757.4
During the year ended December 27, 1998,26, 1999, the average weekday circulation of The
Globe decreased approximately 5,0001,000 copies below 19971998 to approximately 469,800468,900
copies and the average Sunday circulation decreased by approximately 9,70016,700
copies below 19971998 to approximately 745,500728,500 copies.
Approximately 73%74% of the weekday circulation and 63%64% of the larger Sunday
circulation were sold through home or office delivery; the remainder were sold
primarily on newsstands.
Advertising
The Globe's total advertising volume by category of advertising for the two
years ended December 27, 1998,26, 1999, for all editions, as measured by The Globe, is
set forth below:
Full Run
------------------------------ Preprint
Retail National Classified Zoned Total(1) Copies
Inches Inches Inches Inches Inches Distributed
------ ------- -------- ------ ------ ---------
(Inches and Preprints in Thousands)
1998
Full Run
------------------------------------ Preprint
Retail National Classified Zoned Total(1) Copies
Inches Inches Inches Inches Inches Distributed
------ -------- ---------- ------ -------- -----------
(Inches and Preprints in Thousands)
1999 ...................... 667.5 753.1 1,354.3 256.2 3,031.1 801,842
1998....................... 701.9 697.4 1,350.5 278.9 3,028.7 787,016
1997(2) 729.6 629.6 1,346.1 304.5 3,009.9 729,228
Advertising rates in each category of advertising were adjusted in 1998.1999. The
latest increase in certain retail advertising rates occurred on September 1,
1998.1999. Increases in classified and national advertising rates were effective as
of April 1, 1998,1999, and July 1, 1998.1999. These rate increases ranged from 3%2% to 5.5%6%.
- ----------
(1) All totals exclude preprint inches.
5
Based on information supplied by major daily newspapers published in New England
and assembled by the New England Newspaper Association, Inc., for the 12-month
period ending December 27, 1998,26, 1999, The Globe ranked first in advertising inches
among all newspapers published in Boston and New England.
Production and Distribution
All editions of The Globe are printed and prepared for delivery at its main
Boston plant or its Billerica, Massachusetts, satellite plant.
Virtually all of The Globe's home-delivered circulation is delivered through The
Globe's distribution subsidiary, Community Newsdealers, Inc. Direct single-copy
distribution by The Globe and its subsidiary Retail Sales, Inc. accounted for
66%65% and 57%58% of the average weekday and Sunday single-copy distribution in 1998.
- ----------
(1) All totals exclude preprint inches.
(2) For comparability, 1997 has been restated to conform with the 1998
presentation.
61999.
Regional Newspapers
The Company currently owns 18 daily and in most cases, Sunday, and three
non-daily smaller-city newspapers.
Daily Newspapers Non-Daily Newspapers
- -------------------------------------------------------------------------- -----------------------------------------
Daily Newspapers
- -----------------------------------------------------------------------------
The Gadsden Times (Ala.) The Gainesville Sun (Fla.) Marco Island Eagle (Fla.)
The Tuscaloosa News (Ala.) The Ledger (Lakeland, Fla.) The News-Leader (Fernandina Beach, Fla.)
Times Daily (Florence, Ala.) Daily World (Opelousas, La.) The News-Sun (Sebring/Avon Park, Fla.)
Santa Barbara News-Press (Calif.) The Courier (Houma, La.)
The Press Democrat (Santa Rosa, Calif.) The Daily Comet (Thibodaux, La.)
Daily News (Palatka, Fla.) The Dispatch (Lexington, N.C.)
Lake City Reporter (Fla.) Times-News (Hendersonville, N.C.)
Sarasota Herald-Tribune (Fla.) Wilmington Morning Star (N.C.)
Star-Banner (Ocala, Fla.) Spartanburg Herald-Journal (S.C.)
Non-Daily Newspapers
- ---------------------------------------
Marco Island Eagle (Fla.)
The News-Leader (Fernandina Beach, Fla.)
The News-Sun (Sebring/Avon Park, Fla.)
The Regional Newspapers' circulation for the years ended December 27,
1998,26, 1999, and
December 28, 1997,27, 1998, is shown in the table below:
Daily Weekday Non-Daily SundaySunday(1)
------------- --------- ---------------
(Thousands of Copies)
19981999................. 732.7 32.4 779.5
1998................. 736.8 32.6 787.6
1997 733.4 33.0 788.7
Advertising volume, stated on the basis of six columns per page, was 16,187,100
inches in 1999, compared with 16,073,900 inches in 1998, compared with 15,645,900 inches in 1997.1998. Preprints distributed
in 19981999 were 1,082,712,000,1,115,303,000, compared with 1,013,200,0001,082,712,000 in 1997.
New Ventures
The following businesses relating to Newspapers were classified by1998.
On February 17, 2000, the Company as "New Ventures" during 1998:made a decision to offer for sale the Santa
Barbara News-Press, the Daily World, the Daily News, the Lake City Reporter, The
New YorkNews-Sun, The News-Leader and the Marco Island Eagle.
Times on America Online,Company Digital
Times Company Digital operates the Company's major Internet businesses, which
include the following Web sites:
- --------------------------------------------------------------------------------
NYTimes.com Exclusive Internet access to the complete
contents of The New
York Times, on the Web, New York Today,plus enhanced
features, regularly updated breaking news
and The New York Times Learning Network, boston.com, CareerPath.com, various Regional Newspaper on-linean
offering to parents, students and cable
services, NYT Television, and the Company's investmentsteachers
of grades 3-12 (www.nytimes.com/learning).
- --------------------------------------------------------------------------------
NYToday.com Information concerning life in Classified Ventures,
Inc., OVATION and Zip2 Corp.
The New York
Times on America Online, The New York Times on the Web, New York
Today, The New York Times Learning NetworkCity, including neighborhood news,
classifieds and NYT Television are described
above under "The New York Times -- Related Businesses." Boston Globe Electronic
Publishing, Inc. operates The Globe's Web site boston.com, an Internet gateway
toentertainment and restaurant
reviews and listings.
- --------------------------------------------------------------------------------
- ----------
(1) Includes fourteen daily newspapers and does not include one non-daily
newspaper with a Sunday edition.
6
- --------------------------------------------------------------------------------
Boston.com Information concerning Boston and New
England.England and featuring exclusive Internet
access to the complete contents of The
TimesGlobe.
- --------------------------------------------------------------------------------
WineToday.com News and The Globe have participated ininformation about wine, including a
searchable database containing expert
tastings of over 5,000 wines from around the
developmentworld.
- --------------------------------------------------------------------------------
GolfDigest.com Custom news, features and instructional
information for golfers featuring exclusive
Internet access to the complete contents of
CareerPath.com, an employment database onGolf Digest, Golf World and Golf Digest
Woman.
- --------------------------------------------------------------------------------
Abuzz.com Community-building question and answer Web
site featuring the Internet. Several
Regional Newspapers have created on-line services tailored to their local market
interests and needs. The Sarasota Herald-Tribune operates a 24-hour local news
cable television channel which reaches approximately 156,000 subscribers.
The Company has investments in Classified Ventures, Inc., a national on-line
network providing classified advertising through both nationally branded and
local affiliate Web sites; OVATION, a visual and performing arts cable
television network; and Zip2 Corp., a provider of software and on-line business
systems designed to facilitate newspapers' efforts to capture on-line
advertising revenue. Compaq Computer Corp. has agreed to purchase Zip2 Corp.,
andAbuzz technology.
- --------------------------------------------------------------------------------
In July 1999, the Company expectsacquired Abuzz Technologies, Inc., which has developed
techniques for directing information queries to sell its interest in Zip2 Corp. in connection with
this transaction.
7the persons most capable of
answering them and archiving the resulting communication dialogue for future
use.
BROADCASTING
The Company's television and radio stations are operated under licenses from the
Federal Communications Commission ("FCC") and are subject to FCC regulations.
Radio and television license renewals are now normally granted for terms of
eight years.
Station License Expiration Date
----------------------------------------------------------
WNEP-TV (Scranton, Penn.) August 1, 1999
----------------------------------------------------------
WTKR(TV)-------------------------------------------------------------------
WTKR-TV (Norfolk, Va.) October 1, 2004
-----------------------------------------------------------------------------------------------------------------------------
WHNT-TV (Huntsville, Ala.) April 1, 2005
KFSM-TV (Ft. Smith, Ark.) June 1, 2005
WREG-TV (Memphis, Tenn.) August 1, 2005
WQAD-TV (Moline, Ill.) December 1, 2005
-----------------------------------------------------------------------------------------------------------------------------
WHO-TV (Des Moines, Iowa) February 1, 2006
KFOR-TV (Oklahoma City, Okla.) June 1, 2006
-----------------------------------------------------------------------------------------------------------------------------
WNEP-TV (Scranton, Penn.) August 1, 2007
-------------------------------------------------------------------
WQXR(FM) (New York, NY) June 1, 2006
WQEW(AM) (New York, NY) June 1, 2006
-----------------------------------------------------------------------------------------------------------------------------
The Company anticipates that its present and future applications for renewal of its station
licenses will result in the licenses being renewed for eight-year periods.
All of the television stations have three principal sources of revenue: local
advertising sold to advertisers in the immediate geographic areas of the
stations, national spot advertising (sold to national clients by individual
stations rather than networks), and compensation paid by the networks for
carrying commercial network programs.
Market's Network
Station Nielsen Ranking(1) Affiliation Band
-----------------------------------------------------
WTKR(TV)----------------------------------------------------------------------
WREG-TV 40 CBS VHF
-----------------------------------------------------
WREG-TV 43----------------------------------------------------------------------
WTKR-TV 42 CBS VHF
---------------------------------------------------------------------------------------------------------------------------
KFOR-TV 45 NBC VHF
---------------------------------------------------------------------------------------------------------------------------
WNEP-TV 51 ABC UHF(2)
---------------------------------------------------------------------------------------------------------------------------
WHO-TV 70 NBC VHF
---------------------------------------------------------------------------------------------------------------------------
WHNT-TV 8182 CBS UHF(2)
---------------------------------------------------------------------------------------------------------------------------
WQAD-TV 9088 ABC VHF
---------------------------------------------------------------------------------------------------------------------------
KFSM-TV 117118 CBS VHF
---------------------------------------------------------------------------------------------------------------------------
- ----------
(1) According to Nielsen Media Research, a research company that measures
audiences for television stations.
(2) All other stations in this market are also in the UHF band.
7
The Company's two radio stations serve the New York City metropolitan area.
WQXR(FM) is currently the only commercial classical music station serving this
market, which is the nation's largest radio audience. In December 1998, the
Company entered into a Time Brokerage Agreement with ABC, Inc., under which ABC,
Inc. will provideis providing substantially all of the programming for WQEW(AM) for an
eight-year period. ABC, Inc. replaced WQEW's former format of American popular
standards with Radio Disney, a national radio network for children age 12 and
under. Under a separate option agreement, ABC, Inc. has acquired the
right to purchase WQEW(AM) at the end of the eight-year period.
- ----------
(1) According to A.C. Nielsen Company, a research company that measures
audiences for television stations.
(2) All other stations in this market are also in the UHF band.
8
MAGAZINES
The Magazine Group segment consists of two categories:includes: Magazines (including those publications set
forth in the table belowbelow) and related activities in the golf field) and New Ventures.field.
As of December 27, 1998,26, 1999, the Company published the magazines listed in the chart
below:
Percentage Percentage
Increase Increase
(Decrease) in (Decrease) in
Average Advertising
Subject/ Average Circulation Advertising Pages
Magazine Frequency Audience Rate Base Circulation(1) Over 19971998 Pages(2) Over 19971998
- -------------------- ------------------ ---------- ------------ ---------------------- --------- ----------- ------------- ----------- -------------
Golf Digest Monthly Golf 1,550,000 1,552,100 2.1 1,394 1.81,553,900 0.4 1,540 10.7
Golf World 46 issues per year Golf 150,000 158,400 6.6 1,283 (11.9)158,000 (1.3) 1,299 (1.7)
Golf Shop Operations 10 issues per year Golf trade 17,500(3) 17,900 (1.6) 1,053 (0.3)17,700 (0.6) 858 (19.3)
NewTimes Company Digital, a division of the Company (described above), operates
GolfDigest.com. In 2000, Golf Digest Woman will be launched as a separate
publication.
INVESTMENTS
The Company has minority equity investments in:
- --------------------------------------------------------------------------------
TheStreet.com An online provider of financial and
investment news and commentary.
- --------------------------------------------------------------------------------
Classified Ventures The Magazine Group offers various golfA national online network providing
classified advertising through both
nationally branded and travel information and excerpts from
its publicationslocal affiliate Web
sites.
- --------------------------------------------------------------------------------
CareerPath.com An employment database on the World Wide Web. In February 1998 the Company sold the
assets of Golf Digest Information Systems, Inc.Internet.
- --------------------------------------------------------------------------------
OVATION A visual and performing arts cable
television network.
- --------------------------------------------------------------------------------
WineShopper.com First Web site to offer nationwide wine
sales.
- --------------------------------------------------------------------------------
FOREST PRODUCTS INVESTMENTS AND OTHER JOINT VENTURESVENTURE
The Company has ownership interests in one newsprint mill and one
supercalendered (glossy paper used in magazines) paper mill (the "Forest
Products Investments") and the International Herald Tribune.
Forest Products Investments
The Company has a 49% equity interest in a Canadian newsprint company, Donohue
Malbaie Inc. ("Malbaie"). The other 51% is owned by Donohue, Inc. ("Donohue"), a
publicly-traded Canadian company whose voting shares are controlled by Quebecor,
a Canadian publishing company. On February 11, 2000, Abitibi-Consolidated, Inc.
announced that it will offer to purchase all of the shares of Donohue and that
Quebecor has agreed to sell its shares to Abitibi-Consolidated Inc. Malbaie
purchases pulp from Donohue and manufactures newsprint from this raw material on
the paper machine it owns within the Donohue paper mill at Clermont, Quebec.
Malbaie is wholly dependent upon Donohue for its pulp. In 19981999 Malbaie
- ----------
(1) As reported by the publisher to ABC or the Business Publications
Association.
(2) As reported by the publisher to Publisher's Information Bureau ("PIB");
or, in the case of Golf Shop Operations, as calculated by the publisher
using the same methodology as for PIB.
(3) For this trade publication, the average print order is disclosed as the
applicable measure for advertisers.
8
produced 207,000216,000 metric tons of newsprint, 72,00052,000 tons of which were sold to the
Company, with the balance sold to Donohue for resale.
The Company has an equity interest in a partnership operating a supercalendered
paper mill in Maine, Madison Paper Industries ("Madison"). The Company's
interest in Madison is 40%. Madison produces supercalendered paper at its
facility in Madison, Maine. Madison purchases all of its wood from local
suppliers, mostly under long-term contracts. In 19981999 Madison produced 175,000
metric tons, 11,00012,000 tons of which were sold to the Company.
The debt of Malbaie and Madison is not guaranteed by the Company.
Malbaie and Madison are subject to comprehensive environmental protection laws,
regulations and orders of provincial, federal, state and local authorities of
Canada or the United States (the "Environmental Laws"). The Environmental Laws
impose effluent and emission limitations and require Malbaie and Madison to
obtain, and operate in compliance with the conditions of, permits and other
governmental authorizations ("Governmental Authorizations"). Malbaie and Madison
follow policies and operate monitoring programs to ensure compliance with
applicable Environmental Laws and Governmental Authorizations and to minimize
exposure to environmental liabilities. Various regulatory authorities
- ----------
(1) As reported by the publisher to ABC or the Business Publications
Association.
(2) As reported by the publisher to Publisher's Information Bureau ("PIB");
or, in the case of Golf Shop Operations, as calculated by the publisher
using the same methodology as for PIB.
(3) For this trade publication, the average print order is disclosed as the
applicable measure for advertisers.
9
periodically review the status of the operations of Malbaie and Madison. Based
on the foregoing, the Company believes that Malbaie and Madison are in
substantial compliance with such Environmental Laws and Governmental
Authorizations.
Other Joint VenturesVenture
The Company and The Washington Post Company each own a one-half interest in the
International Herald Tribune S.A.S., which publishes the International Herald
Tribune. The newspaper is edited in Paris and printed in Athens, Bangkok,
Bologna, Frankfurt, Hong Kong, Jakarta, Kuala Lumpur, London, Madrid, Marseille,
New York, Paris, Singapore, Tel Aviv, The Hague, Tokyo, Toulouse and Zurich.
RAW MATERIALS
The primary raw materials used by the Company are newsprint and supercalendered
and coated paper. Neither the Company nor any of its businesses is dependent on
any one supplier of paper.
In 19981999 and 1997,1998, the Company used the following types and quantities of paper
(all amounts in metric tons):
Coated,
Supercalendered
Publication Newsprint and Other Paper
--------------------------------------------------------------------------------------------------------------------------------
1999 1998 19971999 1998
1997
--------------------------------------------------------------------------------------------------------------------------------
The Times(1) 322,000 312,000 295,00026,000 22,000
22,000
--------------------------------------------------------------------------------------------------------------------------------
The Globe(1) 141,000 141,000 5,000 5,000
-----------------------------------------------------------4,000 4,000
---------------------------------------------------------------------
Regional Newspapers 100,500 98,500 94,000 -- --
--------------------------------------------------------------------------------------------------------------------------------
Magazine Group -- -- 10,200 9,900
14,500(2)
-----------------------------------------------------------
TOTAL---------------------------------------------------------------------
Total 563,500 551,500 530,000 36,900 41,500
-----------------------------------------------------------40,200 35,900
---------------------------------------------------------------------
The paper used by The Times, The New York Times Magazine, The Globe, the
Regional Newspapers and the magazines published by the Magazine Group was
purchased under long-term contracts with unrelated suppliers and related
suppliers in which the Company holds equity interests (see "Forest Products
Investments").
- ----------
(1) The Times and The Globe use coated, supercalendered or other paper for The
New York Times Magazine and The Globe's Sunday Magazine.
9
COMPETITION
The Times competes with newspapers of general circulation in New York City and
its suburbs. The Times also competes in varying degreessuburbs, as well as with national publications such as The Wall Street
Journal and USA Today andToday. The Times also competes with magazines, television,
radio, direct mail, the Internet and other media. In 1998, Competitive Media
Reporting, Inc., an independent agency that measures advertising sales volume
and estimates advertising revenue, classified The Times as a national newspaper.
The Regional Newspapers and the International Herald Tribune compete with a
variety of other advertising media in their respective markets.
The Globe competes with other daily, weekly and national newspapers distributed
in Boston, its neighboring suburbs and the greater New England region,
including, among others, The Boston Herald (weekday(daily and Sunday). The Globe also
competes with other communications media, such as direct mail, magazines, radio,
the Internet and television (including cable television).
- ----------
(1)television.
The TimesRegional Newspapers and The Globe use coated, supercalendered orthe International Herald Tribune compete with a
variety of other paper for The
New York Times Magazine and The Globe's Sunday Magazine.
(2) Includes coated paper used by six magazines soldadvertising media in November 1997.
10their respective markets.
The magazines published by the Company compete directly with other golfing
publications as well as with general interest magazines and other media,
primarily broadcast and cable television.
All of the Company's television stations compete directly with other television
stations in their respective markets and with other video services, such as
cable network programming carried on local cable systems and satellite-to-home
systems and, to a lesser extent, with the Internet. WQXR(FM) competes for
listeners with WNYC(FM) (a non-commercial station) for the classical music
audience and for listeners and revenues with many adult-audience commercial
radio stations and other media in New York City and surrounding suburbs.
The New York Times Syndicate's operations compete with several other syndicated
features and supplemental news services.
EMPLOYEES
As of December 27, 1998,26, 1999, the Company had approximately 13,20013,400 full-time
equivalent employees.
The Times 5,0004,900
The Globe 3,3003,200
Regional Newspapers 3,500
Broadcast Group 800900
Magazine Group 200
Times Company Digital 300
Corporate/Shared Service Center 300400
------
Total Company 13,20013,400
======
Labor Relations
Approximately 3,6153,690 full-time equivalent employees of The Times and City &
Suburban are represented by 16 unions.unions for collective bargaining purposes.
Approximately 30 employees of Times Company Digital are represented by the
Newspaper Guild of New York.
The Times has collective bargaining agreements effectivein effect through at least March
30, 2000,2003, with all of its production unions except forexcept: the New York Newspaper Printing
Pressmen'sMailers' Union (which contract expires onand the
Paperhandlers' Union, both of which have contracts expiring March 30, 2005, and covers
approximately 450 employees), and with all of its non-production unions, except
for the Newspaper Guild of New York, the International Association of Machinists
and the International Union of Operating Engineers (which contracts expire on
March 30, 2003, and2000, that
cover approximately 1,740 employees),430 full-time production employees; and the International
Brotherhood of Electricians, (whichwhich has a contract expires onexpiring March 30, 1999, and2002, that
covers approximately five full-time maintenance employees.
City & Suburban's collective bargaining agreement with its drivers' union
expires March 30, 2008; its six agreements with its truck maintenance and
building maintenance unions (covering approximately 37 full-time employees).
expire in 2000; and its agreement with its support staff union (covering
approximately 14 full-time employees) expired in 1995. City & Suburban has collective bargaining agreements effective through March 30,
2000,is in the
process of negotiating successor agreements.
10
The Times's agreement with its soleprinting pressmens' union (which covers
approximately 450 production union and with two of its three non-production
unions. City & Suburban's contract with the United Auto Workers (covering
approximately 10 employees in this non-production union) expired in May 1995;
the parties are continuing to negotiate a successor contract.
The agreements described above set wages through their terms except: the
Newspaper and Mail Deliverers' Union agreements with The Times and City &
Suburban, covering approximately 650 production employees, do not set wage
increases for the 1996-2000 period; the Typographers' Union agreement with The
Times, covering approximately 50 production employees, does not setemployees) provides that wages for the 1996-2000 period; and2000-2005
period are to be negotiated by the Pressman's Unionparties. If the negotiations do not result in
an agreement, with The Times,
covering approximately 450 production employees, does not setthe issue of wages for the
2001-2005 period. Wages for these time periods are subjectthis period is to negotiation, and
if the negotiations are unsuccessful, arebe submitted to binding
arbitration for resolution.
Approximately 2,100 full-time equivalent employees of The Globe are represented
by 12 unions. On December 28, 1997,In 1999 The Globe's labor agreementGlobe concluded its negotiations with the Boston Globe
Employees Association, an affiliate of The Newspaper Guild
11
representing
non-production employees, expired. Negotiations are continuing andfor a three-year contract effective January 1, 1998
through December 31, 2000.
The Globe expects them to be completed in 1999.
In 1998 The Globe concluded its negotiationshas a six-year contract with Boston Mailers Union No. 1 which extends
until December 31, 2001. The Globe concluded negotiations with five other
production unions, one for a six-yearthree-year contract effective January 1, 1996,1999,
through December 31, 2001. Eight2001, a second for a four-year contract effective January
1, 1999, through December 31, 2002, two for six-year contracts effective January
1, 1999, through December 31, 2004, and one for a ten-year contract effective
January 1, 1997, through December 31, 2006, with a provision permitting at
specified times after December 31, 2002, negotiation of wages. Four other
production unions have contracts that expired December 31, 1998. Negotiations
have commenced for successor contracts. The Globe expects to conclude these
negotiations during 1999. Two2000. One other production unions have
contractsunion has a contract that
continuecontinues to be in effect with expiration dates ofthrough December 31, 2001 (subject2001. This contract is open for
negotiation of wages. The Globe expects to a wage reopener effective Decembercomplete negotiation on this contract
during 2000.
Approximately one-fourth of the 655 full-time equivalent employees of Worcester
are represented by four unions. Contracts with three production unions expire
October 8, 2000, August 31, 1998)2002, and December 31,
2006.November 30, 2002, respectively. The
Providence Newspaper Guild was certified as the bargaining agent for newsroom
employees in 1993. Negotiations are ongoing.
The Company cannot predict the timing or the outcome of the various negotiations
described above.
Two other entities owned by the Company (The Press Democrat and WQXR(FM)) also
have collective bargaining agreements covering certain of their employees.
11
ITEM 2. PROPERTIES.Properties.
The general character, location, terms of occupancy and approximate size of the
Company's principal plants and other materially important properties at December
27, 1998,26, 1999, are listed below.
General Character Approximate Area in Approximate Area in
of Property Square Feet (Owned) Square Feet (Leased)
- --------------------------------------------------------------------------
NEWSPAPER PUBLISHING:
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Newspaper Publishing:
-------------------------------------------------------------------------
Printing plants, business
and editorial offices,
garages and warehouse
space located in:
- ---------------------------------------------------------------------------------------------------------------------------------------------------
New York, NY 714,000 107,500
- --------------------------------------------------------------------------
College Point,-------------------------------------------------------------------------
Flushing, NY -- 515,000(1)
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Edison, NJ -- 1,300,000(2)
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Boston, MA 652,000 --
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Billerica, MA 290,000 --
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Westwood, MA 115,000 --
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Other locations 1,324,600 548,000
- --------------------------------------------------------------------------
BROADCASTING
- ---------------------------------------------------------------------------------------------------------------------------------------------------
Broadcasting
-------------------------------------------------------------------------
Business offices, studios
and transmitters at
various locations 324,820 25,000
- --------------------------------------------------------------------------
MAGAZINE PUBLISHING26,725
-------------------------------------------------------------------------
Magazine Publishing 87,000 34,500
- --------------------------------------------------------------------------
TOTAL-------------------------------------------------------------------------
Total 3,507,420 2,530,000
- --------------------------------------------------------------------------2,531,725
-------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS.Legal Proceedings.
There are various legal actions that have arisen in the ordinary course of
business and are now pending against the Company. Such actions are usually for
amounts greatly in excess of the payments, if any, that may be required to be
made. It is the opinion of management after reviewing such actions with legal
counsel to the Company that the ultimate liability which might result from such
actions will not have a material adverse effect on the consolidated financial
position or results of operations of the Company.statements.
- ----------
(1) The Company is leasing a 31-acre site in College Point,Flushing, New York, where its
printing and distribution plant is located, and has the option to purchase
the property at any time prior to the end of the lease in 2019.
(2) The Edison production and distribution facility is occupied pursuant to a
long-term lease with renewal and purchase options.
12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
Employed By Registrant Position(s) As Of
Name Age Registrant Since February 26, 1999March 13, 2000
- ----------------------------------------------------- --- ----------- ----------------------------------------------------------------------------- --------------------------------------------------------------------
Corporate Officers
Arthur Sulzberger, Jr. 4748 1978 Chairman (since 1997) and Publisher of The Times
(since 1992)
Russell T. Lewis 5152 1966(1) President (since 1996) and Chief Executive Officer (since 1997);
Chief Operating Officer (1996 to 1997); President and General
Manager of The Times (1993 to 1996)
Michael Golden 4950 1984 Vice Chairman and Senior Vice President (since 1997); Vice
President, Operations Development (1996 to 1997); Executive Vice
President, Sports/Leisure Magazines and Publisher of Tennis
(1994 to 1995); Executive Vice
President and General Manager of Women's Magazines (1991
to 1994)
Cynthia H. Augustine 4142 1986(2) Senior Vice President (since 1998), Human Resources; Partner in
Sabin, Bermant and Gould LLP (1994 to 1998)
John M. O'Brien 5657 1960 Senior Vice President and Chief Financial Officer (since 1998);
Senior Vice President (1996 to 1998), Operations; Executive Vice
President (1992 to 1996) and Deputy General Manager (1991 to
1996) of The Times
Solomon B. Watson IV 5455 1974 Senior Vice President (since 1996); Vice President (1990 to 1996);
General Counsel (since 1989)
Laura J. Corwin 5355 1980 Vice President (since 1997); Secretary (since 1989) and Corporate
Counsel (1993 to 1997)
James C. Lessersohn 45 1987 Vice President and Treasurer (since 1999); Vice President,
Corporate Planning (1997 to 1999); Managing Director, Corporate
Planning (1994 to 1997)
Stuart Stoller 4344 1996 Vice President and Corporate Controller (since 1996); Controller of
Coopers and Lybrand L.L.P. (1995); Senior Vice President,
Control and Accounting, of R. H. Macy & Co., Inc. ("Macy's") (1993 to 1995)
Ellen Taus 40 1996 Vice President (since 1998) and Treasurer (since 1997);
Assistant Treasurer (1996 to 1997); Independent Financial
and Transition Consultant (1994 to 1996); Vice President,
Corporate Finance, of Macy's (1992 to 1994)
- ----------
(1) Mr. Lewis left the Company in 1973 and returned in 1977.
(2) Ms. Augustine left the Company in 1993 and returned in 1998.
13
Employed By Registrant Position(s) As Of
Name Age Registrant Since February 26, 1999March 13, 2000
- ----------------------------------------------------- --- ----------- ----------------------------------------------------------------------------- --------------------------------------------------------------------
Operating Unit Executives
Leonard P. Forman 5354 1974(1) President and Chief Executive Officer, The New York Times Company
Magazine Group, Inc. (since 1998); Senior Vice President
(1996-1998), Corporate Development, New Ventures and Electronic
Businesses; President and Chief Executive Officer of
NYNEX/Newsday electronic service joint venture (1995)
Richard H. Gilman 49 1983 Publisher of The Globe (since 1999); Senior Vice President,
Operations (1993 to 1998) and Circulation (1998 to 1999) of The
Times
Lynn O. Matthews 55 1973 President and Chief Operating Officer, of theThe New York Times Company
Regional Newspaper Association of America (1992 to 1994)
Stephen Golden 51 1967(2) Vice President, Forest Products, Health, Safety and
Environmental AffairsGroup (since 1992)2000); Publisher, Sarasota
Herald-Tribune (1991-2000)
Martin A. Nisenholtz 44 1995 Chief Executive Officer, Times Company Digital, Inc. (since 1999);
President, of the
Company's Forest Products Group (since 1994)The New York Times Electronic Media Company
(1995-1999); Corporate Director, Content Strategy, Ameritech
Corporation (1994 to 1995)
C. Frank Roberts 5556 1970 Vice President, Broadcasting (since 1986); President, The New York
Times Company Broadcast Group (since 1985)
Janet L. Robinson 48 199349 1983 President and General Manager of The Times (since 1996); Senior
Vice President, Advertising of The Times (1995-1996); Vice
President (1993-1995) and Director (1994-1995) of Advertising of
The Times
Benjamin B. Taylor 52 1993 Chairman and Chief Executive Officer of Globe Newspaper
Company, Inc. (since 1998) and Publisher of The Boston
Globe (since 1997); President of The Globe (1993-1997)
James C. Weeks 56 1971 President, The New York Times Company Regional Newspaper
Group (since 1993); Executive Vice President, Operations,
Regional Newspaper Group (1988 to 1993)
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.Market for the Registrant's Common Equity and Related Stockholder
Matters.
The information required by this item appears at page F-35F-40 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.Selected Financial Data.
The information required by this item appears at page F-1 of this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information required by this item appears at pages F-3 to F-12 of this Form
10-K.
ITEM 8. Financial Statements and Supplementary Data.
The information required by this item appears at pages F-13 to F-37 and page
F-39 to F-40 of this Form 10-K.
- ----------
(1) Mr. Forman left the Company in 1986 and returned in 1996.
(2) Mr. Golden left the Company in 1969 and returned in 1974.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears at pages F-13 to F-349. Changes in and page
F-36 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.Directors and Executive Officers of the Registrant.
In addition to the information set forth under the caption "Executive Officers
of the Registrant" in Part I of this Form 10-K, the information required by this
item is incorporated by reference to the sectionsections entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 7Compliance," "Proposal Number 1 - Election of
Directors," and pages 9 to 13,"Interest of Directors in Certain Transactions of the Company,"
but only up to and not including the section entitled "Certain Information About
the Board of Directors," of the Company's Proxy Statement for the 19992000 Annual
Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.Executive Compensation.
The information required by this item is incorporated by reference to pages 15
to 19,the
sections entitled "Compensation of Directors; Liability and Reimbursement
Insurance" and "Compensation of Executive Officers," but only up to and not
including the section entitled "Performance Presentation," of the Company's
Proxy Statement for the 19992000 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference to pages 1 to
9, but only up toSecurity Ownership of Certain Beneficial Owners and not including the section entitled "Proposal Number
1-Election of Directors," of the Company's Proxy Statement for the 1999 Annual
Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.Management.
The information required by this item is incorporated by reference to the
section on pages 12sections entitled "Solicitation of Proxies," "Voting Securities of The Company,"
"Principal Holders of Common Stock," "Security Ownership of Management,"
"Section 16(a) Beneficial Ownership Reporting Compliance," "The 1997 Trust," and
13"Globe Voting Trust" of the Company's Proxy Statement for the 2000 Annual
Meeting of Stockholders.
ITEM 13. Certain Relationships and Related Transactions.
The information required by this item is incorporated by reference to the
sections entitled "Interest of Directors in Certain Transactions of the
Company" and pages 16 to 19,Company," "Compensation of Executive Officers," but only up to and not including
the section entitled "Performance Presentation," of the Company's Proxy
Statement for the 19992000 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORMExhibits, Financial Statement Schedules and Reports on Form 8-K.
(A) DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements and Supplemental Schedules
(a) The Consolidated Financial Statements of the Company are filed as part of
this Form 10-K and are set forth on pages F-13 to F-34.F-37. The report of
Deloitte & Touche LLP, Independent Public Accountants,Auditors, dated January 27,
1999,28, 2000
(February 17, 2000, as to Note 18), is set forth on page F-35F-38 of this Form
10-K.
15
(b) The following additional consolidated financial information is filed as
part of this Form 10-K and should be read in conjunction with the
Consolidated Financial Statements set forth on pages F-13 to F-34.F-37.
Schedules not included with this additional consolidated financial
information have been omitted either because they are not applicable or
because the required information is shown in the Consolidated Financial
Statements at the aforementioned pages.
Page
----
Ratio of Earnings to Fixed Charges........................ Exhibit 12
Independent Auditors' Consent............................. Exhibit 23
Consolidated Schedules for the Three Years Ended
December 27, 1998:
II--Valuation and Qualifying Accounts..................
15
Page
----
Ratio of Earnings to Fixed Charges....................................... Exhibit 12
Independent Auditors' Consent............................................ Exhibit 23
Consolidated Schedules for the Three Years Ended December 26, 1999:
II--Valuation and Qualifying Accounts............................... S-1
Separate financial statements and supplemental schedules of associated companies
accounted for by the equity method are omitted in accordance with the provisions
of Rule 3-09 of Regulation S-X.
(2) Exhibits
(2.1) Agreement and Plan of Merger, dated as of June 11, 1993, as amended by
the First Amendment dated as of August 12, 1993, by and among the
Company, Sphere, Inc. and Affiliated Publications, Inc. ("API") (filed
as Exhibit 2 to the Form S-4 Registration Statement, Registration No.
33-50043, on August 23, 1993, and included as Annex I to the Joint
Proxy Statement/Prospectus included in such Registration Statement
(schedules omitted--the Company agrees to furnish a copy of any
schedule to the Securities and Exchange Commission upon request), and
incorporated by reference herein).
(3.1) Certificate of Incorporation as amended and restated to reflect
amendments effective June 19, 1998 (filed as an Exhibit to the
Company's Form 10-Q dated August 11, 1998, and incorporated by
reference herein).
(3.2) By-laws as amended through May 21, 1998 (filed as an Exhibit to the
Company's Form 10-Q dated August 11, 1998, and incorporated by
reference herein).
(4) The Company agrees to furnish to the Commission upon request a copy
of any instrument with respect to long-term debt of the Company and
any subsidiary for which consolidated or unconsolidated financial
statements are required to be filed, and for which the amount of
securities authorized thereunder does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
(9.1) Globe Voting Trust Agreement, dated as of October 1, 1993, as
amended effective October 1, 1995 (filed as an Exhibit to the
Company's Form 10-K dated March 11, 1996, and incorporated by
reference herein).
(10.1) The Company's Executive Incentive Compensation Plan as amended
through December 20, 1990 (filed as an Exhibit to the Company's Form
10-K dated March 1, 1991, and incorporated by reference herein).
(10.2) The Company's 1991 Executive Stock Incentive Plan, as amended
through AprilDecember 16, 1998 (filed as an Exhibit to the Company's Form 10-Q dated
May 7, 1998, and incorporated by reference herein).1999.
(10.3) The Company's 1991 Executive Cash Bonus Plan, as amended through
April 16, 199815, 1999 (filed as an Exhibit to the Company's 10-Q dated May
7, 1998,12, 1999, and incorporated by reference herein).
(10.4) The Company's Non-Employee Directors' Stock Option Plan, as amended
through February 19, 1998 (filed as an Exhibit to the Company's Form
10-Q dated May 7, 1998, and incorporated by reference herein).
December 16, 1999.
(10.5) The Company's Supplemental Executive Retirement Plan, as amended and
restated through January 1, 1993 (filed as an Exhibit to the
Company's Form 10-K dated March 11, 1996, and incorporated by
reference herein).
(10.6) Amendment No. 1, dated May 1, 1997, to the Company's Supplemental
Executive Retirement Plan (filed as an Exhibit to the Company's Form
10-Q dated March 30, 1997, and incorporated by reference herein).
(10.7) Lease (short form) between the Company and Z Edison Limited
Partnership, dated April 8, 1987 (filed as an Exhibit to the
Company's Form 10-K dated March 27, 1988, and incorporated by
reference herein).
(10.7.1) Amendment to Lease between the Company and Z Edison Limited
Partnership, dated May 14, 1997 (filed as an Exhibit to the
Company's Form 10-Q dated November 10, 1998, and incorporated by
reference herein).
(10.7.2) Second Amendment to Lease between the Company and Z Edison Limited
Partnership, dated June 30, 1998 (filed as an Exhibit to the
Company's Form 10-Q dated November 10, 1998, and incorporated by
reference herein).
(10.8) Agreement of Lease, dated as of December 15, 1993, between The City
of New York, Landlord, and the Company, Tenant (as successor to New
York City Economic Development Corporation (the "EDC"), pursuant to
an Assignment and Assumption of Lease With Consent, made as of
December 15, 1993, between the EDC, as
16
Assignor, to the Company, as Assignee) (filed as an Exhibit to the
Company's Form 10-K dated March 21, 1994, and incorporated by
reference herein).
(10.9) Funding Agreement #1, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.10) Funding Agreement #2, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.11) Funding Agreement #3, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.12) Funding Agreement #4, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.13) New York City Public Utility Service Power Service Agreement, made
as of May 3, 1993, between The City of New York, acting by and
through its Public Utility Service, and The New York Times Newspaper
Division of the Company (filed as an Exhibit to the Company's Form
10-K dated March 21, 1994, and incorporated by reference herein).
(10.14) Employment Agreement, dated May 19, 1993, between API, Globe
Newspaper Company and William O. Taylor (filed as an Exhibit to the
Company's Form 10-K dated March 21, 1994, and incorporated by
reference herein).
(10.15) API's 1989 Stock Option Plan (filed as Annex F-1 to API's Proxy
Statement-Joint Prospectus, dated as of April 28, 1989, contained in
API's Registration Statement on Form S-4 (Registration Statement No.
33-28373) declared effective April 28, 1989, and incorporated by
reference herein).
(10.16) Globe Newspaper Company, Inc. Supplemental Executive Retirement
Plan, as amended effective December 16, 1998.1998 (filed as an Exhibit to
the Company's Form 10-K dated February 26, 1999, and incorporated by
reference herein).
(10.17) API's 1990 Stock Option Plan (Restated 1991) (filed as Exhibit 1 to
API's Quarterly Report on Form 10-Q for the Quarter ended June 30,
1991 (Commission File No. 1-10251), and incorporated by reference
herein).
17
(10.18) The Company's Deferred Executive Compensation Plan, as amended
effective December 28, 1998, and January 1,8, 1999.
(10.19) The New York Times Designated Employees Deferred Earnings Plan, as
amended effective December 28, 1998, and January 1, 1999.
(10.20) The Company's Non-Employee Directors Deferral Plan (filed as an
Exhibit to the Company's Form 10-Q dated November 12, 1997, and
incorporated by reference herein).
(10.21)(10.20) Distribution Agreement, dated as of September 24, 1998, by and among
the Company, Morgan Stanley & Co., Incorporated, Chase Securities
Inc. and Salomon Smith Barney Inc. (filed as an Exhibit to the
Company's Form 8-K dated September 24, 1998, and incorporated by
reference herein).
(10.22)(10.21) Exchange Rate Agency Agreement, dated as of September 24, 1998, by
and between the Company and Morgan Stanley Dean Witter (filed as an
Exhibit to the Company's Form 8-K dated September 24, 1998, and
incorporated by reference herein).
(10.23)(10.22) Calculation Agent Agreement, dated as of September 24, 1998, by and
between the Company and The Chase Manhattan Bank (filed as an
Exhibit to the Company's Form 8-K dated September 24, 1998, and
incorporated by reference herein).
(10.23) Employment Agreement, dated as of September 1, 1999, between the
Company and Martin Nisenholtz.
(12) Ratio of Earnings to Fixed Charges.
17
(21) Subsidiaries of the Company.
(23) Consent of Deloitte & Touche LLP.
(27) Financial Data Schedules.
(B) REPORTS ON FORM 8-K
The Company filed a reportdid not file any reports on Form 8-K dated September 24, 1998, reportingduring the filing of the Company's Registration Statement on Form S-3 relating to the
issuance by the Company from time to time of its unsecured debt securities
consisting of notes, debentures or other evidences of indebtedness at an
aggregate initial offering price of $300,000,000 or, if applicable, the
equivalent thereof in one or more foreign currencies or currency units.fiscal year
ended December 26, 1999.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 26, 1999March 14, 2000
(Registrant)
THE NEW YORK TIMES COMPANY
By: /s//S/ LAURA J. CORWIN
--------------------------------------------------------------------------------------------
Laura J. Corwin, Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
ARTHUR OCHS SULZBERGER Chairman Emeritus, Director February 26, 1999March 14, 2000
ARTHUR SULZBERGER, JR. Chairman, Director (Principal February 26, 1999March 14, 2000
Executive Officer)
RUSSELL T. LEWIS Chief Executive Officer, February 26, 1999March 14, 2000
President and Director
MICHAEL GOLDEN Vice Chairman, Senior Vice February 26, 1999March 14, 2000
President and Director
JOHN F. AKERS Director February 26, 1999March 14, 2000
BRENDA C. BARNES Director February 26, 1999March 14, 2000
RAUL E. CESAN Director March 14, 2000
RICHARD L. GELB Director February 26, 1999March 14, 2000
ROBERT A. LAWRENCE Director February 26, 1999March 14, 2000
ELLEN R. MARRAM Director February 26, 1999March 14, 2000
JOHN M. O'BRIEN Senior Vice President and February 26, 1999March 14, 2000
Chief Financial Officer
(Principal Financial Officer)
CHARLES H. PRICE II Director February 26, 1999
GEORGE L. SHINNMarch 14, 2000
HENRY B. SCHACHT Director February 26, 1999March 14, 2000
DONALD M. STEWART Director February 26, 1999March 14, 2000
STUART STOLLER Vice President, Corporate February 26, 1999March 14, 2000
Controller (Principal Accounting
Officer)
JUDITH P. SULZBERGER Director February 26, 1999
WILLIAM O. TAYLOR Director February 26, 1999
THE NEW YORK TIMES COMPANY
Appendix
1998 Financial Report
- --------------------------------------------------------------------------------
Contents Page
- --------------------------------------------------------------------------------
Selected Financial Data F-1
Management's Discussion and Analysis F-3
Consolidated Statements of Income F-13
Consolidated Balance Sheets F-14
Consolidated Statements of Cash Flows F-16
Consolidated Statements of Stockholders' Equity F-18
Notes to the Consolidated Financial Statements F-19
Independent Auditors' Report F-35
Management's Responsibilities Report F-35
Market Information F-35
Quarterly Information F-36
Ten-Year Supplemental Financial Data F-38
F-1
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
Years Ended
-----------------------------------------------------------------------------
December 27, December 28, December 29, December 31,
------------- ------------- ------------- -------------------------
(In thousands, except per share and employee data) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUES AND INCOME
Revenues $2,936,705 $2,866,418 $2,628,271 $2,428,124 $2,396,517
Operating profit 515,220 455,102 173,280 232,749 210,899
Income before income taxes and extraordinary item 505,520 437,365 197,909 233,839 388,736
Extraordinary item, net of tax - debt
extinguishment(1) (7,716) -- -- -- --
Net income 278,914 262,301 84,534 135,860 213,349
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Property, plant and equipment - net $1,326,196 $1,366,931 $1,358,029 $1,266,609 $1,158,751
Total assets 3,465,109 3,623,183 3,539,871 3,389,704 3,137,631
Long-term debt and capital lease obligations 597,818 535,428 636,632 637,873 523,196
Common stockholders' equity 1,531,470 1,729,297 1,623,523 1,610,437 1,543,539
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK(2)
Basic earnings per share
Earnings before extraordinary item $1.52 $1.36 $ .43 $ .70 $1.02
Extraordinary item, net of tax - debt
extinguishment(1) (.04) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $1.48 $1.36 $ .43 $ .70 $1.02
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share
Earnings before extraordinary item $1.49 $1.33 $ .43 $ .70 $1.02
Extraordinary item, net of tax - debt
extinguishment(1) (.04) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $1.45 $1.33 $ .43 $ .70 $1.02
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends $ .37 $ .32 $ .29 $ .28 $ .28
Common stockholders' equity $8.11 $8.96 $ 8.34 $ 8.31 $7.42
- ------------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS (see notes on F-2)
Operating profit to revenues 18% 16% 11% 10% 9%
Return on average common stockholders' equity 17% 15% 10% 8% 7%
Return on average total assets 8% 7% 5% 4% 3%
Long-term debt and capital lease obligations
to total capitalization 28% 24% 28% 28% 25%
Current assets to current liabilities .83 .92 .74 .92 .92
- ------------------------------------------------------------------------------------------------------------------------------------
FULL-TIME EQUIVALENT EMPLOYEES 13,200 13,100 12,800 12,300 12,800
- ------------------------------------------------------------------------------------------------------------------------------------
All earnings per share amounts for special items on the following page are the
same for basic and diluted earnings per share unless otherwise noted.
(1) See Note 8 of the Notes to the Consolidated Financial Statements.
(2) All share and per-share information is presented on a post two-for-one
split basis. The split was effective on June 17, 1998.
F-2
The following transactions are not reflected in the respective year for income
amounts used in the applicable key ratio calculations presented above:
In 1998 the Company recorded an $8 million after-tax extraordinary item in
connection with the Company's repurchase of $78 million of its $150 million,
8.25% notes due in 2025 (see Note 8 of the Notes to the Consolidated Financial
Statements). In addition, the Company recorded an $8 million pre-tax gain ($5
million after-tax) from the satisfaction of a post-closing requirement related
to the 1997 sale of assets of the Company's tennis, sailing and ski magazines.
The Company also recorded a $5 million pre-tax gain ($3 million after-tax) from
the sale of equipment. These items reduced earnings per share by $.01.
In 1997 the Company recorded an $18 million favorable tax adjustment resulting
from the completion of the Company's federal income tax audits for periods
through 1992 (see Note 9 of the Notes to the Consolidated Financial Statements).
In addition, the Company recorded aggregate pre-tax gains totaling $10 million
($6 million after-tax) from the sale of assets of the Company's tennis, sailing
and ski magazines and certain other properties, net of the exit costs associated
with the shutdown of a golf-related business (see Note 2 of the Notes to the
Consolidated Financial Statements). The Company also recorded a $10 million
pre-tax noncash charge ($6 million after-tax) relating to the adoption of
Emerging Issues Task Force Issue No. 97-13, Accounting for Costs Incurred in
Connection with a Consulting Contract or an Internal Project That Combines
Business Process Reengineering and Information Technology Transformation ("EITF
97-13") (see Note 3 of the Notes to the Consolidated Financial Statements).
These items increased earnings per share by $.09.
In 1996 the Company recorded a $127 million pre-tax noncash charge ($95 million
after-tax) relating to Statement of Financial Accounting Standards No. 121,
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be
Disposed Of ("SFAS 121 charge") (see Note 4 of the Notes to the Consolidated
Financial Statements). The Company also recorded pre-tax gains totaling $33
million ($18 million after-tax) from the sale of a building and the realization
of a gain contingency from the disposition of a paper mill in a prior year (see
Note 2 of the Notes to the Consolidated Financial Statements). These items
reduced basic earnings per share by $.40 and diluted earnings per share by $.39.
In 1995 the Company recorded a pre-tax gain of $11 million ($5 million
after-tax) from the sale of several small regional newspapers (see Note 2 of the
Notes to the Consolidated Financial Statements). This gain increased earnings
per share by $.03.
In 1994 the Company recorded a net pre-tax gain of $201 million ($103 million
after-tax) from the sale of its Women's Magazines Division and U.K. golf
publications, and the disposition of a minority interest in a Canadian paper
mill. This gain increased basic and diluted earnings per share by $.50 and $.49.
F-3
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
In 1998 newspapers contributed 91% of the Company's $2.94 billion in revenues,
while broadcast accounted for 5% and magazines for 4%.
Advertising revenues accounted for 71% of the Company's total revenues in 1998,
circulation revenues made up 23%, and newspaper distribution operations and
database royalties made up the balance.
Newsprint is the major component of the Company's cost of raw materials.
Newsprint market prices in 1998 increased over the prior year, although they did
not rise to the levels of 1996. Newsprint prices are expected to soften in 1999
from 1998 levels.
Below is an analysis of the Company's operating costs for the year ended
December 27, 1998.
CONSOLIDATED OPERATING EXPENSE COMPONENTS
[The following table was depicted as a bar graph in the printed materials.]
[GRAPHIC OMITTED]
Wages and Benefits 41%
Raw Materials 15%
Other Operating Costs 36%
Depreciation & Amortization 8%
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
The Company's consolidated financial results for 1998, 1997 and 1996 were as
follows:
- --------------------------------------------------------------------------------
% Change
---------------
(In millions, 1998 1997 1996 98-97 97-96
except per share data)
- --------------------------------------------------------------------------------
Revenues $ 2,937 $ 2,866 $ 2,628 2.5% 9.1%
- --------------------------------------------------------------------------------
Operating profit $ 515 $ 455 $ 173 13.2% N/A
- --------------------------------------------------------------------------------
Net Income before
special items $ 283 $ 249 $ 187 13.7% 33.2%
Special items (4) 13 (102) N/A N/A
- --------------------------------------------------------------------------------
Total $ 279 $ 262 $ 85 6.5% N/A
- --------------------------------------------------------------------------------
Diluted earnings per
share before
special items $ 1.48 $ 1.26 $ .94 17.5% 34.0%
Special items (.03) .07 (.51) N/A N/A
- --------------------------------------------------------------------------------
Total $ 1.45 $ 1.33 $ .43 9.0% N/A
- --------------------------------------------------------------------------------
Revenues were $2.94 billion in 1998, up from $2.87 billion in 1997. The 1997
revenues were up 9.1% from $2.63 billion in 1996. Revenues in all three years
improved mostly as a result of higher advertising rates and volume. On a
comparable basis, adjusted for acquisitions and dispositions, revenues increased
4.3% in 1998 and 7.2% in 1997.
For an explanation of special items, see "Special Items" section below.
All references to earnings per share in this Management's Discussion and
Analysis are to diluted earnings per share and reflect a two-for-one stock
split. The split was effective on June 17, 1998.
Operating profit for 1998 increased 13.2% to $515 million from $455 million in
1997, mainly due to higher advertising revenues at the Newspaper Group and
tighter cost controls throughout the Company, despite higher newsprint expense.
In 1997 operating profit rose to $455 million from $173 million in 1996.
Operating profit for 1997, exclusive of special items, rose to $474 million from
$344 million in 1996. The improvement in operating profit was mainly due to
higher advertising revenues and lower newsprint expense in the Newspaper Group
and the continuing strong performance of KFOR-TV in Oklahoma City, Oklahoma, and
WHO-TV in Des Moines, Iowa, which the Company acquired in 1996.
F-4
The Company's consolidated EBITDA (earnings before interest, taxes, depreciation
and amortization) for 1998 increased 10.9% to $724 million, excluding all
special items except costs associated with work force reductions ("Buyouts").
Excluding all special items, EBITDA rose 10.3% to $730 million for 1998. For
1997, EBITDA rose to $653 million from $466 million in 1996 excluding all
special items except Buyouts. EBITDA for 1997, excluding all special items, was
$662 million compared with $510 million in 1996.
EBITDA is presented because 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.
OPERATING EXPENSES
Consolidated operating expenses were as follows:
- ----------------------------------------------------------------------------------------------------------
Increase/
(Decrease)
% Change
----------------------------------
(In millions) 1998 1997 1996 98-97 97-96
- ----------------------------------------------------------------------------------------------------------
Production costs
Raw materials $ 354 $ 323 $ 363 9.6% (11.0%)
Wages and benefits 598 605 558 (1.2%) 8.4%
Other 509 484 440 5.2% 10.0%
- ----------------------------------------------------------------------------------------------------------
Total production
costs 1,461 1,412 1,361 3.5% 3.7%
- ----------------------------------------------------------------------------------------------------------
Selling, general and
administrative
expenses 960 999 967 (3.9%) 3.3%
- ----------------------------------------------------------------------------------------------------------
Impairment loss -- -- 127 N/A N/A
- ----------------------------------------------------------------------------------------------------------
Total $ 2,421 $ 2,411 $ 2,455 .4% (1.8%)
- ----------------------------------------------------------------------------------------------------------
Production costs for 1998 rose 3.5% to $1.5 billion. This increase was mainly
due to higher newsprint expense offset by lower costs as a result of certain
divested properties. In 1997 production costs increased 3.7% to $1.4 billion.
That increase was primarily due to higher salary and payroll-related costs and
depreciation expenses associated with new production facilities, partly offset
by lower newsprint expense.
Selling, general and administrative ("SGA") expenses for 1998 decreased 3.9% to
$1 billion from 1997 as a result of lower compensation costs and the disposition
of six magazines and other properties. In 1997 SGA expenses increased 3.3% over
1996. SGA expenses for 1997, exclusive of Buyouts and the EITF 97-13 charge (see
Note 3 of the Notes to the Consolidated Financial Statements), increased 6.2% to
$980 million from $923 million in 1996, exclusive of Buyouts.
The impairment loss in 1996 is related to the SFAS 121 charge of $127 million
(see Note 4 of the Notes to the Consolidated Financial Statements).
OTHER ITEMS
Joint Ventures
Income from Joint Ventures increased to $21 million in 1998 from $14 million in
1997. The increase was primarily due to higher selling prices for paper at the
two mills in which the Company has equity interests. In 1997 Income from Joint
Ventures decreased to $14 million from $18 million in 1996. The decrease
resulted from lower paper prices and the disposition in December 1996 of a new
venture that had operated at a loss.
Interest Expense
Net interest expense, which appears in the Company's Consolidated Statements of
Income as the line item "Interest Expense-net," increased to $43 million in 1998
from $42 million in 1997. The increase is primarily the result of a reduction in
capitalized interest, offset by lower interest expense on long-term borrowings.
In 1997 net interest expense increased to $42 million from $26 million in 1996.
The increase was primarily a result of lower capitalization of interest expense
associated with the construction of the Company's College Point and Lakeland
printing plants.
Total interest income and capitalized interest were $4 million in 1998, $8
million in 1997 and $24 million in 1996.
Taxes
The Company's annual effective tax rates were 43.3% in 1998, 44.1% in 1997 and
44.7% in 1996. The effective tax rates exclude the tax effects of special items
in the applicable year. The decline in the effective tax rate was primarily
attributable to lower state and local taxes and lower levels of non-deductible
items associated with acquisitions.
EARNINGS PER SHARE
Diluted earnings per share in 1998 were $1.48, up 17.5% from $1.26 in 1997,
excluding special items. The improvement was primarily due to stronger
advertising revenues in the Newspaper Group, which resulted from higher rates
and volume, and tighter cost controls throughout the Company. Diluted earnings
per share in 1997 were up 34.0% from $.94 in 1996, excluding special items.
Diluted earnings per share as reported in the Company's Consolidated Statements
of Income were $1.45 in 1998, $1.33 in 1997 and $.43 in 1996. The improvement
was mainly due to revenue gains in all three business segments (newspapers,
broadcast and magazines) and the SFAS 121 charge in 1996. The basic weighted
average Class A and Class B common shares outstanding were 189 million in 1998,
193 million in 1997 and 195 million in 1996. The diluted weighted average Class
A and Class B common shares outstanding were 193 million in 1998, 197 million in
1997 and 197 million in 1996.
F-5
SPECIAL ITEMS
Over the past three years, the Company has realized gains on the disposition of
certain assets and favorably settled a federal tax audit. The Company also
recorded expenses for noncash accounting charges, Buyouts and a debt
extinguishment (see Note 8 of the Notes to the Consolidated Financial
Statements). These items were as follows:
1998
These special items reduced net income by $4 million and earnings per share by
$.03.
o An $8 million after-tax extraordinary charge in connection with the
Company's repurchase of $78 million of its $150 million, 8.25% notes due
in 2025. This charge reduced earnings per share by $.04.
o An $8 million pre-tax gain from the satisfaction of a post-closing
requirement related to the 1997 sale of the Company's assets of its
tennis, sailing and ski magazines. This gain increased earnings per share
by $.02.
o A $5 million pre-tax gain from the sale of equipment. This gain increased
earnings per share by $.01.
o A $5 million pre-tax charge for Buyouts. This charge reduced earnings per
share by $.02.
1997
These special items increased net income by $13 million and earnings per share
by $.07.
o An $18 million after-tax gain resulting from a favorable tax adjustment
from the completion of the Company's federal income tax audits for periods
through 1992. This gain increased earnings per share by $.09.
o A $10 million pre-tax gain from the sale of assets of the Company's
tennis, sailing and ski magazines and certain other properties. This gain
increased earnings per share by $.03.
o A $10 million pre-tax charge resulting from a noncash charge relating to
the adoption of EITF 97-13. This charge reduced earnings per share by
$.03.
o A $9 million pre-tax charge for Buyouts. This charge reduced earnings per
share by $.02.
1996
These special items reduced net income by $102 million and basic and diluted
earnings per share by $.53 and $.51.
o A $127 million pre-tax charge resulting from a noncash charge relating to
the SFAS 121 charge. This charge reduced basic and diluted earnings per
share by $.49 and $.48.
o A $25 million pre-tax gain from the realization of a gain contingency from
the disposition of an investment in a paper mill in a prior year. This
gain increased earnings per share by $.07.
o An $8 million pre-tax gain from the sale of the Company's 110 Fifth Avenue
building. This gain increased earnings per share by $.02.
o A $44 million pre-tax charge for Buyouts. This charge reduced basic and
diluted earnings per share by $.13 and $.12.
F-6
OPERATING SEGMENT INFORMATION
REVENUES AND OPERATING PROFIT
Consolidated revenues, EBITDA and operating profit by business segment were as
follows:
- --------------------------------------------------------------------------------
% Change
------------------
(In millions) 1998 1997 1996 98-97 97-96
- --------------------------------------------------------------------------------
Revenues
Newspapers $ 2,665 $ 2,557 $ 2,348 4.2% 8.9%
Broadcast 151 144 119 4.9% 21.0%
Magazines 121 165 161 (26.7%) 2.5%
- --------------------------------------------------------------------------------
Total revenues $ 2,937 $ 2,866 $ 2,628 2.5% 9.1%
- --------------------------------------------------------------------------------
EBITDA
Newspapers $ 644 $ 594 $ 444 8.4% 33.8%
Broadcast 63 57 45 10.5% 26.7%
Magazines 18 21 19 (14.3%) 10.5%
- --------------------------------------------------------------------------------
Total Segment
EBITDA $ 725 $ 672 $ 508 7.9% 32.3%
- --------------------------------------------------------------------------------
Operating Profit
Newspapers $ 478 $ 435 $ 180 9.9% N/A
Broadcast 45 39 31 15.4% 25.8%
Magazines 22 28 25 (21.4%) 12.0%
Unallocated
corporate expenses (30) (47) (63) 36.2% 25.4%
- --------------------------------------------------------------------------------
Total operating profit $ 515 $ 455 $ 173 13.2% N/A
- --------------------------------------------------------------------------------
Newspaper Group
The Newspaper Group includes The New York Times (the "Times"), The Boston Globe
(the "Globe"), 21 regional newspapers (the "Regionals"), newspaper distributors,
a news service, a features syndicate, TimesFax, licensing operations of the
Times, databases/microfilm and New Ventures. New Ventures include, among other
things, projects developed in electronic media.
- --------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Revenues
Newspapers $ 2,642 $ 2,541 $ 2,339
New Ventures 23 16 9
- --------------------------------------------------------------------------------
Total Revenues $ 2,665 $ 2,557 $ 2,348
- --------------------------------------------------------------------------------
EBITDA
Newspapers $ 656 $ 600 $ 455
New Ventures (12) (6) (11)
- --------------------------------------------------------------------------------
Total EBITDA $ 644 $ 594 $ 444
- --------------------------------------------------------------------------------
Operating Profit (Loss)
Newspapers $ 491 $ 442 $ 196
New Ventures (13) (7) (16)
- --------------------------------------------------------------------------------
Total Operating Profit $ 478 $ 435 $ 180
- --------------------------------------------------------------------------------
The Newspaper Group's operating profit for 1998 rose to $478 million, compared
with $435 million in 1997. The improvement stemmed from higher advertising
revenues and improved cost containment, despite an increase of 12.9% in
newsprint expense. The Company's average cost of newsprint rose 8.8% and
consumption increased 4.1%. Revenues grew to $2.67 billion in 1998, up 13.6 %
from $2.35 billion in 1996. In 1996 operating profit was $335 million, excluding
the SFAS 121 charge and Buyouts. The increases in revenues for the past three
years were primarily due to higher advertising rates and volume and a slight
increase in circulation revenues. Other revenue was flat in 1998 compared with
1997. However, other revenue increased 25.2% in 1997 as the Times expanded its
wholesale newspaper delivery operations. Operating profit for 1997 included a
favorable 15% decrease in newsprint expense compared with 1996, exclusive of
LIFO adjustments.
Advertising, circulation and other revenue, by major product of the Newspaper
Group, were as follows:
- --------------------------------------------------------------------------------
% Change
------------------
(In millions) 1998 1997 1996 98-97 97-96
- --------------------------------------------------------------------------------
The New York Times
Advertising $1,059 $ 989 $ 881 7.0% 12.3%
Circulation 442 428 418 3.3% 2.4%
Other 141 142 113 (0.7%) 25.7%
- --------------------------------------------------------------------------------
Total $1,642 $1,559 $1,412 5.3% 10.4%
- --------------------------------------------------------------------------------
The Boston Globe
Advertising $ 449 $ 441 $ 402 1.8% 9.7%
Circulation 133 134 132 (0.7%) 1.5%
Other 8 8 5 N/A N/A
- --------------------------------------------------------------------------------
Total $ 590 $ 583 $ 539 1.2% 8.2%
- --------------------------------------------------------------------------------
Regional Newspapers
Advertising $ 342 $ 323 $ 308 5.9% 4.9%
Circulation 77 78 76 (1.3%) 2.6%
OtherMarch 14, 14 13 N/A 7.7%
- --------------------------------------------------------------------------------
Total $ 433 $ 415 $ 397 4.3% 4.5%
- --------------------------------------------------------------------------------
Total Newspaper
Group
Advertising $1,850 $1,753 $1,591 5.5% 10.2%
Circulation 652 640 626 1.9% 2.2%
Other 163 164 131 (0.6%) 25.2%
- --------------------------------------------------------------------------------
Total $2,665 $2,557 $2,348 4.2% 8.9%
- --------------------------------------------------------------------------------
F-7
Advertising volume for the Times, the Globe and the Regionals was as follows:
- --------------------------------------------------------------------------------
% Change
------------------
(Inches in thousands,
preprints in thousands
of copies) 1998 1997 1996 98-97 97-96
- --------------------------------------------------------------------------------
The New York Times
Retail 587 607 620 (3.3%) (2.1%)
National 1,393 1,331 1,230 4.7% 8.2%
Classified 997 971 918 2.7% 5.8%
Zoned 1,019 1,034 1,000 (1.5%) 3.4%
- --------------------------------------------------------------------------------
Total 3,996 3,943 3,768 1.3% 4.6%
- --------------------------------------------------------------------------------
Preprints 343,070 318,490 296,839 7.7% 7.3%
- --------------------------------------------------------------------------------
The Boston Globe
Retail 702 730 765 (3.8%) (4.6%)
National 697 630 555 10.6% 13.5%
Classified 1,351 1,346 1,295 0.4% 3.9%
Zoned 279 304 304 (8.2%) N/A
- --------------------------------------------------------------------------------
Total 3,029 3,010 2,919 0.6% 3.1%
- --------------------------------------------------------------------------------
Preprints 787,016 729,228 686,628 7.9% 6.2%
- --------------------------------------------------------------------------------
Regional Newspaper
Retail 7,884 7,830 7,933 0.7% (1.3%)
National 253 275 240 (8.0%) 14.6%
Classified 476 454 479 4.8% (5.2%)
Zoned 7,461 7,087 6,951 5.3% 2.0%
- --------------------------------------------------------------------------------
Total 16,074 15,646 15,603 2.7% 0.3%
- --------------------------------------------------------------------------------
Preprints 1,082,712 1,013,200 928,765 6.9% 9.1%
- --------------------------------------------------------------------------------
Circulation for the Times, the Globe and the Regionals was as follows:
- --------------------------------------------------------------------------------
Weekday Sunday
(Copies in thousands) 1998 % Change 1998 % Change
- --------------------------------------------------------------------------------
Average Circulation
The New York Times 1,094 .5% 1,645 (.4%)
The Boston Globe 470 (1.1%) 746 (1.3%)
Regional Newspapers 737 .5% 788 (.1%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weekday Sunday
(Copies in thousands) 1997 % Change 1997 % Change
- --------------------------------------------------------------------------------
Average Circulation
The New York Times 1,089 (1.2%) 1,651 (1.7%)
The Boston Globe 475 .6% 755 (1.0%)
Regional Newspapers 733 .5% 789 (0.2%)
- --------------------------------------------------------------------------------
In 1998 the Times took several steps to improve the quality and levels of its
home delivery circulation base. Circulation growth expanded due to improved
availability in major markets across the nation. The Times started to realize
the benefits of this strategy as daily circulation increased in 1998 and the
decline on Sunday slowed. The Times and the Globe also added new sections and
made improvements in delivery service to attract new readers and retain existing
ones.
Broadcast Group
The Broadcast Group is comprised of eight network-affiliated television stations
and two radio stations.
- --------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Revenues $151 $ 144 $119
- --------------------------------------------------------------------------------
EBITDA 63 57 45
- --------------------------------------------------------------------------------
Operating Profit $ 45 $ 39 $ 31
- --------------------------------------------------------------------------------
The Broadcast Group's operating profit was $47 million in 1998, $39 million in
1997 and $31 million in 1996, excluding Buyouts. Revenues were $151 million in
1998, $144 million in 1997 and $119 million in 1996.
Revenues and operating profit rose in 1998 mainly due to political advertising
generated by mid-term elections and referendums, the Winter Olympics and
stringent cost controls. The revenue and operating profit increases in 1997 were
principally due to the strong performance of KFOR-TV in Oklahoma City, Oklahoma,
and WHO-TV in Des Moines, Iowa.
F-8
Magazine Group
This group consists of Golf Digest, Golf World and Golf Shop Operations, related
activities in the golf field and new ventures such as on-line magazine services.
- --------------------------------------------------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Revenues
Magazines $ 114 $ 153 $ 150
Non-Compete Agreement 6 10 10
New Ventures 1 2 1
- --------------------------------------------------------------------------------
Total Revenues $ 121 $ 165 $ 161
- --------------------------------------------------------------------------------
EBITDA
Magazines $ 19 $ 28 $ 26
New Ventures (1) (7) (7)
- --------------------------------------------------------------------------------
Total EBITDA $ 18 $ 21 $ 19
- --------------------------------------------------------------------------------
Operating Profit (Loss)
Magazines $ 17 $ 26 $ 23
Non-Compete Agreement 6 10 10
New Ventures (1) (8) (8)
- --------------------------------------------------------------------------------
Total Operating Profit $ 22 $ 28 $ 25
- --------------------------------------------------------------------------------
The Magazine Group's operating profit declined in 1998 to $22 million from $28
million in 1997 and $25 million in 1996. On a comparable basis, excluding
divestitures and income from a non-compete agreement, revenues in 1998 exceeded
1997 and 1996. Consolidation in the golf industry and a very competitive
advertising environment adversely affected the Group's performance in 1998.
Additionally, the benefits of the non-compete agreement expired in July 1998. In
1998 operating profit was also negatively impacted by a charge for Buyouts but
benefited from lower New Venture losses. In 1997 the Company completed the sale
of the assets of its tennis, sailing and ski magazines and exited its new
venture in the tee-time reservation business. The Magazine Group's operating
results include 11 months in 1997 and a full year in 1996 of the tennis, sailing
and ski magazines (see Note 2 of the Notes to the Consolidated Financial
Statements).
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $451 million in 1998, compared
with $450 million in 1997. Operating cash flow was primarily used for share
repurchases, capital expenditures, debt repayment and dividends.
Net cash used in investing activities was $56 million in 1998, compared with
$117 million in 1997. The decrease of $61 million in 1998 was mainly due to
lower capital expenditures.
Net cash used in financing activities was $466 million in 1998, compared with
$265 million in 1997. The increase of $201 million in 1998 was primarily related
to stock repurchases and the repurchase of the Company's debentures, partly
offset by an increase in commercial paper outstanding (see Note 8 of the Notes
to the Consolidated Financial Statements).
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 .83 at December 27, 1998, and
.92 at December 28, 1997. The decrease in the ratio of current assets to current
liabilities is primarily related to lower short-term investments at December 27,
1998. Long-term debt and capital lease obligations, as a percentage of total
capitalization, were 28% at December 27, 1998, and 24% at December 28, 1997.
FINANCING
The Company currently maintains $300 million in revolving credit agreements,
which require, among other matters, specified level of stockholders' equity. The
amount of stockholders' equity over the required levels was $600 million at
December 27, 1998, compared with $936 million at December 28, 1997. The decrease
in the level of unrestricted stockholders' equity is mainly due to the Company's
stock repurchase program. In July 1998, the Company renewed its $100 million
revolving credit agreement, which had a maturity of July 1998, through July
1999. The remaining $200 million revolving credit agreement expires in July
2002.
The Company had $124 million in commercial paper outstanding with an annual
weighted average interest rate of 5.3% and an average of 41 days to maturity at
December 27, 1998. No such borrowings were outstanding at December 28, 1997.
On August 21, 1998, the Company filed a $300 million 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. 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
million in medium-term notes. On October 8, 1998, the Company issued $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%. On December 4, 1998, the
Company issued an additional $49.5 million under this program at a semi-annual
interest rate of 5.625% due on December 4, 2008. The proceeds were utilized to
pay down borrowings under the Company's commercial paper program.
F-9
In October 1993 the Company issued $200 million of senior notes. Five-year notes
totaling $100 million were due in October 1998 while the remaining $100 million
notes are due in April 2000. On October 28, 1998, the Company repaid $100
million due on its five-year senior notes.
The Company's tender offer for any and all of its $150 million of outstanding
publicly held 8.25% debentures due March 15, 2025, expired on April 2, 1998. The
debenture holders tendered $78 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 approximately $89
million. The Company incurred a charge to operations in 1998 of $14 million ($8
million after-tax) in connection with this debt extinguishment (see Note 8 of
the Notes to the Consolidated Financial Statements).
The Company's total long-term debt, including capital leases, was $600 million
at December 27, 1998, and $639 million at December 28, 1997. The increase is
primarily attributable to the issuance of medium-term notes and an increase in
capitalized lease obligations as a result of amendments to the Company's lease
for the Edison facility, offset by the Company's debt tender offer described
above.
CAPITAL EXPENDITURES
The Company estimates that capital expenditures for 1999 will range from $90
million to $100 million, compared with $82 million in 1998 and $160 million in
1997. The 1998 Capital Expenditures exclude amounts related to the Company's
Edison facility lease renegotiations (see Note 15 of the Notes to the
Consolidated Financial Statements).
DEPRECIATION AND AMORTIZATION
The Company expects that depreciation and amortization expense will be $195
million to $200 million for 1999, compared with $188 million in 1998 and $174
million in 1997.
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.
THE COMPANY'S STATE OF READINESS
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 location
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.).
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 9% 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 32%.
F-10
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 January 31, 1999, 85% 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.
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 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.
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.
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 PRONOUNCEMENT
In June 1998 the Financial Accounting Standard's Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"), which is effective for all quarters of
fiscal years beginning after June 15, 1999. SFAS No. 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.
F-11
FACTORS THAT COULD AFFECT OPERATING RESULTS
This Form 10-K contains forward-looking statements. Additional written and oral
forward-looking statements may be made by the Company from time to time in
Securities and Exchange Commission ("SEC") filings and otherwise. The Company
cautions readers that results predicted by forward-looking statements,
including, without limitation, those relating to the Company's:
o future business prospects
o revenues
o working capital
o liquidity
o capital needs
o interest costs and
o income
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those indicated in the forward-looking statements. The
risks and uncertainties include those listed below as well as other risks and
factors identified from time to time in the Company's filings with the SEC.
ADVERTISING REVENUES
Advertising is the Company's most significant source of revenue. Competition
from other forms of media available in the Company's various markets, including
direct marketing, affects the Company's ability to attract and retain
advertisers and to increase advertising rates. Advertising could be negatively
affected by an economic downturn in any of the Company's markets.
Advertising revenues cause the Company's quarterly consolidated results to vary
by season. Second-quarter and fourth-quarter advertising volume is higher than
first- and third-quarter volume since economic activity tends to be lower after
the holidays and in the summer. National and local economic conditions,
particularly in the New York City and Boston metropolitan regions, affect the
levels of the Company's retail, national and most particularly, classified
advertising revenue. Structural changes in the retail environment may also
depress the level of display advertising revenue.
CIRCULATION REVENUES
Circulation is a significant source of revenue for the Company. Circulation
revenue and the Company's ability to achieve price increases for its products
are affected by competition from other publications and other forms of media
available in the Company's various markets. Circulation could also be negatively
affected by an economic downturn in the Company's markets, including, but not
limited to, the New York City or Boston metropolitan regions. Decreased consumer
spending on discretionary items like newspapers and magazines and the decreasing
number of newspaper readers among young people could also negatively affect
circulation.
PAPER PRICES
Newsprint and magazine paper are the Company's most important raw material and
represent a significant portion of the Company's operating costs. The Company's
operating
results could be adversely affected to the extent that such historically
volatile raw material prices increase materially.
LABOR RELATIONS
Advances in technology and other factors have allowed the Company to lower costs
by reducing the size of its work force. There is no assurance that the Company
will continue to be able to reduce costs in this way. A significant portion of
the Company's employees are unionized and the Company's results could be
adversely affected if labor negotiations were to restrict its ability to
maximize the efficiency of its operations. In addition, if the Company
experienced labor unrest, its ability to produce and deliver its largest
products could be impaired.
NEW PRODUCTS IN NEW MARKETS
There are substantial uncertainties associated with the Company's efforts to
develop new products and services for evolving markets. The success of these
ventures will be determined by the Company's efforts, and in some cases by those
of its partners, fellow investors and licensees. Initial timetables for the
introduction and development of new products or services may not be achieved and
price/profitability targets may not prove feasible. External factors, such as
the development of competitive alternatives and market response, may cause new
markets to move in unanticipated directions.
Because of the potential threat to the Company's traditional sources of revenue
(particularly classified advertising and circulation) posed by on-line
competition, the Company may seek to develop its own on-line products, which may
incur losses. The Company may also consider the acquisition of specific
properties or business that fall outside its preferred parameters if it deems
such properties sufficiently attractive.
PRODUCT PORTFOLIO; ACQUISTIONS
From time to time, the Company evaluates the various components of its portfolio
of products and may, as a result, buy or sell different properties. Such
acquisitions or divestitures may affect the Company's costs, revenues and
profitability.
Acquisitions involve risks, including difficulties in integrating acquired
operations, diversions of management resources, debt incurred in financing such
acquisitions and unanticipated problems and liabilities.
F-12
TELEVISION BROADCASTING
The Company's television stations are subject to continuing technology and
regulatory developments that may affect their future profitability. The advent
of digital broadcasting is one such development. The Federal Communications
Commission ("FCC") adopted rules in 1997 under which all television stations are
required to change to a new system of digital broadcasting. The direct hardware
cost of this change will be substantial and the new digital stations are
unlikely to produce significant additional revenue until consumers have
purchased a substantial number of digital television receivers. Additionally,
the new digital transmission systems to be used by television stations, cable
systems and direct broadcast satellites could greatly increase the number of
electronic video services with which the Company's stations compete.
YEAR 2000
A discussion of the Company's plans and assessments with respect to the Year
2000 problem is included above in this Management's Discussion and Analysis
section. The Company is undertaking a remediation program to address issues
related the Year 2000 problem. While the Company does not expect Year 2000
issues to have a material effect on results of operations, liquidity or
financial conditions, the Company cannot guarantee that the Year 2000 problem
will not disrupt operations or adversely affect its financial results. The
Company is dealing with the issues arising from this problem on a timely and
systematic basis.
The foregoing list of factors should not be construed as exhaustive or as any
admission regarding the adequacy of disclosure made by the Company.
The Company disclaims any intention or obligation to update or revise
forward-looking statements, whether as a result of new information, future
events or otherwise.
MARKET RISK
The Company's qualitative and quantitative market risk is principally associated
with market interest rate fluctuations related to its debt obligations. Any such
market risk is not considered significant by the Company.
F-13
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
---------------------------------------------
December 27, December 28, December 29,
(In thousands, except per share data) 1998 1997 1996
- -----------------------------------------------------------------------------------------------
REVENUES
Advertising $ 2,073,540 $ 1,999,844 $ 1,811,411
Circulation 678,784 672,662 659,818
Other 184,381 193,912 157,042
- -----------------------------------------------------------------------------------------------
Total 2,936,705 2,866,418 2,628,271
- -----------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs
Raw materials 354,085 323,285 363,503
Wages and benefits 598,508 604,924 557,543
Other 509,051 484,057 440,038
- -----------------------------------------------------------------------------------------------
Total 1,461,644 1,412,266 1,361,084
Selling, general and administrative expenses 959,841 999,050 967,144
Impairment loss -- -- 126,763
- -----------------------------------------------------------------------------------------------
Total 2,421,485 2,411,316 2,454,991
- -----------------------------------------------------------------------------------------------
OPERATING PROFIT 515,220 455,102 173,280
Income from Joint Ventures 21,014 13,990 18,223
Interest expense, net 43,333 42,115 26,430
Net gain on dispositions of assets 12,619 10,388 32,836
- -----------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 505,520 437,365 197,909
Income taxes 218,890 175,064 113,375
- -----------------------------------------------------------------------------------------------
Income before extraordinary item 286,630 262,301 84,534
Extraordinary item, net of tax 7,716 -- --
- -----------------------------------------------------------------------------------------------
NET INCOME $ 278,914 $ 262,301 $ 84,534
- -----------------------------------------------------------------------------------------------
Average number of common shares outstanding(1)
Basic 188,762 193,040 194,586
Diluted 192,846 197,150 196,884
- -----------------------------------------------------------------------------------------------
Basic earnings per share(1)
Earnings before extraordinary item $ 1.52 $ 1.36 $ .43
Extraordinary item, net of tax (.04) -- --
- -----------------------------------------------------------------------------------------------
Net income $ 1.48 $ 1.36 $ .43
- -----------------------------------------------------------------------------------------------
Diluted earnings per share(1)
Earnings before extraordinary item $ 1.49 $ 1.33 $ .43
Extraordinary item, net of tax (.04) -- --
- -----------------------------------------------------------------------------------------------
Net income $ 1.45 $ 1.33 $ .43
- -----------------------------------------------------------------------------------------------
Dividends per share(1) $ .37 $ .32 $ .29
- -----------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
(1) All share and per share information is presented on a post two-for-one
split basis. The split was effective on June 17, 1998
F-14
CONSOLIDATED BALANCE SHEETS
December 27, December 28,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and short-term investments (at cost which approximates
market: 1998 - none; 1997 - $72,516) $ 35,991 $ 106,820
Accounts receivable (net of allowances:
1998 - $34,364; 1997 - $25,887) 331,933 331,287
Inventories 32,287 32,134
Deferred income taxes 40,612 44,203
Other current assets 81,153 85,555
- ---------------------------------------------------------------------------------------
Total current assets 521,976 599,999
- ---------------------------------------------------------------------------------------
INVESTMENT IN JOINT VENTURES 122,273 133,054
- ---------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Land 71,935 71,515
Buildings, building equipment and improvements 818,811 793,311
Equipment 1,307,869 1,317,446
Construction and equipment installations in progress 24,885 52,933
- ---------------------------------------------------------------------------------------
Total - at cost 2,223,500 2,235,205
Less accumulated depreciation 897,304 868,274
- ---------------------------------------------------------------------------------------
Property, plant and equipment - net 1,326,196 1,366,931
- ---------------------------------------------------------------------------------------
INTANGIBLE ASSETS ACQUIRED
Costs in excess of net assets acquired 1,204,021 1,204,021
Other intangible assets acquired 428,974 428,474
- ---------------------------------------------------------------------------------------
Total 1,632,995 1,632,495
Less accumulated amortization 305,422 254,790
- ---------------------------------------------------------------------------------------
Intangible assets acquired - net 1,327,573 1,377,705
- ---------------------------------------------------------------------------------------
MISCELLANEOUS ASSETS 167,091 145,494
- ---------------------------------------------------------------------------------------
Total $3,465,109 $3,623,183
- ---------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
F-15
December 27, December 28,
(In thousands, except share data) 1998 1997
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Commercial paper outstanding $ 124,100 $ --
Accounts payable 163,783 189,580
Accrued payroll and other related liabilities 87,265 103,511
Accrued expenses 169,705 175,501
Unexpired subscriptions 81,080 82,621
Current portion of long-term debt and capital lease obligations 1,867 104,033
- ------------------------------------------------------------------------------------------------------
Total current liabilities 627,800 655,246
- ------------------------------------------------------------------------------------------------------
OTHER LIABILITIES
Long-term debt 513,695 490,237
Capital lease obligations 84,123 45,191
Deferred income taxes 165,268 170,869
Other 542,753 532,343
- ------------------------------------------------------------------------------------------------------
Total other liabilities 1,305,839 1,238,640
- ------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY(1)
Serial preferred stock of $1 par value - authorized 200,000
shares - none issued -- --
Common stock of $.10 par value
Class A - authorized 300,000,000 shares; issued:
1998 - 185,763,418; 1997 - 226,567,580
(including treasury shares: 1998 - 5,000,000;
1997 - 34,159,486) 18,575 22,656
Class B - convertible - authorized 849,602 shares;
issued: 1998 - 849,602; 1997 - 1,129,488
(including treasury shares: 1998 - none and 1997 - 279,886) 86 114
Additional paid-in capital -- 761,982
Accumulated other comprehensive income (loss) - foreign
currency translation adjustments (2,609) (1,510)
Retained earnings 1,677,469 1,491,655
Common stock held in treasury, at cost (162,051) (545,600)
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,531,470 1,729,297
- ------------------------------------------------------------------------------------------------------
Total $ 3,465,109 $ 3,623,183
- ------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
(1) All share and per share information is presented on a post two-for-one
split basis. The split was effective on June 17, 1998.
F-16
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
----------------------------------------------
December 27, December 28, December 29,
(In thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 278,914 $ 262,301 $ 84,534
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation
Amortization 135,240 128,427 108,787
Impairment loss 52,997 45,470 39,090
Business process/technology reengineering charge -- -- 126,763
Equity in operations of Joint Ventures -- 10,100 --
Cash distributions and dividends from Joint Ventures (21,014) (18,476) (21,713)
Net gain on dispositions 18,192 14,982 16,957
Deferred income taxes (12,619) (10,388) (32,836)
Changes in operating assets and liabilities, net of (2,010) (26,559) (6,005)
acquisitions/dispositions
Accounts receivable - net (646) (29,216) (24,192)
Inventories (153) 1,152 9,036
Other current assets 4,402 (4,927) (25,821)
Accounts payable (25,797) 31,279 14,919
Accrued payroll and accrued expenses (22,042) (8,559) 81,118
Unexpired subscriptions (1,541) 4,359 8,093
Other - net 47,538 49,741 46,351
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 451,461 449,686 425,081
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from dispositions 23,661 39,727 16,878
Businesses acquired, net of cash acquired -- -- (246,805)
Additions to property, plant and equipment (81,578) (160,168) (206,834)
Other investing proceeds 14,725 10,560 24,815
Other investing payments (12,974) (6,782) (8,843)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (56,166) (116,663) (420,789)
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Commercial paper borrowings (repayments) 124,100 (45,500) 45,500
Long-term obligations
Increase 98,433 -- --
Reduction (177,141) (3,847) (3,377)
Capital shares
Issuance 38,941 9,930 5,358
Repurchase (480,857) (162,615) (48,631)
Dividends paid to stockholders (69,600) (61,865) (55,532)
Preferred stock redemption -- (1,753) --
Other financing proceeds -- 344 51
- ---------------------------------------------------------------------------------------------------------
Net cash used in financing activities (466,124) (265,306) (56,631)
- ---------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and short-term investments (70,829) 67,717 (52,339)
Cash and short-term investments at the beginning of the year 106,820 39,103 91,442
- ---------------------------------------------------------------------------------------------------------
Cash and short-term investments at the end of the year $ 35,991 $ 106,820 $ 39,103
- ---------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements and Supplemental Disclosures
to Consolidated Statements of Cash Flows.
F-17
SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
-----------------------------------------------
December 27, December 28, December 29,
(In thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING TRANSACTIONS
Businesses acquired
Fair value of assets acquired $ 268,319
Assets forgiven (9,833)
Liabilities assumed and incurred (11,681)
- -------------------------------------------------------------------------------------------
Cash paid $ 246,805
- -------------------------------------------------------------------------------------------
Issuance of common shares 34,667 30,561 23,155
- -------------------------------------------------------------------------------------------
CASH FLOW INFORMATION
Cash payments during the year for
Interest (net of amount capitalized) $ 49,025 $ 39,122 $ 24,367
- -------------------------------------------------------------------------------------------
Income taxes $ 177,261 $ 169,115 $ 133,871
- -------------------------------------------------------------------------------------------
Amounts in these statements of cash flows are presented on a cash basis and may
differ from those shown in other sections of the Consolidated Financial
Statements.
The Company renegotiated its lease agreement for its Edison facility, extending
the capitalized lease commitment for an additional 10 years. Accordingly, the
capitalized lease value was increased to $78 million, with a corresponding
increase to $78 million of the capital lease obligation (see Note 15 of the
Notes to the Consolidated Financial Statements).
During 1996 federal tax authorities issued a favorable ruling on matters
affecting the Globe that had originated prior to its acquisition in 1993. As a
result, accrued federal taxes were reduced by $25 million. The $25 million was
excluded from income and was applied as a reduction of goodwill (see Note 9 of
the Notes to the Consolidated Financial Statements).
F-18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Capital Stock
----------------------------
Accumulated Common
Other Stock
Additional Comprehensive Held in
(In thousands, except share and 5 1/2 % Class A Class B Paid-in Income Retained Treasury,
per share data) Preference Common Common Capital (Loss) Earnings at cost Total
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1996 $1,753 $ 21,790 $114 $607,618 $(107) $1,262,217 $(281,195) $1,612,190
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net Income 84,534 84,534
Foreign currency translation adjustments (69) (69)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 84,465
Dividends, preference - $5.50 per share (96) (96)
Dividends, common - $.285 per share (55,436) (55,436)
Issuance of shares
Retirement units, etc. - 32,254 Class A
shares (271) 383 112
Employee stock plan - 1,934,250
Class A shares 729 22,707 23,436
Stock options - 1,016,444 Class A shares 334 43,761 (39,702) 4,393
Stock conversions - 1,320 shares
Purchase of stock - 2,789,800 Class A
shares (43,839) (43,839)
Proceeds from the sale of put options 51 51
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 29, 1996 1,753 22,124 114 651,888 (176) 1,291,219 (341,646) 1,625,276
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 262,301 262,301
Foreign currency translation adjustments (1,334) (1,334)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 260,967
Dividends, preference - $4.125 per share (72) (72)
Dividends, common - $.32 per share (61,793) (61,793)
Issuance of shares
Retirement units, etc. - 17,190 Class A
shares 202 202 404
Employee stock plan - 1,598,570
Class A shares 8,335 18,730 27,065
Stock options - 2,161,926 Class A shares 532 101,304 (77,423) 24,413
Stock awards - 7,700 Class A shares (91) 91 --
Stock conversions - 7,030 shares
Purchase of stock - 5,932,000 Class A
shares (145,554) (145,554)
Preferred stock redemption (1,753) (1,753)
Proceeds from the sale of put options 344 344
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 28, 1997 -- 22,656 114 761,982 (1,510) 1,491,655 (545,600) 1,729,297
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 278,914 278,914
Foreign currency translation adjustments (1,099) (1,099)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 277,815
Dividends, common - $.37 per share (69,600) (69,600)
Issuance of shares
Retirement units, etc. - 152,866 Class A
shares (1,088) 1,898 810
Employee stock plan - 1,427,273 Class A
shares (3,764) 35,802 32,038
Stock options - 1,559,185 Class A shares 339 76,295 (61,433) 15,201
Purchase of stock - 14,784,000 Class A
shares (454,091) (454,091)
Treasury stock retirement - 44,478,000
shares (4,420) (28) (833,425) (23,500) 861,373 --
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 27, 1998 -- $18,575 $86 -- $(2,609) $1,677,469 $(162,051) $1,531,470
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
All share and per share information is presented on a post two-for-one split
basis. The split was effective on June 17, 1998.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The New York Times Company (the "Company") is engaged in diversified activities
in the communications field. The Company's principal businesses are newspapers,
magazines and broadcasting. The Company also has equity interests in a Canadian
newsprint mill and a supercalendered paper mill. The Company's major source of
revenue is advertising from its newspaper business. The newspapers operate in
the Northeast, Southeast and California markets.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company after
elimination of intercompany items.
Fiscal Year
The Company changed its fiscal year-end to the last Sunday in December beginning
with the fiscal year ended December 29, 1996.
Inventories
Inventories are stated at the lower of cost or current market value. Inventory
cost is generally based on the last-in, first-out ("LIFO") method for newsprint
and magazine paper and the first-in, first-out ("FIFO") method for other
inventories.
Investments
Investments in which the Company has at least a 20%, but not more than 50%,
interest are accounted for under the equity method. Non-equity interests below
20% are accounted for under the cost method. The fair value of these investments
approximate cost.
Property, Plant and Equipment
Property, plant and equipment is stated at cost; and depreciation is computed by
the straight-line method over estimated service lives. The Company capitalizes
interest costs as part of the cost of constructing major facilities and
equipment.
Intangible Assets Acquired
Cost in excess of net assets acquired is primarily the excess of cost over the
fair market value of tangible net assets acquired. Each quarter the Company
evaluates whether there has been a permanent impairment in any of its intangible
assets, including goodwill. An impairment in value is considered to have
occurred when the undiscounted future operating cash flows generated by the
acquired businesses are not sufficient to recover the carrying values of the
intangible assets. If it is determined that an impairment in value has occurred,
the excess of the purchase price over the net assets acquired and intangible
assets will be written down to the present value of the future operating cash
flows to be generated by the acquired businesses. The excess costs that arose
from acquisitions after October 31, 1970, are being amortized by the
straight-line method mainly over 40 years. The remaining portion ($13 million),
which arose from acquisitions before November 1, 1970, is not being amortized
since management believes there has been no decrease in value. Other intangible
assets acquired consist primarily of advertiser and subscriber relationships and
mastheads, which are being amortized over their remaining lives, ranging from
five to 40 years for various software licenses and a life of 40 years for
mastheads on various acquired properties.
Subscription Revenues and Costs
Proceeds from subscriptions and related costs, principally agency commissions,
are deferred at the time of sale and are included in the Consolidated Statements
of Income on a pro rata basis over the terms of the subscriptions.
Foreign Currency Translation
The assets and liabilities of foreign companies are translated at year-end
exchange rates. Results of operations are translated at average rates of
exchange in effect during the year. The resulting translation adjustment is
included as a component of the Consolidated Statements of Stockholders' Equity
and in the Stockholders' Equity section of the Consolidated Balance Sheets, in
the caption "Accumulated other comprehensive income (loss) - foreign currency
translation adjustments.
Earnings Per Share
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share ("EPS") (see
Note 6). Basic EPS is calculated by dividing net earnings available to common
shares by weighted average common shares outstanding. Diluted EPS is calculated
similarly, except that it includes the dilutive effect of the assumed exercise
of securities, including the effect of shares issuable under the Company's
incentive plans (see Note 13). All per share amounts included in the footnotes
are the same for basic and diluted earnings per share unless otherwise noted.
EPS for years prior to 1998 gives effect to the two-for-one stock split
effective on June 17, 1998.
Cash and Short-Term Investments
For purposes of the Consolidated Statements of Cash Flows, the Company considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.
Investment Tax Credits
The Company uses the deferred method of accounting for investment tax credits.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results could
differ from these estimates.
F-20
New Accounting Pronouncements
In the first quarter of 1998 the Company adopted the provisions of the Statement
of Financial Standards SFAS No. 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 Consolidated
Statements of Stockholders' Equity and in the Stockholders' Equity section of
the Company's Consolidated Balance Sheets.
In 1998 the Company adopted the provisions of SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131
requires the reporting of financial and descriptive information about a
company's reportable operating segments. Operating segments are components of an
enterprise's separate financial information that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance of that component. The statement requires reporting
segment profit or loss, certain specific revenue and expense items, and segment
assets. In addition, SFAS 131 requires that companies report information about
revenues derived from its products or services. The adoption of SFAS 131 did not
have a material effect on the Company's Consolidated Financial Statements (see
Note 17).
In the fourth quarter of 1998 the Company adopted the provisions of SFAS No.
132, Employer's Disclosures about Pensions and Other Postretirement Benefits
("SFAS 132"). 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 did not change
the measurement or recognition of pension or other postretirement benefits. The
adoption of SFAS 132 did not have a material effect on the Company's
Consolidated Financial Statements (see Notes 11 and 12).
In March 1998 the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 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 Company adopted the provisions of
SOP 98-1 in 1998. The Company capitalized $8 million of costs as a result of the
adoption of SOP 98-1. The improvement to net income in 1998 was $4 million or
$.02 per share.
In April 1998 the AICPA issued Statement of Position No. 98-5, Reporting on the
Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that companies
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 June 1998 the Financial Accounting Standards Board ("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 reflect 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.
- --------------------------------------------------------------------------------
2. ACQUISITIONS/DISPOSITIONS
Acquisitions
In July 1996 the Company acquired KFOR-TV in Oklahoma City (OK), and WHO-TV in
Des Moines (IA). The aggregate cost of the acquisition was $234 million, of
which $233 million was paid in cash and the balance represented accrued
liabilities. The purchases resulted in increases in intangible assets of $197
million (consisting primarily of network affiliation agreements, Federal
Communications Commission licenses and other intangible assets), property, plant
and equipment of $29 million, other assets of $10 million and other assumed
liabilities of $2 million.
In 1996 the Company acquired newspaper distribution businesses that distribute
The New York Times, other newspapers and periodicals throughout the New York
City metropolitan area. The aggregate cost of these acquisitions was $32
million, of which $14 million was paid in cash, $10 million in notes and
accounts receivable which were forgiven and the balance in assumed and accrued
liabilities. The purchase resulted in increases in intangible assets of $30
million (consisting primarily of a customer list) and accounts receivable and
equipment of $2 million.
These acquisitions have been accounted for by the purchase method. The
Consolidated Financial Statements include the operating results of these
acquisitions after their respective dates of acquisition. If the foregoing
acquisitions had occurred on January 1, 1996, they would not have had a material
impact on the results of operations in 1996.
Dispositions
During the second quarter of 1998 the Company recorded an $8 million pre-tax
gain from the satisfaction of a post-closing requirement related to the 1997
sale of assets of the Company's tennis, sailing and ski magazines (see below).
This gain increased earnings per share by $.02.
F-21
During the first quarter of 1998, the Company recorded a $5 million pre-tax gain
resulting from the sale of equipment. The gain increased earnings per share by
$.01.
In November 1997 the Company sold the assets of its tennis, sailing and ski
businesses and certain small properties, and exited a golf-related business.
These transactions resulted in a $10 million net pre-tax gain. This gain
increased earnings per share by $.03.
In 1997 the Company sold its NYT Custom Publishing division and a printing
facility which had closed. These sales did not have a material effect on the
Company's Consolidated Financial Statements.
In connection with the divestiture of a newsprint mill in 1991, the Company made
a loan commitment of up to $27 million to the new owners of the mill. At
December 31, 1995, the commitment was fully funded. In 1996 the Company received
the funds to satisfy this loan. As a result of the repayment, the Company
recorded a $25 million pre-tax gain resulting from the realization of a gain
contingency from the divestiture of the mill. This gain increased earnings per
share by $.07.
In June 1996 the Company sold its 110 Fifth Avenue building in New York City,
which the Women's Magazine Division had occupied. The sale resulted in an $8
million pre-tax gain. This gain increased earnings per share by $.02.
- --------------------------------------------------------------------------------
3. BUSINESS PROCESS/TECHNOLOGY REENGINEERING CHARGE
In the fourth quarter of 1997, the Company recorded a pre-tax noncash accounting
charge of $10 million ($6 million after-tax, or $.03 per share) as a result of
adopting the provisions of Emerging Issues Task Force No. 97-13, Accounting for
Costs Incurred in Connection with a Consulting Contract or an Internal Project
that Combines Business Process Rengineering and Information Technology
Transformation. This charge related to certain expenses associated with the
Company's business process/technology reengineering program. This charge had no
impact on the Company's 1997 cash flow.
- --------------------------------------------------------------------------------
4. IMPAIRMENT LOSS
In September 1996 the Company recorded a noncash accounting charge related to an
impairment of certain long-lived assets as required by SFAS No. 121, Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of
("SFAS 121 charge"), which was principally the accounting policy used by the
Company in prior years. As a result of the Company's strategic review process,
analyses were prepared to determine if there was impairment of any long-lived
asset. Certain assets, primarily in the Newspaper Group, met the test for
impairment. These assets were associated with three small regional newspapers,
certain wholesale distribution operations and a printing facility. The revised
carrying values of these assets were generally calculated on the basis of
discounted estimated future cash flows and resulted in a pre-tax noncash charge
of $127 million ($95 million after-tax, or $.49 basic earnings per share and
$.48 diluted earnings per share).
The SFAS 121 charge had no effect on the Company's 1996 cash flow and will not
affect its ability to generate cash flow in the future. As a result of the SFAS
121 charge, depreciation and amortization expense related to these assets will
decrease in future periods. However, in conjunction with the review for
impairment, the estimated lives of certain of the Company's long-lived assets
were reviewed. This review resulted in the acceleration of amortization expense
for certain intangible assets. In the aggregate, the changes to depreciation and
amortization expense are not expected to have a material effect on net income in
the future.
- --------------------------------------------------------------------------------
5. INVESTMENT IN JOINT VENTURES
Investment in Joint Ventures consists of equity ownership interests in two paper
mills ("Forest Products Investments"), the International Herald Tribune S.A.S.
("IHT"), and the operations of a new venture, which ceased operations in
December 1996. The results of the IHT and the new venture are not material to
the operations of the Company.
The Forest Products Investments consist of a Canadian newsprint company, Donohue
Malbaie Inc. ("Malbaie"), and a partnership operating a supercalendered paper
mill in Maine, Madison Paper Industries ("Madison") (with Malbaie, the "Paper
Mills"). The equity interest in Malbaie represents a 49% ownership interest.
The Company and Myllykoski Oy, a Finnish paper manufacturing company, are
partners through subsidiary companies in Madison. The partners' interests in the
net assets of Madison at any time will depend on their capital accounts, as
defined, at such time. Through an 80%-owned subsidiary, the Company's share of
Madison's profits and losses is 40%.
The Company received distributions from Madison of $8 million in 1998, $10
million in 1997 and $6 million in 1996. Loans to Madison by the 80%-owned
subsidiary of the Company totaled $2 million in 1996. Loan repayments were $15
million in 1998 and $2 million in 1997. No contributions were made to Madison in
1998, 1997 or 1996. The Company received distributions from Malbaie of $10
million in 1998, $5 million in 1997 and $11 million in 1996. No loans or
contributions were made to Malbaie in 1998, 1997, or 1996.
F-22
The current portion of debt of the Paper Mills included in current liabilities
in the table below was $6 million at December 27, 1998, and $.1 million at
December 27, 1997. The debt of the Paper Mills is not guaranteed by the Company.
Condensed combined balance sheets of the Paper Mills were as follows:
Condensed Combined Balance Sheets
of Paper Mills
- ---------------------------------------------------------------
December 27, December 28,
(In thousands) 1998 1997
- ---------------------------------------------------------------
Current assets $ 61,129 $ 67,023
Less current liabilities 38,970 31,817
- ---------------------------------------------------------------
Working capital 22,159 35,206
Fixed assets, net 203,114 215,427
Long-term debt -- (99)
Deferred income taxes and other (60,403) (96,168)
- ---------------------------------------------------------------
Net assets $164,870 $154,366
- ---------------------------------------------------------------
During 1998, 1997 and 1996 the Company's Newspaper Group purchased newsprint and
supercalendered paper from the Paper Mills at competitive prices. Such purchases
aggregated approximately $79 million for 1998, $74 million for 1997 and $80
million for 1996.
Condensed combined income statements of the Paper Mills were as follows:
- -------------------------------------------------------------------------------
Condensed Combined Income Statements
of Paper Mills
- ------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
Net sales and
other income $248,611 $234,290 $268,654
Costs and
expenses 188,665 196,415 203,120
- ------------------------------------------------------------------------------
Income before taxes 59,946 37,875 65,534
Income tax expense 8,826 5,577 9,635
- ------------------------------------------------------------------------------
Net income $ 51,120 $ 32,298 $ 55,899
- ------------------------------------------------------------------------------
The condensed combined financial information of the Paper Mills excludes the
income tax effects attributable to Madison. Such tax effects (see Note 9) have
been included in the Company's Consolidated Financial Statements.
- --------------------------------------------------------------------------------
6. EARNINGS PER SHARE
Basic and diluted earnings per share, which include the effect of the
two-for-one stock split effective on June 17, 1998, for the years ended December
27,1998, December 28, 1997, and December 29, 1996, were as follows:
- -------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------
Basic earnings per share computation
Numerator
Net income $278,914 $262,301 $ 84,534
Less cumulative preference stock dividends -- 72 96
- -------------------------------------------------------------------------------------------------------
Income available to common stockholders $278,914 $262,229 $ 84,438
Denominator
Average number of common shares outstanding 188,762 193,040 194,586
- -------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.48 $ 1.36 $ 0.43
- -------------------------------------------------------------------------------------------------------
Diluted earnings per share computation
Numerator
Net income $278,914 $262,301 $ 84,534
Less cumulative preference stock dividends -- 72 96
- -------------------------------------------------------------------------------------------------------
Income available to common stockholders $278,914 $262,229 $ 84,438
Denominator
Average number of common shares outstanding 188,762 193,040 194,586
Incremental shares for assumed exercise of securities 4,084 4,110 2,298
- -------------------------------------------------------------------------------------------------------
Total shares 192,846 197,150 196,884
- -------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.45 $ 1.33 $ 0.43
- -------------------------------------------------------------------------------------------------------
F-23
Outstanding stock options to purchase common stock with an exercise price
greater than the average market price of common stock were not included in the
computation of diluted earnings per share. The balance of such options were
1,168,000 in 1998, 2,195,000 in 1997 and 2,167,000 in 1996.
The incremental shares for assumed exercise of securities was determined using
the treasury stock method, which assumes repurchases of Company stock with
proceeds of the stock option exercises as required.
- --------------------------------------------------------------------------------
7. INVENTORIES
Inventories as shown in the accompanying Consolidated Balance Sheets were as
follows:
- ---------------------------------------------------------------------------
December 27, December 28,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------
Newsprint and magazine paper $27,705 $27,694
Work-in-process, etc. 4,582 4,440
- ---------------------------------------------------------------------------
Total $32,287 $32,134
- ---------------------------------------------------------------------------
Inventories are stated at the lower of cost or current market value. Cost was
determined utilizing the LIFO method for 88% of inventory in 1998 and 88% for
1997. The replacement cost of inventory was approximately $38 million at
December 27, 1998, and $36 million at December 28, 1997.
- --------------------------------------------------------------------------------
8. DEBT
Long-term debt consists of the following:
- -----------------------------------------------------------------------------
December 27, December 28,
(In thousands) 1998 1997
- -----------------------------------------------------------------------------
5.50% - 5.77% Senior Notes due $100,000 $200,000
1998 and 2000(a)
7.625% Notes due 2005, net of 245,599 245,001
unamortized debt costs of
$4,461 in 1998, and $4,999
in 1997, effective interest
rate 7.996%(b)
8.25% Debentures due 2025 (due 69,647 145,236
2005 at option of Company),
net of unamortized debt costs of
$2,253 in 1998 and $4,764 in
1997, effective interest rate
8.553%(b)
5%-5.625% Medium Term Notes 98,449 --
due 2003 and 2008, net of
unamortized debt costs of $551(c)
- -----------------------------------------------------------------------------
Total notes and debentures 513,695 590,237
- -----------------------------------------------------------------------------
Less current portion -- 100,000
- -----------------------------------------------------------------------------
Total long-term debt $513,695 $490,237
- -----------------------------------------------------------------------------
(a) In October 1993 the Company issued senior notes totaling $200 million with
interest payable semi-annually. Five-year notes totaling $100 million were
issued at an annual rate of 5.50%, and the remaining $100 million were issued as
six and one-half year notes at an annual rate of 5.77%. In October 1998 $100
million due on the five-year notes was paid.
(b) In March 1995 the Company completed a public offering of $400 million of
unsecured notes and debentures. The offering consisted of 10-year notes
aggregating $250 million maturing March 15, 2005, at an annual rate of 7.625%
and 30-year debentures aggregating $150 million maturing March 15, 2025, at an
annual rate of 8.25%. The debentures are callable after ten years. Interest is
payable semi-annually on March 15 and September 15 on both the notes and the
debentures.
The net proceeds from the offering were used to repay the principal balance of
$162 million of 11.85% notes due March 31, 1995, $50 million of 9.34% notes due
July 15, 1995, and indebtedness outstanding under the Company's commercial paper
program. The remaining net proceeds were used for general corporate purposes.
The Company's tender offer for any and all of its $150 million of outstanding
publicly held 8.25% debentures due March 15, 2025, expired on April 2, 1998. The
debenture holders tendered $78 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 million. The
Company recorded an extraordinary charge in 1998 of $14 million ($8 million net
of tax or $.04 per share) in connection with this debt extinguishment.
(c) On August 21, 1998, the Company filed a $300 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 million in
medium-term notes. On October 8, 1998, the Company issued $49.5 million, and on
December 4, 1998, the Company issued an additional $49.5 million, under the
medium-term note
F-24
program. The two $49.5 million notes mature on October 8, 2003, and December 4,
2008, and pay interest semi-annually at an average rate of 5.3%. The proceeds
were utilized to pay down borrowings under the Company's commercial paper
program.
Based on borrowing rates currently available for debt with similar terms and
average maturities, the fair value of long-term debt, excluding the current
portion, was $556 million at December 27, 1998, and $532 million at December 28,
1997.
In July 1996 the Company entered into a $100 million revolving credit agreement
and a $200 million revolving credit agreement with a group of banks (the
"Revolvers"). The Revolvers replaced existing revolving credit agreements
aggregating $170 million. The $100 million Revolver was renewed in July 1998 and
has been extended through July 1999; and the $200 million Revolver, which had an
original maturity of July 2001, has been extended through July 2002, at which
time any outstanding borrowings would be payable. The $100 million Revolver
provides for an annual facility fee of 0.04%. The $200 million Revolver provides
for an annual facility fee of 0.06% based on the Company's current credit
rating.
In July 1996 the Company increased its ability to issue commercial paper from
$200 million to $300 million, which is supported by the Company's Revolvers.
Borrowings are in the form of unsecured notes sold at a discount with maturities
ranging up to 270 days.
At December 27, 1998, the Company had $124 million in commercial paper
outstanding with an annual weighted average interest rate of 5.3% and an average
of 41 days to maturity. No such borrowings were outstanding at December 28,
1997.
The Revolvers permit borrowings, which bear interest at the Company's option (i)
for domestic borrowings: based on the certificates of deposit rate, the Federal
Funds rate, a prime rate or a quoted rate; or (ii) for Eurodollar borrowings:
based on the LIBOR rate, plus various margins based on the Company's credit
rating. The Revolvers include provisions that require, among other matters,
specified levels of stockholders' equity. The amount of stockholders' equity in
excess of the required levels was $600 million at December 27, 1998. The
aggregate face amount of maturities of long-term debt over the next five years
are as follows: 1999, none; 2000, $100 million; 2001, none; 2002, none; 2003,
$50 million; and $372 million, thereafter.
Interest expense, net as shown in the accompanying Consolidated Statements of
Income were as follows:
- --------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Interest expense $47,100 $50,433 $50,333
Capitalized interest (173) (5,394) (19,574)
Interest income (3,594) (2,924) (4,329)
- --------------------------------------------------------------------------------
Interest expense, net $43,333 $42,115 $26,430
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. INCOME TAXES
Income tax expense for each of the years presented is determined in accordance
with SFAS No. 109, Accounting for Income Taxes.
The reasons for the variance between the effective tax rate on income before
income taxes and the federal statutory rate (exclusive of a favorable tax
adjustment of $18 million in fiscal 1997 resulting from the completion of the
Company's federal income tax audits for periods through 1992, the impairment
loss in fiscal 1996 and gains on dispositions in each period) are presented on
the following page.
The components of income tax expense as shown in the Consolidated Statements of
were as follows:
- -------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- -------------------------------------------------------------------------------
Current tax expense
Federal $180,583 $146,550 $ 90,886
State, local, foreign 40,317 55,073 28,494
- -------------------------------------------------------------------------------
Total Current Expense 220,900 201,623 119,380
- -------------------------------------------------------------------------------
Deferred tax expense
Federal (10,529) (24,102) 6,076
State, local, foreign 8,519 (2,457) (12,081)
- -------------------------------------------------------------------------------
Total Deferred Benefit (2,010) (26,559) (6,005)
- -------------------------------------------------------------------------------
Income tax expense $218,890 $175,064 $113,375
- -------------------------------------------------------------------------------
F-25
- ------------------------------------------------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
% of % of % of
Amount Pretax Amount Pretax Amount Pretax
- ------------------------------------------------------------------------------------------------------------------------
Tax at federal statutory rate $172,515 35.0% $149,442 35.0% $102,143 35.0%
Increase (decrease)
State and local taxes -- net 30,696 6.2 32,837 7.7 14,310 4.9
Amortization of nondeductible
intangible assets acquired 9,510 1.9 9,892 2.3 12,856 4.4
Other -- net 704 .2 (3,832) (.9) 1,026 .4
- ------------------------------------------------------------------------------------------------------------------------
Subtotal 213,425 43.3% 188,339 44.1% 130,335 44.7%
- ------------------------------------------------------------------------------------------------------------------------
Impairment loss -- -- (32,264)
- ------------------------------------------------------------------------------------------------------------------------
Favorable tax adjustment -- (18,000) --
- ------------------------------------------------------------------------------------------------------------------------
Dispositions 5,465 4,725 15,304
- ------------------------------------------------------------------------------------------------------------------------
Income tax expense $218,890 $175,064 $113,375
- ------------------------------------------------------------------------------------------------------------------------
Tax expense in 1998 was reduced by $1 million ($2 million before federal tax
effect) due to a reduction in the valuation allowance attributable to state net
operating loss tax benefits.
Tax expense in 1996 was reduced by $6 million ($9 million before federal tax
effect) due to a reduction in the valuation allowance attributable to state net
operating loss tax benefits. Other state and local operating loss tax benefits
further reduced 1996 tax expense by $3 million.
During 1996 federal tax authorities issued a favorable ruling on matters
affecting the Globe, which had originated prior to its acquisition in 1993. As a
result, accrued federal taxes were reduced by $25 million relating to a
pre-acquisition tax contingency. This contingency was predominately related to
pre-acquisition net operating loss carryforwards. The remainder of the reduction
is related to other pre-acquisition tax contingencies. In accordance with SFAS
109, this tax benefit was excluded from income and was applied as a reduction of
goodwill.
Income tax benefits, which related to the exercise of options and the employee
stock purchase plan, reduced current taxes payable and increased additional
paid-in capital by $32 million in 1998, $39 million in 1997 and $4 million in
1996.
At December 27, 1998, tax loss carryforwards included only state tax loss
benefits. The benefits are attributable to tax operating losses totaling $5
million at December 27, 1998. Such loss carryforwards expire in accordance with
provisions of applicable tax laws and have remaining lives ranging from one to
15 years. The principal portion of these tax loss carryforwards are likely to
expire unused. Accordingly, the Company has valuation allowances amounting to $4
million as of December 27, 1998.
The Company generated $16 million in investment tax credits in the state of New
York in connection with the construction of its College Point facility in 1997.
The unused investment tax credit carryforward at December 27, 1998, was $5
million, which the Company has the ability to utilize for 15 years. For
financial statement purposes, the Company has selected the deferred method of
accounting for investment tax credits, and therefore will amortize the $16
million tax benefit over the average useful life of the assets.
The Internal Revenue Service has completed its examination of federal income tax
returns for all years through 1992. Examinations of the tax returns for the
years 1993 through 1995 are in process. Management is of the opinion that any
assessments resulting from these examinations will not have a material effect on
the Consolidated Financial Statements.
The components of the net deferred tax liabilities recognized on the respective
Consolidated Balance Sheets were as follows:
- -------------------------------------------------------------------------------
December 27, December 28,
(In thousands) 1998 1997
- -------------------------------------------------------------------------------
Deferred Tax Assets
Retirement, postemployment and
deferred compensation plans $184,359 $ 174,069
Accruals for other employee
benefits, compensation,
insurance and other 51,499 33,244
Accounts receivable allowances 25,278 26,561
Other 43,727 38,690
- -------------------------------------------------------------------------------
Total deferred tax assets 304,863 272,564
Valuation allowance (3,749) (5,268)
- -------------------------------------------------------------------------------
Net deferred tax assets 301,114 267,296
- -------------------------------------------------------------------------------
Deferred Tax Liabilities
Property, plant and equipment 261,176 230,712
Intangible assets 105,204 98,076
Investments in Joint Ventures 42,644 42,057
Other 16,746 23,117
- -------------------------------------------------------------------------------
Total deferred tax liabilities 425,770 393,962
- -------------------------------------------------------------------------------
Net deferred tax liability 124,656 126,666
- -------------------------------------------------------------------------------
Amounts included in
Other current assets 40,612 44,203
- -------------------------------------------------------------------------------
Deferred income tax liability $165,268 $170,869
- -------------------------------------------------------------------------------
Income tax benefits related to foreign currency translation adjustments which
were included in "Accumulated other comprehensive income (loss) - foreign
translation adjustments" in the Company's Consolidated Balance Sheets and
Consolidated Statements of Stockholders' Equity were $1 million in both 1998 and
1997 and $.1 million in 1996. The accumulated tax benefit was $2 million at
December 27, 1998, and $1 million at December 28, 1997.
F-26
- --------------------------------------------------------------------------------
10. VOLUNTARY STAFF REDUCTIONS
In 1998 the Company recorded pre-tax charges of $5 million related to voluntary
staff reductions. These charges reduced earnings per share by $.02. In 1997 and
1996, the Company recorded pre-tax charges of $9 million and $44 million. These
charges reduced earnings per share by $.02 in 1997. In 1996 these charges
reduced basic earnings per share by $.13 and diluted earnings per share by $.12.
At December 27, 1998, $23 million and at December 28, 1997, $25 million of these
charges were unpaid. This balance will be principally paid within one year.
- --------------------------------------------------------------------------------
11. PENSION PLANS
The Company sponsors several pension plans and makes contributions to several
others in connection with collective bargaining agreements, including a
joint-Company union plan and a number of joint-industry union plans. These plans
cover substantially all employees.
The Company-sponsored pension plans provide participating employees with
retirement benefits in accordance with benefit provision formulas, which are
based on years of service and final average or career pay and, where applicable,
employee contributions. In 1996 the Company merged the assets of two of the
plans. Retirement benefits are also provided under supplemental unfunded pension
plans.
In accordance with SFAS No. 132, Employer's Disclosures about Pensions and Other
Postretirement Benefits, the components of net periodic pension cost for all
Company-sponsored pension plans were as follows:
- ------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
Service cost $ 22,093 $ 19,645 $ 20,984
Interest cost 51,367 48,734 45,353
Expected return on plan assets (44,521) (40,164) (37,313)
Recognized actuarial loss 958 1,006 2,864
Amortization of prior service cost 433 433 433
Amortization of transition
obligation 637 637 637
- ------------------------------------------------------------------------------
Net periodic pension cost $ 30,967 $ 30,291 $ 32,958
- ------------------------------------------------------------------------------
Assumptions used in the actuarial computations were as follows:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Discount rate 6.75% 7.25% 7.75%
Rate of increase in
compensation levels 5.00% 5.50% 5.50%
Expected long-term rate of
return on assets 8.75% 8.75% 8.75%
- --------------------------------------------------------------------------------
In connection with collective bargaining agreements, the Company contributes to
several other pension plans, including a joint Company-union plan and a number
of joint industry-union plans. Contributions are determined as a function of
hours worked or period earnings. Pension cost for these plans was $23 million in
1998, $22 million in 1997, and $21 million in 1996.
The changes in benefit obligation and plan assets at September 30, 1998, and
1997, were as follows:
- -------------------------------------------------------------------------------
(In thousands) 1998 1997
- -------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at prior
measurement date $ 723,497 $ 627,874
Service cost 22,093 19,645
Interest cost 51,367 48,734
Plan participants' contribution 226 172
Actuarial loss 44,665 61,222
Special termination benefits 824 --
Benefits paid (29,448) (34,150)
- -------------------------------------------------------------------------------
Benefit obligation at current
measurement date 813,224 723,497
- -------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at prior
measurement date 620,562 505,643
Actual return on plan assets (18,939) 142,410
Employer contribution 5,754 6,487
Plan participants' contributions 226 172
Benefits paid (29,448) (34,150)
- -------------------------------------------------------------------------------
Fair value of plan assets at
current measurement date 578,155 620,562
- -------------------------------------------------------------------------------
Funded status (235,069) (102,936)
Unrecognized actuarial (gain) loss 50,904 (56,344)
Unrecognized transition obligation 1,009 1,646
Unrecognized prior service cost 2,515 2,948
Contribution paid after
measurement date 1,461 1,263
- -------------------------------------------------------------------------------
Net amount recognized $ (179,180) $ (153,423)
- -------------------------------------------------------------------------------
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plan with accumulated benefit obligations in
excess of plan assets were $711 million, $577 million, and $482 million as of
December 27, 1998; $120 million, $82 million, and none as of December 28, 1997.
Additional termination benefits were provided to certain Globe mechanical union
employees who retired during 1998. The offer gave rise to a special charge to
earnings of $.8 million under SFAS No. 88, Employers Accounting for Settlements
and Curtailments of Deferred Benefit Plans and for Termination Benefits.
F-27
A minimum liability of $7 million relating to the unfunded status of the plans
was recorded in Other Liabilities -- Other and a related intangible asset of an
equal amount recorded in Miscellaneous Assets in the Company's Consolidated
Balance Sheets as of December 28, 1997.
The financial statement effects of the Company's Supplemental Employee
Retirement Plans were included in the tables above.
The primary portion of the Company's net obligation under these plans is
included in Other Liabilities -- Other on the Company's Consolidated Balance
Sheets.
The amount of cost recognized for employer sponsored defined contribution
pension plans for the year ended December 27, 1998, was $12 million, December
28, 1997, was $10 million and December 29, 1996, was $9 million.
- --------------------------------------------------------------------------------
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
The Company provides health and life insurance benefits to retired employees
(and their eligible dependents) who are not covered by any collective bargaining
agreements if the employee meets specified age and service requirements.
In accordance with SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, the Company accrues the costs of such benefits
during the employee's active years of service.
Net periodic postretirement cost was as follows:
- --------------------------------------------------------------------------------
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Components of net periodic benefit cost
Service cost $ 4,129 $ 3,680 $ 3,682
Interest cost 8,822 8,581 8,250
Recognized actuarial gain (852) (1,535) (699)
Amortization of prior service cost (2,132) (1,659) (1,668)
- --------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 9,967 $ 9,067 $ 9,565
- --------------------------------------------------------------------------------
The Company's policy is to fund the above-mentioned plans as claims and premiums
are paid.
For 1998 the accumulated postretirement benefit obligation was determined using
a discount rate of 6.75%, an estimated increase in compensation levels of 5.0%
and a health care cost trend rate of between 8.5% and 7.5% for 1998, grading
down to 5.0% in the year 2008.
For 1997 the accumulated postretirement benefit obligation was determined using
a discount rate of 7.25%, an estimated increase in compensation levels of 5.5%
and a health care cost trend rate of between 9.25% and 8.0% for 1997, grading
down to 5.0% in the year 2008.
For 1996 the accumulated postretirement benefit obligation was determined using
a discount rate of 7.75%, an estimated increase in compensation levels of 5.5%
and a health care cost trend rate of between 10.0% and 8.5% for 1996, grading
down to 5.0% in the year 2008.
A one-percentage point change in assumed health care cost trend rates would have
the following effects in 1998:
- ----------------------------------------------------------------
One-Percentage One-Percentage
(In thousands) Point Increase Point Decrease
- ----------------------------------------------------------------
Effect on total service
and interest cost for
1998 $ 2,296 $ (1,926)
Effect on accumulated
postretirement
benefit obligation as
of December 27, 1998 $ 20,888 $ (17,834)
- ----------------------------------------------------------------
The accrued postretirement benefit liability and the change in benefit
obligation at September 30 in each year were as follows:
- ------------------------------------------------------------------------------
(In thousands) 1998 1997
- ------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at prior
measurement date $ 127,420 $ 114,125
Service cost 4,129 3,680
Interest cost 8,822 8,580
Actuarial loss 9,195 4,789
Amendments (6,050) --
Benefits paid (3,367) (3,754)
- ------------------------------------------------------------------------------
Benefit obligation at current
measurement date 140,149 127,420
- ------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at
prior measurement date -- --
Employer contribution 3,367 3,754
Benefits paid (3,367) (3,754)
- ------------------------------------------------------------------------------
Fair value of plan assets at
current measurement date -- --
- ------------------------------------------------------------------------------
Funded status (140,149) (127,420)
Unrecognized actuarial gain (16,253) (26,677)
Unrecognized prior service cost (14,577) (10,186)
Contribution paid after
measurement date 609 878
- ------------------------------------------------------------------------------
Net amount recognized $ (170,370) $ (163,405)
- ------------------------------------------------------------------------------
In connection with collective bargaining agreements, the Company contributes to
several welfare plans, including a joint Company-union plan and a number of
joint industry-union plans. Contributions are determined as a function of
F-28
hours worked or period earnings. Portions of these contributions, which cannot
be disaggregated, related to postretirement benefits for plan participants.
Total contributions to these welfare funds were $27 million in 1998, $27 million
in 1997, and $25 million in 1996.
The primary portion of the Company's net obligation under these plans is
included in other non-current liabilities on the Company's consolidated balance
sheets.
In accordance with SFAS No. 112, Employers' Accounting for Postemployment
Benefits, the Company accrues the cost of certain benefits provided to former or
inactive employees after employment but before retirement (such as workers'
compensation, disability benefits and health care continuation coverage) during
the employee's active years of service.
- --------------------------------------------------------------------------------
13. EXECUTIVE AND NON-EMPLOYEE DIRECTORS' INCENTIVE PLANS
Under the Company's 1991 Executive Stock Incentive Plan and 1991 Executive Cash
Bonus Plan (together, the "1991 Executive Plans"), the Board of Directors may
authorize incentive compensation awards and grant stock options to key employees
of the Company. Awards may be granted in cash, restricted and unrestricted
shares of the Company's Class A Common Stock, retirement units (stock
equivalents) or such other forms as the Board of Directors deems appropriate.
Under the 1991 Executive Plans, stock options of up to 40 million shares of
Class A Common Stock may be granted and stock awards of up to two million shares
of Class A Common Stock may be made. In adopting the 1991 Executive Plans,
shares previously available for issuance of retirement units and stock options
under prior plans are no longer available for future awards.
Retirement units are payable in Class A Common Stock generally over a period of
10 years following retirement.
Stock options currently outstanding were granted under the Company's 1984 Stock
Option Plan and the 1991 Executive Plans.
The Plans provide for granting of both incentive and non-qualified stock options
principally at an option price per share of 100% of the fair market value of the
Class A Common Stock on the date of grant. These options have a term of 10
years, and become exercisable in annual periods ranging from one year to four
years from the date of grant. Payment upon exercise of an option may be made in
cash, with previously-acquired shares, or with shares (valued at fair market
value), which would be otherwise issued on the exercise of the option or any
combination thereof.
Under the Company's Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"), non-qualified options with 10-year terms are granted annually to each
non-employee director of the Company. The 1997 annual grant increased the number
of shares of Class A Common Stock a director may purchase from the Company from
2,000 to 4,000 shares at the fair market value of such shares at the date of
grant. Options for an aggregate of 500,000 shares of Class A Common Stock may be
granted under the Directors' Plan.
Changes in the Company's stock options for period ended December 27, 1998, were
as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
------------------------------- --------------------------------- --------------------------------
Weighted Weighted Weighted
Number of Average Number of Average Number of Average
(Shares in thousands) Options Exercise Price Options Exercise Price Options Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
Options outstanding,
beginning of year 19,585 $18 20,738 $14 20,014 $12
Granted 4,505 34 4,436 32 4,338 19
Exercised (3,513) 13 (5,316) 12 (3,344) 12
Forfeited (260) 18 (273) 8 (270) 14
- ------------------------------------------------------------------------------------------------------------------------------------
Options outstanding,
end of year 20,317 $23 19,585 $18 20,738 $14
- ------------------------------------------------------------------------------------------------------------------------------------
Options exercisable,
end of year 10,045 $16 9,278 $13 10,558 $12
- ------------------------------------------------------------------------------------------------------------------------------------
F-29
The Company's stock options outstanding at December 27, 1998, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands) Options Outstanding Options Exercisable
--------------------------------------------------------- ------------------------------------------
Weighted Average
Number Remaining Weighted Remaining Number Weighted Average
Exercise Price Ranges of Options Contractual Life Exercise Price of Options Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5-10 260 3 years $ 8 260 $ 8
$10-15 4,736 5 years 12 4,736 12
$15-20 6,475 8 years 17 3,846 17
$20-35 8,846 9 years 33 1,203 32
- ------------------------------------------------------------------------------------------------------------------------------------
20,317 $23 10,045 $ 16
- ------------------------------------------------------------------------------------------------------------------------------------
The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations to accounting for its
stock option and employee stock purchase plans (see Note 14) ("Employee
Stock-Based Plans"). Accordingly, no compensation cost has been recognized for
the aforementioned plans.
The weighted average fair values for stock option grants were $9.35 in 1998,
$9.26 in 1997 and $5.47 in 1996. The weighted average values for employer stock
purchase plan ("ESPP") rights were $6.67 in 1998, $4.41 in 1997 and $2.91 in
1996. The weighted average values were estimated at the date of grant using the
Black Scholes Option Valuation model and the following assumptions:
- -----------------------------------------------------------------------------------------------------------------------------
Stock Options ESPP Rights
---------------------------------- ---------------------------------------
1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
Risk-free interest rate 4.34% 5.72% 6.14% 5.15% 5.45% 5.47%
Expected life 5 years 5 years 5 years 1.1 years 1.1 years 1.2 years
Expected volatility 24.90% 22.62% 23.84% 24.90% 22.62% 21.22%
Expected dividend yield 1.08% 1.05% 1.56% 1.39% 1.66% 2.0%
- -----------------------------------------------------------------------------------------------------------------------------
Had compensation cost for the Employee Stock-Based Plans been determined over
the vesting period based on the fair value at the grant date for awards under
those plans, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ----------------------------- --------------------------
(In thousands, except per share data) As reported Pro forma As reported Pro forma As reported Pro forma
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 278,914 $ 257,803 $ 262,301 $ 249,582 $ 84,534 $ 76,889
Basic earnings per share $ 1.48 $ 1.37 $ 1.36 $ 1.29 $ .43 $ .40
Diluted earnings per share $ 1.45 $ 1.34 $ 1.33 $ 1.27 $ .43 $ .39
- -----------------------------------------------------------------------------------------------------------------------------------
The pro forma effect for 1998, 1997 and 1996 on the amounts presented above is
not representative of the pro forma effect in future years because it does not
take into account pro forma compensation expense related to grants made prior to
1995.
- --------------------------------------------------------------------------------
14. CAPITAL STOCK
The 5 1/2% cumulative prior preference stock was redeemable at the option of the
Company on 30-days notice at par plus accrued dividends and was entitled to an
annual dividend of $5.50 payable quarterly. The Company redeemed all outstanding
shares of its 5 1/2% cumulative prior preference stock at October 1, 1997, at
par value at a cost of $2 million.
The serial preferred stock was subordinate to the 5 1/2% cumulative prior
preference stock. The Board of Directors is authorized to set the distinguishing
characteristics of each series prior to issuance, including the granting of
limited or full voting rights; however, the consideration received must be at
least $100 per share. No shares of serial preferred stock have been issued.
The Class A and Class B Common Stock are entitled to equal participation in the
event of liquidation and in dividend declarations. The Class B Common Stock is
convertible at the holders' option on a share-for-share basis into Class A
shares. As provided for in the Certificate of Incorporation, the Class A Common
Stock has limited voting rights, including the right to elect 30% of the
directors of the Board, and the Class A and
F-30
Class B Common Stock have the right to vote together on reservation of Company
stock for stock options and other stock-related plans, on the ratification of
the selection of independent certified public accountants and, in certain
circumstances, on acquisitions of the stock or assets of other companies.
Otherwise, except as provided by the laws of the State of New York, all voting
power is vested solely and exclusively in the holders of the Class B Common
Stock.
At the April 1996 annual meeting of the Company's Class A and B Common
Shareholders, an amendment to the 1991 Executive Stock Incentive Plan was
approved to reserve an additional 20 million shares of Class A Common Stock for
issuance thereunder pursuant to the exercise of stock options.
The Company spent $454 million in 1998 and $146 million in 1997 to repurchase
shares of Class A Common Stock. The Company repurchased 15 million shares in
1998 at an average cost of $31 per share and 3 million shares in 1997 at an
average cost of $25 per share. During the period from December 28, 1998, through
January 27, 1999, the Company spent $47 million to repurchase 1.4 million shares
of Class A Common Stock at an average price of $34 per share. As of January 27,
1999, the remaining amount of repurchase authorizations from the Company's Board
of Directors is $300 million. Under the authorizations, purchases may be made
from time to time either in the open market or through private transactions.
Purchases may be suspended from time to time or discontinued. Stock repurchases
under this program exclude shares reacquired in connection with taxes due from
optionees on certain exercises under the Company's stock option plans at a cost
of $27 million in 1998.
Had the 1998 stock repurchases occurred as of January 1, 1998, the impact on
earnings per share would have been reduced by $.04 per share. For 1997 and 1996
the impact on earnings per share would have been immaterial.
In June 1998 the Company retired from treasury 17 million Class A shares and
140,000 Class B shares. As a result of this retirement, treasury stock and
Additional Paid-In Capital were both reduced by $539 million. In December 1998
the Company retired from treasury an additional 10 million Class A shares. This
retirement resulted in a reduction of $322 million in treasury stock, $296
million in Additional Paid-In Capital and $26 million in Retained Earnings.
In addition to the Company's stock repurchase program, the Company sells equity
options in private placements that entitle the holder, upon exercise, to sell
shares of Class A Common Stock to the Company at a specified price. In 1997 put
options for 400,000 shares were issued for $.3 million in premiums, which were
accounted for as a part of Additional Paid-In Capital. In 1998 no put options
were issued. All put options have expired.
Shares of Class A Common Stock reserved for issuance were as follows:
- ----------------------------------------------------------------
December 27, December 28,
(Shares in thousands) 1998 1997
- ----------------------------------------------------------------
Stock Options
Outstanding 20,317 19,585
Available 11,256 15,383
- ----------------------------------------------------------------
Employee Stock Purchase Plan
Available 4,444 5,872
- ----------------------------------------------------------------
Voluntary Conversion of
Class B Common Stock
Available 1,129 1,129
- ----------------------------------------------------------------
Retirement Units
Outstanding 157 318
Available 1,933 1,933
- ----------------------------------------------------------------
Total
Outstanding 20,474 19,903
Available 18,754 24,309
- ----------------------------------------------------------------
Under the 1999 Offering of the ESPP, eligible employees may purchase Class A
Common Stock through payroll deductions during the 1999 plan year at the lower
of $21.70 per share (85% of the average market price on October 1, 1998) or 85%
of the average market price on November 29, 1999. Between 35 to 46% of eligible
employees have participated in the ESPP in the last three years. Under the ESPP,
the Company issued 1.4 million shares in 1998, 1.6 million shares in 1997 and
1.9 million shares in 1996.
- --------------------------------------------------------------------------------
15. COMMITMENTS AND CONTINGENT LIABILITIES
Operating Leases
Such lease commitments are primarily for office space and equipment. Certain
office space leases provide for rent adjustments relating to changes in real
estate taxes and other operating expenses.
Rental expense amounted to $29 million in 1998, $30 million in 1997 and $30
million in 1996. The approximate minimum rental commitments under noncancelable
leases at December 27, 1998, were as follows: 1999, $7 million; 2000, $6
million; 2001, $4 million; 2002, $3 million; 2003, $3 million and $8 million
thereafter.
Capital Leases
In 1994 the Company recorded a $5 million capital lease for 31 acres of
City-owned land in College Point, New York City, on which the Company has
completed building a printing and distribution facility. The Company has the
option to purchase the property at any time prior to the end of
F-31
the lease in 2019. Under the terms of the lease agreement with the City of New
York, the Company receives various tax and energy cost reductions.
The Company also has a long-term lease for a building and site in Edison, NJ.
The lease provides the Company with certain early cancellation rights, as well
as renewal and purchase options. For financial reporting purposes, the Edison
lease has been classified as a capital lease; accordingly, an asset of $57
million (included in buildings, building equipment and improvements) was
recorded at December 28, 1997. In May 1998 the Company renegotiated its lease
for this property to extend its commitment for an additional 10 years through
2018. Accordingly, the Company increased its capitalized asset and corresponding
liability to $78 million.
Future minimum lease payments for all capital leases, and the present value of
the minimum lease payments at December 27, 1998, are as follows:
- ------------------------------------------------------------
(In thousands) Amount
- ------------------------------------------------------------
1999 $ 7,781
2000 7,474
2001 7,281
2002 7,057
2003 6,956
Later years 140,650
- ------------------------------------------------------------
Total minimum lease payments 177,199
Less imputed interest (91,209)
- ------------------------------------------------------------
Present value of net minimum lease
payments including current maturities $ 85,990
- ------------------------------------------------------------
Other
There are various legal actions that have arisen in the ordinary course of
business and are now pending against the Company. These actions are generally
for amounts greatly in excess of the payments, if any, that may be required to
be made.
It is the opinion of management after reviewing these actions with legal counsel
to the Company that the ultimate liability that might result from these actions
would not have a material adverse effect on the consolidated financial
statements.
- --------------------------------------------------------------------------------
16. RECLASSIFICATIONS
For comparability, certain 1997 and 1996 amounts have been reclassified to
conform with the 1998 presentation.
F-32
- --------------------------------------------------------------------------------
17. SEGMENT INFORMATION
Operating segments represent components of the Company's business that are
evaluated regularly by key management in assessing performance and resource
allocation. The Company has determined that its reportable segments consist of
its Newspaper, Broadcast and Magazine Groups. The Newspaper Group is comprised
of the following operating segments, each of which has its own management: The
New York Times, The Boston Globe, and 21 regional newspapers. The economic
characteristics, products, services, production process, customer type and
distribution methods for the operating segments of the Newspaper Group are
substantially similar and have therefore been aggregated as a reportable
segment.
The Broadcast and Magazine Groups are managed separately and have different
economic characteristics from those of the Newspaper Group, and are therefore
shown as separate reportable segments.
Revenues from individual customers, revenues between business segments, and
revenues, operating profit and identifiable assets of foreign operations are not
significant.
The following are the Company's reportable operating segments:
Newspaper Group
The New York Times, The Boston Globe, 21 regional newspapers, newspaper
distributors, a news service, a features syndicate, TimesFax, licensing
operations of The New York Times databases/microfilm and New Ventures. New
Ventures include, among other things, projects developed in electronic media.
Broadcast Group
Eight network-affiliated television stations and two radio stations.
Magazine Group
Three golf publications, related activities in the golf industry and New
Ventures, such as on-line magazine services.
The Company's Statements of Income on a segment basis were as follows:
- -------------------------------------------------------------------------------------------------------------------------------
Years Ended
-----------------------------------------------------------
December 27, December 28, December 29,
(In thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
REVENUES
Newspapers $2,664,396 $2,557,080 $2,348,592
Broadcast 151,175 144,506 118,608
Magazines 121,134 164,832 161,071
- -------------------------------------------------------------------------------------------------------------------------------
Total $2,936,705 $2,866,418 $2,628,271
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Newspapers $ 477,782 $ 434,057 $ 179,611
Broadcast 45,120 39,368 30,596
Magazines 22,110 28,332 24,778
Unallocated corporate expenses (29,792) (46,655) (61,705)
- -------------------------------------------------------------------------------------------------------------------------------
Total 515,220 455,102 173,280
- -------------------------------------------------------------------------------------------------------------------------------
Income from Joint Ventures 21,014 13,990 18,223
Interest expense, net 43,333 42,115 26,430
Net gain on dispositions of assets 12,619 10,388 32,836
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 505,520 437,365 197,909
Income taxes 218,890 175,064 113,375
- -------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 286,630 262,301 84,534
Extraordinary item, net of tax - debt extinguishment 7,716 -- --
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 278,914 $ 262,301 $ 84,534
- -------------------------------------------------------------------------------------------------------------------------------
F-33
Newspaper Group operating profit includes Buyouts of $3 million for 1998, $8
million for 1997 and $31.9 million for 1996.
The 1998 Broadcast Group operating profit includes a charge of $2 million for
Buyouts; 1996 includes a charge of $300,000 for Buyouts in this group. The 1998
Magazine Group operating profit includes a charge of $3 million for Buyouts.
The 1996 operating profit includes the noncash SFAS 121 charge for the Newspaper
Group of $126 million and for the Magazine Group of $1 million (see Note 4).
Broadcast Group amounts for 1996 were affected by the acquisitions of new
television stations (see Note 2).
Magazine Group amounts include the amortization of the income relating to a $40
million non-compete agreement associated with the disposition of the Women's
Magazines Division. The benefit under this agreement, amounting to $40 million,
was recognized on a straight-line basis over four years ending in July 1998.
Amortization of this income was $6 million in 1998, $10 million in 1997 and $10
million in 1996.
The Magazine Group amounts for 1998 were affected by the sale of the assets of
the tennis, sailing and ski magazines (see Note 2).
Unallocated corporate expenses include Buyouts of $1 million for 1997 and $12
million for 1996. Unallocated corporate expenses for 1997 also include a $10
million noncash charge related to the adoption of EITF 97-13 (see Note 3).
Revenues from individual customers, revenues between business segments, and
revenues, operating profit and identifiable assets of foreign operations are not
significant.
Advertising, circulation and other revenue, by major product of the Newspaper
Group, were as follows:
- --------------------------------------------------------------------------------
% Change
------------------
(In millions) 1998 1997 1996 98-97 97-96
- --------------------------------------------------------------------------------
The New York Times
Advertising $1,059 $ 989 $ 881 7.0% 12.3%
Circulation 442 428 418 3.3% 2.4%
Other 141 142 113 (0.7%) 25.7%
- --------------------------------------------------------------------------------
Total $1,642 $1,559 $1,412 5.3% 10.4%
- --------------------------------------------------------------------------------
The Boston Globe
Advertising $ 449 $ 441 $ 402 1.8% 9.7%
Circulation 133 134 132 (0.7%) 1.5%
Other 8 8 5 N/A N/A
- --------------------------------------------------------------------------------
Total $ 590 $ 583 $ 539 1.2% 8.2%
- --------------------------------------------------------------------------------
Regional Newspapers
Advertising $ 342 $ 323 $ 308 5.9% 4.9%
Circulation 77 78 76 (1.3%) 2.6%
Other 14 14 13 N/A 7.7%
- --------------------------------------------------------------------------------
Total $ 433 $ 415 $ 397 4.3% 4.5%
- --------------------------------------------------------------------------------
Total Newspaper
Group
Advertising $1,850 $1,753 $1,591 5.5% 10.2%
Circulation 652 640 626 1.9% 2.2%
Other 163 164 131 (0.6%) 25.2%
- --------------------------------------------------------------------------------
Total $2,665 $2,557 $2,348 4.2% 8.9%
- --------------------------------------------------------------------------------
F-34
The Company's segment depreciation and amortization, capital expenditures and
identifiable assets reconciled to consolidated amounts were as follows:
- --------------------------------------------------------------------------------
Years Ended
---------------------------------------------
December 27, December 28, December 29,
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Newspapers $ 166,485 $ 160,192 $ 138,630
Broadcast 17,662 17,919 14,161
Magazines (4,361) (7,330) (7,320)
Corporate 8,099 2,764 2,054
Investment in Joint Ventures 352 352 352
- --------------------------------------------------------------------------------
Total $ 188,237 $ 173,897 $ 147,877
- --------------------------------------------------------------------------------
CAPITAL EXPENDITURES*
Newspapers $ 54,178 $ 117,346 $ 179,762
Broadcast 4,331 7,225 4,438
Magazines 631 3,205 2,554
Corporate 22,438 32,392 20,080
- --------------------------------------------------------------------------------
Total $ 81,578 $ 160,168 $ 206,834
- --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Newspapers $ 2,669,290 $ 2,711,180 $ 2,733,243
Broadcast 387,764 409,742 406,053
Magazines 62,147 56,236 92,632
Corporate 223,635 312,971 170,688
Investment in Joint Ventures 122,273 133,054 137,255
- --------------------------------------------------------------------------------
Total $ 3,465,109 $ 3,623,183 $ 3,539,871
- --------------------------------------------------------------------------------
* Capital expenditures exclude additions to capitalized leases for the
Edison Facility in 1998 (see Note 15 of the Notes to the Consolidated
Financial Statements).
F-35
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
AND STOCKHOLDERS OF
THE NEW YORK TIMES COMPANY
We have audited the accompanying consolidated balance sheets of The New York
Times Company as of December 27, 1998 and December 28, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 27, 1998. Our audits also
include the financial statement schedule listed in the Index at Item 14a. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The New York Times Company as of
December 27, 1998 and December 28, 1997, and the results of their operations and
their cash flows for each of the three years in the period ended December 27,
1998 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
New York, New York
January 27, 1999
MANAGEMENT'S RESPONSIBILITIES REPORT
The Company's consolidated financial statements were prepared by management who
is responsible for their integrity and objectivity. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and, as such, include amounts based on management's best estimates
and judgments.
Management is further responsible for maintaining a system of internal
accounting control, designed to provide reasonable assurance that the Company's
assets are adequately safeguarded and that the accounting records reflect
transactions executed in accordance with management's authorization. The system
of internal control is continually reviewed for its effectiveness and is
augmented by written policies and procedures, the careful selection and training
of qualified personnel and a program of internal audit.
The consolidated financial statements were audited by Deloitte & Touche LLP,
independent auditors. Their audit was conducted in accordance with generally
accepted auditing standards and their report is shown on this page.
The Audit Committee of the Board of Directors, which is composed solely of
independent directors, meets regularly with the independent auditors, internal
auditors and management to discuss specific accounting, financial reporting and
internal control matters. Both the independent auditors and the internal
auditors have full and free access to the Audit Committee. Each year the Audit
Committee selects, subject to ratification by stockholders, the firm which is to
perform audit and other related work for the Company.
- --------------------------------------------------------------------------------
MARKET INFORMATION
- --------------------------------------------------------------------------------
The Class A Common Stock is listed on the New York Stock Exchange. Prior to
September 25, 1997, the Class A Common Stock was listed on the American Stock
Exchange. The Class B Common Stock is unlisted and is not actively traded.
The number of security holders of record as of January 27, 1999, was as follows:
Class A Common Stock: 11,597; Class B Common Stock: 38.
The market price range of Class A Common Stock was as follows:
- --------------------------------------------------------------------------
Quarter Ended 1998 1997
- --------------------------------------------------------------------------
High Low High Low
March $34.13 31.13 $23.94 $18.19
June 38.72 33.25 25.88 20.00
September 40.69 26.25 27.66 22.78
December 35.81 20.50 33.25 25.00
Year 40.69 20.50 33.25 18.19
- --------------------------------------------------------------------------
F-36
QUARTERLY INFORMATION (UNAUDITED)
First Quarter Second Quarter Third Quarter Fourth Quarter Year
-----------------------------------------------------------------------------------------
(In millions, except per
share data) 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
Revenues $ 723 $692 $ 749 $722 $ 683 $683 $ 782 $ 769 $2,937 $2,866
- ----------------------------------------------------------------------------------------------------------------------
Costs and expenses
Production costs
Raw materials 88 75 89 78 83 78 94 92 354 323
Wages and benefits 154 158 147 149 140 146 158 152 599 605
Other 122 113 122 118 135 126 130 127 509 484
- ----------------------------------------------------------------------------------------------------------------------
Total production costs 364 346 358 345 358 350 382 371 1,462 1,412
Selling, general and
administrative expenses 243 245 246 250 224 242 247 262 960 999
- ----------------------------------------------------------------------------------------------------------------------
Operating profit 116 101 145 127 101 91 153 136 515 455
Income from Joint Ventures 5 1 4 3 5 3 7 7 21 14
Interest expense, net 10 8 10 11 10 12 13 11 43 42
Net gain on dispositions
of assets 5 -- 8 -- -- -- -- 10 13 10
- ----------------------------------------------------------------------------------------------------------------------
Earnings before taxes and
extraordinary item 116 94 147 119 96 82 147 142 506 437
Income taxes 51 42 64 34 41 36 63 63 219 175
- ----------------------------------------------------------------------------------------------------------------------
Earning before
extraordinary item 65 52 83 85 55 46 84 79 287 262
Extraordinary item, net of
tax(1) -- -- (8) -- -- -- -- -- (8) --
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 65 $ 52 $ 75 $ 85 $ 55 $ 46 $ 84 $ 79 $ 279 $ 262
- ----------------------------------------------------------------------------------------------------------------------
Average number of common
shares outstanding(2)
Basic 193 196 192 192 189 192 182 192 189 193
Diluted 197 199 196 196 192 196 186 197 193 197
- ----------------------------------------------------------------------------------------------------------------------
Basic earnings per share(2)
Earnings before
extraordinary item $ .34 $.26 $ .43 $.44 $ .29 $.24 $ .46 $ .41 $ 1.52 $ 1.36
Extraordinary item, net
of tax(1) -- -- (.04) -- -- -- -- -- (.04) --
- ----------------------------------------------------------------------------------------------------------------------
Net income $ .34 $.26 $ .39 $.44 $ .29 $.24 $ .46 $ .41 $ 1.48 $ 1.36
- ----------------------------------------------------------------------------------------------------------------------
Diluted earnings per
share(2)
Earnings per share before
extraordinary item $ .33 $.26 $ .42 $.43 $ .29 $.24 $ .45 $ .40 $ 1.49 $ 1.33
Extraordinary item, net
of tax(1) -- -- (.04) -- -- -- -- -- (.04) --
- ----------------------------------------------------------------------------------------------------------------------
Net income $ .33 $.26 $ .38 $.43 $ .29 $.24 $ .45 $ .40 $ 1.45 $ 1.33
- ----------------------------------------------------------------------------------------------------------------------
Dividends per share(2) $.085 $.08 $.095 $.08 $.095 $.08 $.095 $.085 $ .37 $ .32
- ----------------------------------------------------------------------------------------------------------------------
All earnings per share amounts for special items below are the same basic and
diluted earnings per share unless otherwise noted.
(1) See Note 8 of the Notes to the Consolidated Financial Statements.
(2) All share and per-share information is presented on a post two-for-one
split basis. The split was effective on June 17, 1998.
F-37
The 1998 and 1997 quarters do not equal the respective year-end amounts for
earnings per share due to the weighted average number of shares outstanding used
in the computations for the respective periods. Per share amounts for the
respective quarters and years have been computed using the average number of
common shares outstanding as presented in the table on the proceeding page.
The Company's largest source of revenue is advertising, which influences the
pattern of the Company's quarterly consolidated revenues and is seasonal in
nature. Traditionally, second-quarter and fourth-quarter advertising volume is
higher than that which occurs in the first- and third-quarters. Advertising
volume tends to be less in these quarters primarily because economic activity is
lower in the post holiday season and summer periods. 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.
First-quarter 1998 results include a $5 million pre-tax gain ($.01 per share)
from the sale of equipment.
Second-quarter 1998 results include an $8 million after-tax extraordinary item
in connection with a debt extinguishment (see Note 8). In addition, 1998 results
include an $8 million pre-tax gain on the sale of assets of the Company's
tennis, sailing and ski magazines.
Fourth-quarter 1998 results include a $5 million pre-tax charge ($.02 per share)
for Buyouts.
First-quarter 1997 results included a $2.5 million pre-tax charge ($.01 earnings
per share) for Buyouts.
Second-quarter 1997 results included an $18 million favorable adjustment ($.09
earning per share) resulting from the completion of the Company's federal income
tax audits for periods through 1992.
Fourth-quarter 1997 results included a $10 million aggregate pre-tax gain ($.03
per share) resulting from the sale of the assets of the tennis, sailing and ski
businesses and certain small properties, net of the exit costs associated with
the shutdown of a golf-related business. Fourth-quarter 1997 results also
included a $10 million pre-tax noncash charge ($.03 per share) relating to EITF
97-13 and a $6 million pre-tax charge ($.03 earning per share) for Buyouts.
F-38
TEN-YEAR SUPPLEMENTAL FINANCIAL DATA
Years Ended December
-----------------------------------------------------------------------------------------
(In millions, except per share data) 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues and Income
Revenues $2,937 $2,866 $2,628 $2,428 $2,397 $2,057 $1,810 $1,737 $1,808 $1,797
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Profit 515 455 173 233 211 126 88 93 129 168
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Joint Ventures 21 14 18 15 5 (53) (9) (9) 8 (11)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from continuing
operations 287 262 85 136 213 6 (11) 47 65 68
Discontinued operations -- -- -- -- -- -- -- -- -- 199
Extraordinary item (1) (8) -- -- -- -- -- -- -- -- --
Net cumulative effect of
accounting changes -- -- -- -- -- -- (34) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 279 $ 262 $ 85 $ 136 $ 213 $ 6 $ (45) $ 47 $ 65 $ 267
- -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet
Total assets $3,465 $3,623 $3,540 $3,390 $3,138 $3,215 $1,995 $2,128 $2,150 $2,188
Long-term debt
and capital lease obligations 598 535 637 638 523 460 207 213 319 337
Common stockholders' equity 1,531 1,729 1,623 1,610 1,544 1,599 1,000 1,073 1,056 1,064
- -----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share(2)
Continuing operations $ 1.52 1.36 .43 .70 1.02 .04 (.07) .30 .42 .44
Discontinued operations -- -- -- -- -- -- -- -- -- 1.26
Extraordinary item (1) (.04) -- -- -- -- -- -- -- -- --
Net cumulative effect of accounting
changes -- -- -- -- -- -- (.22) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.48 $ 1.36 $ .43 $ .70 $ 1.02 $ .04 $ (.29) $ .30 $ .42 $ 1.70
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share (2)
Continuing operations $ 1.49 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.06) $ .30 $ .42 $ .43
Discontinued operations -- -- -- -- -- -- -- -- -- 1.26
Extraordinary item (1) (.04) -- -- -- -- -- -- -- -- --
Net cumulative effect of accounting
Changes -- -- -- -- -- -- (.22) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.45 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.28) $ .30 $ .42 $ 1.69
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends $ .37 $ .32 $ .29 $ .28 $ .28 $ .28 $ .28 $ .28 $ .27 $ .25
Common stockholders' equity $ 8.11 $ 8.96 $ 8.34 $ 8.31 $ 7.42 $ 9.46 $ 6.36 $ 6.92 $ 6.90 $ 6.82
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding(2)
Class A and Class B Common 182 193 195 195 196 214 159 157 154 156
- -----------------------------------------------------------------------------------------------------------------------------------
Market Price (end of year)(2) $35.31 $32.03 $19.25 $14.81 $11.06 $13.13 $13.19 $11.81 $10.31 $13.19
- -----------------------------------------------------------------------------------------------------------------------------------
All references to earnings per share are the same for basic and diluted unless
noted otherwise.
(1) See Note 8 of the Notes to the Consolidated Financial Statements.
(2) All share and per-share information is presented on a post-two-for-one
split basis. The split was effective on June 17, 1998.
F-39
All earnings per share amounts for special items below are the same for basic
and diluted earnings per share unless otherwise noted.
1998
Results included: a $5 million pre-tax gain ($.01 earnings per share) from the
sale of equipment; a $8 million extraordinary charge ($.04 per share) in
connection with the Company's repurchase of $78 million of its $150 million,
8.25% notes due in 2025; an $8 million pre-tax gain ($.02 earnings per share)
from the satisfaction of a post-closing requirement related to the 1997 sale of
assets of the Company's tennis, sailing and ski magazines; $5 million pre-tax
charge ($.02 per share) for Buyouts.
1997
Results included: a $10 million pre-tax gain ($.03 per share) resulting from the
sale of the Company's assets of its tennis, sailing and ski magazines and
certain small properties, net of the exit costs associated with the shutdown of
a golf-related business; a $10 million pre-tax noncash accounting charge ($.03
per share) related to EITF 97-13; an $9 million pre-tax charge ($.02 per share)
for Buyouts; an $18 million ($.09 per share) favorable tax adjustment.
1996
Results included: a $127 million pre-tax noncash accounting charge ($.49 basic
earnings per share, $.48 diluted earnings per share) related to SFAS 121; $44
million pre-tax charge ($.13 basic per share, $.12 diluted earnings per share)
for Buyouts; a $25 million pre-tax gain ($.07 per share) resulting from the
realization of a gain contingency from the disposition of a paper mill in a
prior year; $8 million pre-tax gain ($.02 per share) on the sale of an office
building.
1995
Results included: a net pre-tax gain of $11 million ($.03 per share) from the
sales of several small newspapers; a $10 million pre-tax charge ($.03 per share)
for Buyouts.
1994
Results included: a net pre-tax gain of $201 million ($.50 basic earnings per
share, $.49 diluted earnings per share) from the sales of the Women's Magazines
Division and U.K. golf publications, and the disposition of a minority interest
in a newsprint mill.
1993
Results included: a pre-tax $4 million charge ($.01 per share) for rate
adjustments due to a severe snowstorm; a $4 million ($.02 per share) of
additional tax expense for remeasurement of deferred tax balances due to the
enactment of the Revenue Reconciliation Act of 1993; $1 million ($.01 per share)
of additional tax expense due to the Revenue Reconciliation Act of 1993 which
increased the federal corporate income tax rate; a $3 million pre-tax gain ($.01
per share) from the sale of assets; a $35 million of pre-tax charges ($.12 per
share) for Buyouts; a pre-tax noncash charge of $47 million ($.28 per share) to
write down a joint venture investment.
1992
Results included: a $54 million pre-tax loss ($.24 per share) on the closing of
The Gwinnett Daily News (GA); a $3 million pre-tax gain ($.01 per share) from
the sale of assets; a $28 million pre-tax charge ($.10 per share) for Buyouts; a
$21 million pre-tax charge ($.08 per share) for labor disruptions, training and
start-up costs at Edison. Net cumulative effect of accounting changes ($.22 per
share) includes the change in methods of accounting for income taxes,
postretirement benefits other than pensions and postemployment benefits.
1991
Results included: a $20 million pre-tax charge ($.08 per share) for Buyouts at
the Times; the reversal of a provision for income taxes of $10 million ($.06 per
share) for a favorable tax settlement.
1989
Results included: an after-tax gain of $193 million ($1.26 per share) from the
sale of the Company's cable television operation; a $30 million ($.11 per share)
before tax charge for costs related to anticipated voluntary union staff
reductions at The New York Times newspaper; a pre-tax charge of $27 million
($.17 per share) for a valuation reserve against the Company's investment in a
paper mill (since sold).
S-1
THE NEW YORK TIMES COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 27, 1998
(In thousands)
- ------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------
Additions Deductions for
charged to purposes for
Balance at costs and which Balance
beginning expenses or accounts at end of
Description of period revenues were set up period
- ------------------------------------------------------------------------------------------------------------------
Year Ended December 27, 1998
Deducted from assets to which they apply
Uncollectible accounts $20,889 $36,221 $28,964 $28,146
Returns and allowances, etc 4,998 6,242 5,022 6,218
- ------------------------------------------------------------------------------------------------------------------
Total $25,887 $42,463 $33,986 $34,364
- ------------------------------------------------------------------------------------------------------------------
Year Ended December 28, 1997
Deducted from assets to which they apply
Uncollectible accounts $24,359 $22,423 $25,893 $20,889
Returns and allowances, etc 6,953 8,997 10,952 4,998
- ------------------------------------------------------------------------------------------------------------------
Total $31,312 $31,420 $36,845 $25,887
- ------------------------------------------------------------------------------------------------------------------
Year Ended December 29, 1996
Deducted from assets to which they apply
Uncollectible accounts $18,942 $23,526 $18,109 $24,359
Returns and allowances, etc 6,923 10,324 10,294 6,953
- ------------------------------------------------------------------------------------------------------------------
Total $25,865 $33,850 $28,403 $31,312
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT INDEX
(2.1) Agreement and Plan of Merger, dated as of June 11, 1993, as amended by
the First Amendment dated as of August 12, 1993, by and among the
Company, Sphere, Inc. and Affiliated Publications, Inc. ("API") (filed
as Exhibit
2 to the Form S-4 Registration Statement, Registration No.
33-50043, on August 23, 1993, and included as Annex I to the Joint
Proxy Statement/Prospectus included in such Registration Statement
(schedules omitted--the Company agrees to furnish a copy of any
schedule to the Securities and Exchange Commission upon request), and
incorporated by reference herein).Number Description
- ------- -----------
(3.1) Certificate of Incorporation as amended and restated to reflect
amendments effective June 19, 1998 (filed as an Exhibit to the
Company's Form 10-Q dated August 11, 1998, and incorporated by
reference herein).
(3.2) By-laws as amended through May 21, 1998 (filed as an Exhibit to the
Company's Form 10-Q dated August 11, 1998, and incorporated by
reference herein).
(4) The Company agrees to furnish to the Commission upon request a copy
of any instrument with respect to long-term debt of the Company and
any subsidiary for which consolidated or unconsolidated financial
statements are required to be filed, and for which the amount of
securities authorized thereunder does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
(9.1) Globe Voting Trust Agreement, dated as of October 1, 1993, as
amended effective October 1, 1995 (filed as an Exhibit to the
Company's Form 10-K dated March 11, 1996, and incorporated by
reference herein).
(10.1) The Company's Executive Incentive Compensation Plan as amended
through December 20, 1990 (filed as an Exhibit to the Company's Form
10-K dated March 1, 1991, and incorporated by reference herein).
(10.2) The Company's 1991 Executive Stock Incentive Plan, as amended
through AprilDecember 16, 1998 (filed as an Exhibit to the Company's Form 10-Q dated
May 7, 1998, and incorporated by reference herein).1999.
(10.3) The Company's 1991 Executive Cash Bonus Plan, as amended through
April 16, 199815, 1999 (filed as an Exhibit to the Company's 10-Q dated May
7, 1998,12, 1999, and incorporated by reference herein).
(10.4) The Company's Non-Employee Directors' Stock Option Plan, as amended
through February 19, 1998 (filed as an Exhibit to the Company's Form
10-Q dated May 7, 1998, and incorporated by reference herein).
December 16, 1999.
(10.5) The Company's Supplemental Executive Retirement Plan, as amended and
restated through January 1, 1993 (filed as an Exhibit to the
Company's Form 10-K dated March 11, 1996, and incorporated by
reference herein).
(10.6) Amendment No. 1, dated May 1, 1997, to the Company's Supplemental
Executive Retirement Plan (filed as an Exhibit to the Company's Form
10-Q dated March 30, 1997, and incorporated by reference herein).
(10.7) Lease (short form) between the Company and Z Edison Limited
Partnership, dated April 8, 1987 (filed as an Exhibit to the
Company's Form 10-K dated March 27, 1988, and incorporated by
reference herein).
(10.7.1) Amendment to Lease between the Company and Z Edison Limited
Partnership, dated May 14, 1997 (filed as an Exhibit to the
Company's Form 10-Q dated November 10, 1998, and incorporated by
reference herein).
(10.7.2) Second Amendment to Lease between the Company and Z Edison Limited
Partnership, dated June 30, 1998 (filed as an Exhibit to the
Company's Form 10-Q dated November 10, 1998, and incorporated by
reference herein).
(10.8) Agreement of Lease, dated as of December 15, 1993, between The City
of New York, Landlord, and the Company, Tenant (as successor to New
York City Economic Development Corporation (the "EDC"), pursuant to
an Assignment and Assumption of Lease With Consent, made as of
December 15, 1993, between the EDC, as Assignor, to the Company, as
Assignee) (filed as an Exhibit to the Company's Form 10-K dated
March 21, 1994, and incorporated by reference herein).
(10.9) Funding Agreement #1, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.10) Funding Agreement #2, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.11) Funding Agreement #3, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.12) Funding Agreement #4, dated as of December 15, 1993, between the EDC
and the Company (filed as an Exhibit to the Company's Form 10-K
dated March 21, 1994, and incorporated by reference herein).
(10.13) New York City Public Utility Service Power Service Agreement, made
as of May 3, 1993, between The City of New York, acting by and
through its Public Utility Service, and The New York Times Newspaper
Division of the Company (filed as an Exhibit to the Company's Form
10-K dated March 21, 1994, and incorporated by reference herein).
(10.14) Employment Agreement, dated May 19, 1993, between API, Globe
Newspaper Company and William O. Taylor (filed as an Exhibit to the
Company's Form 10-K dated March 21, 1994, and incorporated by
reference herein).
(10.15) API's 1989 Stock Option Plan (filed as Annex F-1 to API's Proxy
Statement-Joint Prospectus, dated as of April 28, 1989, contained in
API's Registration Statement on Form S-4 (Registration Statement No.
33-28373) declared effective April 28, 1989, and incorporated by
reference herein).
(10.16) Globe Newspaper Company, Inc. Supplemental Executive Retirement
Plan, as amended effective December 16, 1998.1998 (filed as an Exhibit to
the Company's Form 10-K dated February 26, 1999, and incorporated by
reference herein).
(10.17) API's 1990 Stock Option Plan (Restated 1991) (filed as Exhibit 1 to
API's Quarterly Report on Form 10-Q for the Quarter ended June 30,
1991 (Commission File No. 1-10251), and incorporated by reference
herein).
(10.18) The Company's Deferred Executive Compensation Plan, as amended
effective December 28, 1998, and January 1,8, 1999.
(10.19) The New York Times Designated Employees Deferred Earnings Plan, as
amended effective December 28, 1998, and January 1, 1999.
(10.20) The Company's Non-Employee Directors Deferral Plan (filed as an
Exhibit to the Company's Form 10-Q dated November 12, 1997, and
incorporated by reference herein).
(10.21)(10.20) Distribution Agreement, dated as of September 24, 1998, by and among
the Company, Morgan Stanley & Co., Incorporated, Chase Securities
Inc. and Salomon Smith Barney Inc. (filed as an Exhibit to the
Company's Form 8-K dated September 24, 1998, and incorporated by
reference herein).
(10.22)(10.21) Exchange Rate Agency Agreement, dated as of September 24, 1998, by
and between the Company and Morgan Stanley Dean Witter (filed as an
Exhibit to the Company's Form 8-K dated September 24, 1998, and
incorporated by reference herein).
(10.23)(10.22) Calculation Agent Agreement, dated as of September 24, 1998, by and
between the Company and The Chase Manhattan Bank (filed as an
Exhibit to the Company's Form 8-K dated September 24, 1998, and
incorporated by reference herein).
(10.23) Employment Agreement, dated as of September 1, 1999, between the
Company and Martin Nisenholtz.
(12) Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the Company.
(23) Consent of Deloitte & Touche LLP.
(27) Financial Data Schedules.
THE NEW YORK TIMES COMPANY
1999 Financial Report
- -------------------------------------------------------------------------------
Contents Page
- -------------------------------------------------------------------------------
Selected Financial Data................................................. F-1
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. F-3
Consolidated Statements of Income....................................... F-13
Consolidated Balance Sheets............................................. F-14
Consolidated Statements of Cash Flows................................... F-16
Consolidated Statements of Stockholders' Equity......................... F-18
Notes to the Consolidated Financial Statements.......................... F-19
Independent Auditors' Report............................................ F-38
Management's Responsibilities Report.................................... F-38
Quarterly Information................................................... F-39
Market Information...................................................... F-40
Ten-Year Supplemental Financial Data.................................... F-41
F-1
SELECTED FINANCIAL DATA
Years Ended
--------------------------------------------------------------------------
December 26, December 27, December 28, December 29, December 31,
(In thousands, except per share and employee data) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
REVENUES AND INCOME
Revenues $ 3,130,629 $ 2,936,705 $ 2,866,418 $ 2,628,271 $ 2,428,124
Operating profit 571,282 515,220 455,102 173,280 232,749
Income before income taxes and extraordinary item 538,464 505,520 437,365 197,909 233,839
Extraordinary item, net of tax - debt extinguishment(1) -- (7,716) -- -- --
Net income 310,177 278,914 262,301 84,534 135,860
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Property, plant and equipment - net $ 1,218,396 $ 1,326,196 $ 1,366,931 $ 1,358,029 $ 1,266,609
Total assets 3,495,802 3,465,109 3,623,183 3,539,871 3,389,704
Long-term debt and capital lease obligations 598,327 597,818 535,428 636,632 637,873
Common stockholders' equity 1,448,658 1,531,470 1,729,297 1,623,523 1,610,437
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Basic earnings per share
Earnings before extraordinary item $ 1.77 $ 1.52 $ 1.36 $ .43 $ .70
Extraordinary item, net of tax - debt
extinguishment(1) -- (.04) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.77 $ 1.48 $ 1.36 $ .43 $ .70
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share
Earnings before extraordinary item $ 1.73 $ 1.49 $ 1.33 $ .43 $ .70
Extraordinary item, net of tax - debt
extinguishment(1) -- (.04) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.73 $ 1.45 $ 1.33 $ .43 $ .70
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends $ .41 $ .37 $ .32 $ .29 $ .28
Common stockholders' equity $ 8.08 $ 7.94 $ 8.77 $ 8.25 $ 8.27
- -----------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS
Operating profit to revenues(2) 19% 18% 16% 12% 10%
Return on average common stockholders' equity(2) 21% 17% 15% 11% 8%
Return on average total assets(2) 9% 8% 7% 5% 4%
Long-term debt and capital lease obligations
to total capitalization 29% 28% 24% 28% 28%
Current assets to current liabilities .91 .82 .92 .74 .91
- -----------------------------------------------------------------------------------------------------------------------------------
FULL-TIME EQUIVALENT EMPLOYEES 13,400 13,200 13,100 12,800 12,300
- -----------------------------------------------------------------------------------------------------------------------------------
All earnings per share amounts for special items on the following page are the
same for basic and diluted earnings per share unless otherwise noted.
(1) See Note 7 of the Notes to the Consolidated Financial Statements.
(2) Key operating ratios exclude special items from income as noted on page
F-2.
F-2
Income used in computing the key operating ratios on page F-1 exclude the
following special items:
1999
This item reduced earnings per share by $.05.
o The Company recorded a $15.5 million pre-tax charge ($8.9 million
after-tax) principally for work force reduction charges ("Buyouts") at The
Boston Globe (see Note 9 of the Notes to the Consolidated Financial
Statements).
1998
These items reduced earnings per share by $.03.
o The Company recorded a $4.6 million pre-tax gain ($2.6 million after-tax)
from the sale of equipment (see Note 2 of the Notes to the Consolidated
Financial Statements).
o The Company recorded a $7.7 million after-tax extraordinary item in
connection with its repurchase of $78.1 million of its $150.0 million,
8.25% notes due in 2025 (see Note 7 of the Notes to the Consolidated
Financial Statements).
o The Company recorded an $8.0 million pre-tax gain ($4.5 million after-tax)
from the satisfaction of a post-closing requirement related to the sale of
assets of its tennis, sailing and ski magazines in 1997 (see Note 2 of the
Notes to the Consolidated Financial Statements).
o The Company recorded a $5.4 million pre-tax charge ($3.1 million
after-tax) for Buyouts (see Note 9 of the Notes to the Consolidated
Financial Statements).
1997
These items increased earnings per share by $.07.
o The Company recorded an $18.0 million favorable tax adjustment resulting
from the completion of its federal income tax audits for periods through
1992 (see Note 8 of the Notes to the Consolidated Financial Statements).
o The Company recorded aggregate pre-tax gains totaling $10.4 million ($5.7
million after-tax) from the sale of assets of its tennis, sailing and ski
magazines and certain small properties, net of costs associated with the
exit of a golf tee-time reservation operation (see Note 2 of the Notes to
the Consolidated Financial Statements).
o The Company recorded a $10.1 million pre-tax noncash charge ($5.7 million
after-tax) relating to the adoption of Emerging Issues Task Force Issue
No. 97-13, Accounting for Costs Incurred in Connection with a Consulting
Contract or an Internal Project That Combines Business Process
Reengineering and Information Technology Transformation ("EITF 97-13")
(see Note 3 of the Notes to the Consolidated Financial Statements).
o The Company recorded an $8.5 million pre-tax charge ($4.7 million
after-tax) for Buyouts (see Note 9 of the Notes to the Consolidated
Financial Statements).
1996
These items reduced basic earnings per share by $.53 and diluted earnings per
share by $.51.
o The Company recorded a $126.8 million pre-tax noncash charge ($94.5
million after-tax) relating to Statement of Financial Accounting Standards
No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of ("SFAS 121 charge").
o The Company recorded pre-tax gains totaling $32.9 million ($17.5 million
after-tax) from the sale of a building and the realization of a gain
contingency from the disposition of a paper mill in a prior year.
o The Company recorded a $44.1 million pre-tax charge ($24.4 million
after-tax) for Buyouts.
1995
These items had no net effect on earnings per share.
o The Company recorded a pre-tax gain of $11.3 million ($5.0 million
after-tax) from the sale of several small regional newspapers.
o The Company recorded a $10.1 million pre-tax charge ($5.9 million
after-tax) for Buyouts.
F-3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
In 1999 newspapers contributed 92% of the Company's $3.1 billion in revenues,
while broadcasting accounted for 5% and magazines accounted for 3%.
Advertising revenues were 72% and circulation revenues were 22% of the Company's
total revenues in 1999, and newspaper distribution operations and database
royalties principally made up the balance.
Newsprint is the major component of the Company's cost of raw materials.
Newsprint market prices in 1999 decreased from 1998 and are expected to rise in
2000 over 1999 levels.
Below is a chart of the Company's consolidated costs and expenses for the three
years ended December 26, 1999.
All percentages presented below for consolidated costs and expenses include
production costs as well as selling, general and administrative expenses.
Components of Consolidated Costs and Expenses
[The following table was depicted as a bar chart in the printed material.]
1999 1998 1997
---- ---- ----
Wages and Benefits 42% 41% 42%
Raw Materials 13% 15% 14%
Other Operating Costs 37% 36% 37%
Depreciation & Amortization 8% 8% 7%
---- ---- ----
100% 100% 100%
Consolidated Costs and Expenses
as a Percentage of Revenues
[The following table was depicted as a bar chart in the printed material.]
1999 1998 1997
---- ---- ----
Wages and Benefits 35% 34% 36%
Raw Materials 10% 12% 11%
Other Operating Costs 31% 30% 31%
Depreciation & Amortization 6% 6% 6%
---- ---- ----
82% 82% 84%
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
The Company's consolidated financial results for 1999, 1998 and 1997 were as
follows:
- --------------------------------------------------------------------------------
% Change
------------
(In millions, except per
share data) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
Revenues $3,130.6 $2,936.7 $2,866.4 6.6 2.5
- --------------------------------------------------------------------------------
Operating profit $ 571.3 $ 515.2 $ 455.1 10.9 13.2
- --------------------------------------------------------------------------------
Income before
special items $ 319.1 $ 282.6 $ 249.1 12.9 13.5
Special items (8.9) (3.7) 13.2 * *
- --------------------------------------------------------------------------------
Net income $ 310.2 $ 278.9 $ 262.3 11.2 6.3
- --------------------------------------------------------------------------------
Diluted earnings per
share before
special items $ 1.78 $ 1.48 $ 1.26 20.3 17.5
Special items (.05) (.03) .07 66.7 *
- --------------------------------------------------------------------------------
Diluted earnings per
share $ 1.73 $ 1.45 $ 1.33 19.3 9.0
- --------------------------------------------------------------------------------
For an explanation of special items, see "Special Items" on page F-5.
All references to earnings per share in this Management's Discussion and
Analysis of Financial Condition and Results of Operations are to diluted
earnings per share. Years presented each comprise 52 weeks.
*Represents percentages greater than or equal to 100%.
Revenues were $3.1 billion in 1999, up 6.6% from $2.9 billion in 1998. In 1998
revenues were up 2.5% from $2.9 billion in 1997. On a comparable basis, adjusted
for dispositions, revenues increased 4.3% in 1998. The effect of dispositions on
revenues in 1999 was nominal. Revenues in 1999 improved mostly as a result of
higher advertising rates, increased advertising volume and an improved
advertising mix. Revenues in 1998 improved as a result of higher advertising
rates and volume.
Operating profit for 1999 increased 10.9% to $571.3 million from $515.2 million
in 1998. Operating profit for 1999, exclusive of special items, rose 12.7% to
$586.7 million from $520.6 million in 1998. The increases were mainly due to
higher advertising revenues and lower newsprint expense at the Company's
newspapers.
In 1998 operating profit rose 13.2% to $515.2 million from $455.1 million in
1997. Operating profit for 1998, exclusive of special items, rose 9.9% to $520.6
million from $473.7 million in 1997. The improvement in operating profit was
mainly due to higher advertising revenues at the Company's newspapers and
tighter cost controls throughout the Company, despite higher newsprint expense.
F-4
Net income for 1999 increased 11.2% to $310.2 million from $278.9 million in
1998. Net income for 1999, exclusive of special items, rose 12.9% to $319.1
million from $282.6 million in 1998. The increases were primarily attributable
to higher advertising revenues and lower newsprint expense.
Net income in 1998 increased 6.3% to $278.9 million from $262.3 million in 1997.
Net income for 1998, exclusive of special items, rose 13.5% to $282.6 million
from $249.1 million in 1997. The increases in net income were primarily
attributable to higher advertising revenues.
The Company's consolidated EBITDA (earnings before interest, taxes, depreciation
and amortization) for 1999 increased 7.9% to $786.7 million. EBITDA for 1999
increased 9.9% to $802.1 million, excluding special items. EBITDA for 1998 rose
11.6% to $729.4 million from $653.4 million. Excluding special items, EBITDA for
1998 rose 10.3% to $729.9 million from $661.6 million in 1997.
EBITDA is presented because 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 EBITDA
presented may not be comparable to similarly titled measures reported by other
companies. 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.
OPERATING EXPENSES
Consolidated operating expenses were as follows:
- --------------------------------------------------------------------------------
% Change
-----------------
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
Production costs
Raw materials $ 321.4 $ 354.9 $ 324.7 (9.4) 9.3
Wages and benefits 621.3 608.2 584.0 2.2 4.1
Other 436.1 418.1 381.8 4.3 9.5
- --------------------------------------------------------------------------------
Total production
costs 1,378.8 1,381.2 1,290.5 (0.2) 7.0
- --------------------------------------------------------------------------------
Selling, general and
administrative
expenses 1,180.5 1,040.3 1,120.8 13.5 (7.2)
- --------------------------------------------------------------------------------
Total $2,559.3 $2,421.5 $2,411.3 5.7 0.4
- --------------------------------------------------------------------------------
Production costs for 1999 were flat compared to 1998 at $1.4 billion. Lower
newsprint expense was primarily offset by higher compensation and contracted
printing costs associated with The New York Times newspaper's national
expansion.
In 1998 production costs increased 7.0% to $1.4 billion. That increase was
mainly due to higher newsprint expense offset by lower costs as a result of the
divestiture of certain properties.
Selling, general and administrative ("SGA") expenses for 1999, exclusive of
special items, increased 14.4% to $1.2 billion from 1998, principally as a
result of higher incentive compensation tied to improved earnings, increased
costs associated with The New York Times newspaper's national expansion and
higher promotional spending. SGA expenses for 1998, exclusive of special items,
decreased 8.2% to $1.0 billion from $1.1 billion in 1997, principally from lower
compensation and promotional costs and lower costs as a result of the
divestiture of certain properties in 1997.
OTHER ITEMS
Joint Ventures
Income from joint ventures decreased to $17.9 million in 1999 from $21.0 million
in 1998. In 1998 income from joint ventures increased to $21.0 million from
$14.0 million in 1997. The fluctuations year over year are primarily a result of
varying levels of paper prices at the mills in which the Company has equity
interests.
Interest Expense
Interest expense, net increased to $50.7 million in 1999 from $43.3 million in
1998. The increase was principally due to additional borrowings to fund the
Company's share repurchase program. In 1998 interest expense, net increased to
$43.3 million from $42.1 million in 1997. The increase was primarily the result
of a reduction in capitalized interest, partially offset by lower interest
expense on long-term borrowings.
Total interest income and capitalized interest were $1.8 million in 1999, $3.8
million in 1998 and $8.3 million in 1997.
Taxes
The Company's annual effective income tax rates were 42.4% in 1999, 43.3% in
1998 and 44.1% in 1997. These effective income tax rates exclude the tax effects
of special items. The decline in the effective income tax rates was primarily
attributable to lower state and local income taxes.
EARNINGS PER SHARE
Diluted earnings per share in 1999 were $1.78, up 20.3% from $1.48 in 1998, and
up 17.5% from $1.26 in 1997, excluding special items. The increases were mostly
due to stronger advertising revenues in the Newspaper Group and lower
outstanding share levels resulting from the Company's share repurchase program.
Diluted earnings per share as reported in the Company's Consolidated Statements
of Income were $1.73 in 1999, $1.45 in 1998 and $1.33 in 1997. The effect of
repurchases on diluted earnings per share was an increase to earnings per share
of $.07 in 1999 and $.05 in 1998.
The average basic Class A and Class B common shares outstanding were 175.6
million in 1999, 188.8 million in 1998 and 193.0 million in 1997. The average
diluted Class A and Class B common shares outstanding were 179.2 million in
1999, 192.8 million in 1998 and 197.2 million in 1997.
F-5
SPECIAL ITEMS
Over the past three years, the Company has realized gains on the disposition of
certain assets and favorably settled a federal tax audit. The Company also
recorded expenses for a noncash accounting charge, Buyouts, and a debt
extinguishment (see Note 7 of the Notes to the Consolidated Financial
Statements). These items were as follows:
1999
This item reduced net income by $8.9 million and earnings per share by $.05.
o A $15.5 million pre-tax charge principally for Buyouts at The Boston
Globe (see Note 9 of the Notes to the Consolidated Financial Statements).
1998
These items reduced net income by $3.7 million and earnings per share by $.03.
o A $4.6 million pre-tax gain from the sale of equipment. This gain
increased earnings per share by $.01 (see Note 2 of the Notes to the
Consolidated Financial Statements).
o A $7.7 million after-tax extraordinary charge 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 earnings per share by $.04 (see Note 7 of
the Notes to the Consolidated Financial Statements).
o An $8.0 million pre-tax gain from the satisfaction of a post-closing
requirement related to the 1997 sale of the Company's assets of its
tennis, sailing and ski magazines. This gain increased earnings per share
by $.02 (see Note 2 of the Notes to the Consolidated Financial
Statements).
o A $5.4 million pre-tax charge for Buyouts: $2.5 million (The Boston
Globe), $3.0 million (Magazine Group), $1.9 million (Broadcast Group)
offset by a reversal of $2.0 million (Corporate). This charge reduced
earnings per share by $.02 (see Note 9 of the Notes to the Consolidated
Financial Statements).
1997
These items increased net income by $13.2 million and earnings per share by
$.07.
o A $10.4 million pre-tax gain from the sale of assets of the Company's
tennis, sailing and ski magazines and certain small properties, net of
costs associated with the exit of a golf tee-time reservation operation.
This gain increased earnings per share by $.03 (see Note 2 of the Notes to
the Consolidated Financial Statements).
o A $10.1 million pre-tax charge resulting from a noncash charge relating to
the adoption of EITF 97-13. This charge reduced earnings per share by $.03
(see Note 3 of the Notes to the Consolidated Financial Statements).
o An $18.0 million after-tax gain resulting from a favorable tax adjustment
from the completion of the Company's federal income tax audits for periods
through 1992. This gain increased earnings per share by $.09 (see Note 8
of the Notes to the Consolidated Financial Statements).
o An $8.5 million pre-tax charge for Buyouts: $7.5 million (Newspaper Group)
and $1.0 million (Corporate). This charge reduced earnings per share by
$.02 (see Note 9 of the Notes to the Consolidated Financial Statements).
F-6
OPERATING SEGMENT INFORMATION
REVENUES, EBITDA AND OPERATING PROFIT
Consolidated revenues, EBITDA and operating profit by business segment were as
follows:
- --------------------------------------------------------------------------------
% Change
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
Revenues
Newspapers $2,869.9 $2,664.4 $2,557.1 7.7 4.2
Broadcast 150.1 151.2 144.5 (0.7) 4.6
Magazines 110.6 121.1 164.8 (8.7) (26.5)
- --------------------------------------------------------------------------------
Total segment revenues $3,130.6 $2,936.7 $2,866.4 6.6 2.5
- --------------------------------------------------------------------------------
EBITDA
Newspapers $ 724.9 $ 644.3 $ 594.2 12.5 8.4
Broadcast 63.2 62.8 57.3 0.7 9.6
Magazines 19.4 17.7 21.0 9.4 (15.5)
- --------------------------------------------------------------------------------
Total Segment
EBITDA $ 807.5 $ 724.8 $ 672.5 11.4 7.8
- --------------------------------------------------------------------------------
Operating Profit
Newspapers $ 556.3 $ 477.8 $ 434.1 16.4 10.1
Broadcast 45.8 45.1 39.4 1.6 14.6
Magazines 18.1 22.1 28.3 (18.4) (22.0)
Unallocated
corporate expenses (48.9) (29.8) (46.7) (64.0) 36.1
- --------------------------------------------------------------------------------
Total segment operating
profit $ 571.3 $ 515.2 $ 455.1 10.9 13.2
- --------------------------------------------------------------------------------
Newspaper Group
For the years presented, the Newspaper Group includes The New York Times ("The
Times"), The Boston Globe ("The Globe"), 21 regional newspapers ("The
Regionals"), newspaper distributors, a news service, a features syndicate,
TimesFax, licensing operations of the New York Times databases and microfilm and
Internet-related ventures.
The Company acquired certain assets and liabilities of the Worcester Telegram &
Gazette on January 7, 2000, and the related results of operations are not
included herein. Beginning in 2000 the Worcester Telegram & Gazette and The
Globe will be presented as the New England Newspaper Group.
Internet-related revenues and operating losses are principally from NYTimes.com,
NYToday.com, Boston.com, WineToday.com, Abuzz and Web sites of The Regionals.
See "Proposed Public Offering of Securities" on page F-9 for additional
information regarding the Company's Internet Operations.
- --------------------------------------------------------------------------------
% Change
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
Revenues
Newspapers $2,839.4 $2,646.9 $2,546.0 7.3 4.0
Internet 30.5 17.5 11.1 74.7 57.4
- --------------------------------------------------------------------------------
Total revenues $2,869.9 $2,664.4 $2,557.1 7.7 4.2
- --------------------------------------------------------------------------------
EBITDA
Newspapers $ 741.5 $ 656.1 $ 601.4 13.0 9.1
Internet (16.6) (11.8) (7.2) (41.1) (64.8)
- --------------------------------------------------------------------------------
Total EBITDA $ 724.9 $ 644.3 $ 594.2 12.5 8.4
- --------------------------------------------------------------------------------
Operating Profit (Loss)
Newspapers $ 577.9 $ 490.8 $ 441.4 17.7 11.2
Internet (21.6) (13.0) (7.3) (65.7) (79.3)
- --------------------------------------------------------------------------------
Total Operating Profit $ 556.3 $ 477.8 $ 434.1 16.4 10.1
- --------------------------------------------------------------------------------
The Newspaper Group's operating profit for 1999 rose to $556.3 million, compared
with $477.8 million in 1998. For 1999 operating profit rose to $571.6 million,
compared with $480.3 million in 1998, excluding special items. The improvement
primarily resulted from higher advertising revenues and lower newsprint expense.
In 1999 the Company's newsprint expense fell 10.9%, which resulted from a
decrease in the cost of newsprint of 12.9% and an increase in consumption of
2.0% due to strong advertising compared with 1998.
Revenues grew to $2.9 billion in 1999, up 7.7% from $2.7 billion in 1998. The
increase in revenue was primarily due to higher advertising rates and volume and
an improved advertising mix. Performance was strongest at The Times and The
Globe, where advertising revenues climbed 12.6% and 6.5%. Both newspapers
benefited from strong national advertising including increased business from
technology companies, and Internet businesses. At The Regionals, advertising
revenues were also strong, due in part to the success of Celebrate 2000, a
comprehensive program of millennium-related advertising, circulation and
promotion initiatives. Across the Newspaper Group there was also a slight
increase in circulation revenue. Other revenue increased $10.2 million in 1999
principally due to a special printing project at The Globe.
The Newspaper Group's operating profit for 1998 rose to $477.8 million, compared
with $434.1 million in 1997. In 1998 operating profit rose to $480.3 million,
compared with $441.6 million in 1997, excluding special items. The improvement
was mainly from higher advertising revenues and cost containment, despite an
increase of 12.9% in newsprint expense. In 1998 the Company's newsprint expense
rose 8.8% and consumption increased 4.1% compared with 1997.
Revenues grew to $2.7 billion in 1998, up 4.2% from $2.6 billion in 1997. The
increases in revenues for 1998 over 1997 were primarily due to higher
advertising rates and volume, as well as a slight increase in circulation
revenues.
F-7
Advertising, circulation and other revenue, by major product of the Newspaper
Group, were as follows:
- --------------------------------------------------------------------------------
% Change
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
The New York Times
Advertising $1,192.0 $1,058.9 $ 989.5 12.6 7.0
Circulation 452.6 440.6 426.0 2.7 3.4
Other 144.4 142.1 144.2 1.6 (1.4)
- --------------------------------------------------------------------------------
Total $1,789.0 $1,641.6 $1,559.7 9.0 5.3
- --------------------------------------------------------------------------------
The Boston Globe
Advertising $ 477.5 $ 448.2 $ 440.3 6.5 1.8
Circulation 133.7 133.4 134.5 0.2 (0.8)
Other 14.0 8.2 7.8 70.7 5.3
- --------------------------------------------------------------------------------
Total $ 625.2 $ 589.8 $ 582.6 6.0 1.2
- --------------------------------------------------------------------------------
Regional Newspapers
Advertising $ 362.7 $ 341.7 $ 323.2 6.1 5.7
Circulation 76.9 77.3 77.6 (0.5) (0.4)
Other 16.1 14.0 14.0 15.6 --
- --------------------------------------------------------------------------------
Total $ 455.7 $ 433.0 $ 414.8 5.3 4.4
- --------------------------------------------------------------------------------
Total Newspaper Group
Advertising $2,032.2 $1,848.8 $1,753.0 9.9 5.5
Circulation 663.2 651.3 638.1 1.8 2.1
Other 174.5 164.3 166.0 6.2 (1.0)
- --------------------------------------------------------------------------------
Total $2,869.9 $2,664.4 $2,557.1 7.7 4.2
- --------------------------------------------------------------------------------
Advertising volume for The Times, The Globe and The Regionals was as follows:
- --------------------------------------------------------------------------------
(Inches in thousands,
preprints in % Change
thousands ---------------
of copies) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
The New York Times
Retail 567.3 587.2 606.8 (3.4) (3.2)
National 1,582.1 1,392.7 1,330.8 13.6 4.7
Classified 984.1 996.9 971.1 (1.3) 2.7
Zoned 1,015.7 1,019.6 1,034.6 (0.4) (1.4)
- --------------------------------------------------------------------------------
Total 4,149.2 3,996.4 3,943.3 3.8 1.3
- --------------------------------------------------------------------------------
Preprints 427,857 343,070 318,490 24.7 7.7
- --------------------------------------------------------------------------------
The Boston Globe
Retail 667.5 701.9 729.6 (4.9) (3.8)
National 753.1 697.4 629.6 8.0 10.6
Classified 1,354.3 1,350.5 1,346.1 0.3 0.4
Zoned 256.2 278.9 304.5 (8.2) (8.2)
- --------------------------------------------------------------------------------
Total 3,031.1 3,028.7 3,009.8 0.1 0.6
- --------------------------------------------------------------------------------
Preprints 801,842 787,016 729,228 1.9 7.9
- --------------------------------------------------------------------------------
Regional Newspapers
Retail 7,575.4 7,884.4 7,830.4 (3.9) 0.7
National 285.0 252.7 274.9 12.8 (8.0)
Classified 7,870.3 7,460.4 7,086.7 5.5 5.3
Zoned 456.4 476.4 453.9 (4.2) 4.8
- --------------------------------------------------------------------------------
Total 16,187.1 16,073.9 15,645.9 0.7 2.7
- --------------------------------------------------------------------------------
Preprints 1,115,303 1,082,712 1,013,200 3.0 6.9
- --------------------------------------------------------------------------------
Circulation for The Times, The Globe and The Regionals was as follows:
- --------------------------------------------------------------------------------
Weekday Sunday
--------------------- ----------------------
(Copies in thousands) 1999 % Change 1999 % Change
- --------------------------------------------------------------------------------
Average Circulation
The New York Times 1,110.2 1.5 1,668.1 1.4
The Boston Globe 468.9 (0.2) 728.5 (2.2)
Regional Newspapers 732.7 (0.6) 779.5 (1.0)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weekday Sunday
--------------------- ----------------------
(Copies in thousands) 1998 % Change 1998 % Change
- --------------------------------------------------------------------------------
Average Circulation
The New York Times 1,094.1 0.5 1,644.8 (0.4)
The Boston Globe 469.9 (1.1) 745.2 (1.3)
Regional Newspapers 736.8 0.5 787.6 (0.1)
- --------------------------------------------------------------------------------
Circulation growth for The Times was primarily due to additional availability
and promotion 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 and customer service to attract new readers and retain existing ones.
These improvements included the use of The Times's and The Globe's Web sites for
new subscriptions and customer service.
Broadcast Group
The Broadcast Group is comprised of eight network-affiliated television stations
and two radio stations.
- --------------------------------------------------------------------------------
% Change
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
Revenues $150.1 $151.2 $144.5 (0.7) 4.6
- --------------------------------------------------------------------------------
EBITDA 63.2 62.8 57.3 0.7 9.6
- --------------------------------------------------------------------------------
Operating Profit $ 45.8 $ 45.1 $ 39.4 1.6 14.6
- --------------------------------------------------------------------------------
The Broadcast Group's operating profit was $45.9 million in 1999, $47.0 million
in 1998 and $39.4 million in 1997, excluding Buyouts.
Revenues and operating profit varied in the three years presented primarily as a
result of the level of political advertising revenue in each year. Additionally,
the Broadcast Group employed tight cost controls to aid profitability.
F-8
Magazine Group
This group consists of three golf publications and related activities in the
golf field.
- --------------------------------------------------------------------------------
% Change
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
Revenues
- --------------------------------------------------------------------------------
Magazines $110.6 $115.3 $154.8 (4.1) (25.5)
Non-Compete
Agreement -- 5.8 10.0 * *
- --------------------------------------------------------------------------------
Total Revenues $110.6 $121.1 $164.8 (8.7) (26.5)
- --------------------------------------------------------------------------------
EBITDA $ 19.4 $ 17.7 $ 21.0 9.4 (15.5)
- --------------------------------------------------------------------------------
Operating Profit
- --------------------------------------------------------------------------------
Magazines $ 18.1 $ 16.3 $ 18.3 10.8 (11.2)
Non-Compete
Agreement -- 5.8 10.0 * *
- --------------------------------------------------------------------------------
Total Operating Profit $ 18.1 $ 22.1 $ 28.3 (18.4) (22.0)
- --------------------------------------------------------------------------------
The Magazine Group's operating profit declined in 1999 to $18.1 million from
$22.1 million in 1998 and $28.3 million in 1997. On a comparable basis,
excluding divestitures and income from a non-compete agreement, revenues in 1999
decreased by 3.3% compared to 1998 and 1997. Consolidation in the golf equipment
industry and a competitive rate environment adversely affected the Group's
performance in 1999 and 1998. The revenue related to the non-compete agreement
ceased in July 1998. In 1998 operating profit was also negatively affected by a
$3.0 million charge for Buyouts, and was positively affected by the absence of
losses related to a golf tee-time reservation operation that the Company exited
in late 1997. In November 1997 the Company completed the sale of assets of its
tennis, sailing and ski magazines and certain small properties (see Note 2 of
the Notes to the Consolidated Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $601.1 million in 1999, compared
with $496.9 million in 1998 and $449.7 million in 1997. The increases were
primarily due to higher earnings and improvements in working capital. Operating
cash flow was primarily used for share repurchases, capital expenditures,
acquisitions and dividend payments to stockholders.
Net cash used in investing activities was $82.9 million in 1999, compared with
$56.2 million in 1998 and $116.7 million in 1997. The increase of $26.7 million
in 1999 was primarily due to additional minority interest investments in
Internet-related companies. The 1999 increase was partially offset by reduced
levels of capital expenditures. The decrease in 1998 from 1997 was principally
from reduced capital expenditures.
Net cash used in financing activities was $490.4 million in 1999, compared with
$511.6 million in 1998 and $265.3 million in 1997. The decrease of $21.2 million
in 1999 was primarily related to the debt extinguishment in 1998. The increase
in 1998 over 1997 was principally from increased levels of stock repurchases.
Cash generated from the Company's operations and the funds available from
external sources are expected to 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 rose to 91.3% at December 26,
1999, from 82.1% at December 27, 1998 as a result of a higher cash balance and a
lower level of short-term borrowings. Long-term debt and capital lease
obligations, as a percentage of total capitalization, were 29.2% at December 26,
1999, and 28.1% at December 27, 1998. This increase was principally from
reductions in stockholders' equity and increases in debt associated with stock
repurchases.
FINANCING
In July 1999 the Company increased its borrowing capacity under a revolving
credit agreement 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 of stockholders' equity over required
levels was $509.2 million at December 26, 1999, compared with $600.8 million at
December 27, 1998. The decrease in the level of unrestricted stockholders'
equity is mainly due to stock repurchases.
The revolving credit agreements permit borrowings, which bear interest at the
Company's option (i) for domestic borrowings: based on a certificates of deposit
rate, a Federal Funds rate, a base rate or a quoted rate; or (ii) for Eurodollar
borrowings: based on the LIBOR rate, plus various margins based on the Company's
credit rating.
In July 1999 the Company increased its ability to issue commercial paper from
$300.0 million to $400.0 million, which is supported by the Company's revolving
credit agreements. Borrowings are in the form of unsecured notes sold at a
discount with maturities ranging up to 270 days.
The Company had no commercial paper outstanding at December 26, 1999. At
December 27, 1998, the Company had $124.1 million in commercial paper
outstanding with an annual weighted average interest rate of 5.3% and an average
of 41 days to maturity.
F-9
On August 21, 1998, the Company filed a $300.0 million 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. 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. As of December 26, 1999, the Company had issued a
total of $198.0 million, excluding unamortized debt costs, under the medium-term
note program. The notes have maturity dates ranging from October 8, 2003,
through November 18, 2009, and pay interest semi-annually with rates ranging
from 5.0% to 7.125%.
In October 1993 the Company issued $200.0 million of senior notes. Five-year
senior notes totaling $100.0 million matured in October 1998, while the
remaining $100.0 million in notes are due in April 2000.
In 1998, the Company made a tender offer for any and all of its $150.0 million
of outstanding publicly-held 8.25% debentures due March 15, 2025. 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 reduced interest
expense and generated a positive return on a net present value basis. Total cash
paid in connection with the tender offer was approximately $89.3 million. The
Company incurred a charge to operations in 1998 of $13.7 million ($7.7 million
after-tax) in connection with this debt extinguishment (see Note 7 of the Notes
to the Consolidated Financial Statements).
The Company's total long-term debt, including current portion and capital
leases, was $701.2 million at December 26, 1999, and $599.7 million at December
27, 1998. The increase is primarily attributable to the issuance of additional
medium-term notes. Total additional borrowings available under all financing
arrangements amounted to $502.0 million as of December 26, 1999, and $272.0
million as of January 28, 2000. Total debt, including current portion and
capital leases, as of January 28, 2000, amounted to $931.2 million. This
increase of $230.0 million from December 26, 1999, is primarily from the
acquisition of the Worcester Telegram & Gazette on January 7, 2000 (see
Acquisitions/Dispositions on page F-10).
PROPOSED PUBLIC OFFERING OF SECURITIES
On January 20, 2000, the Board of Directors of the Company authorized, subject
to shareholder approval, the issuance of a new class of stock. On January 28,
2000, the Company filed a registration statement with the Securities and
Exchange Commission ("SEC") on Form S-3 (the "Form S-3") related to a proposed
initial public offering of a new class of common stock ("Class C Stock") which
is intended to track the performance of the Company's Internet business
division, Times Company Digital (the "TCD group").
After shareholder approval and the completion of the proposed stock offering,
the Company intends to separate for financial reporting purposes the TCD group
and the "NYT group" (the Company excluding the TCD group except for a retained
interest in the TCD group) (See Note 19 of the Notes to the Consolidated
Financial Statements). The NYT group includes all of the other business
segments: Newspaper, Broadcast and Magazines, except for the businesses that
comprise the TCD group. The NYT group also includes a retained interest in the
TCD group which is currently 100%. This retained interest will decline to
reflect the issuance of Class C Stock to the public.
For segment reporting purposes, the Company currently provides financial data on
its Internet operations which are included in the Newspaper Group (the "Internet
Operations"). The Internet Operations principally include all Internet-related
operations of the Company. However, the operating results of the Internet
Operations are not indicative of the operating results of the TCD group's
operations. The TCD group includes NYTimes.com, NYToday.com, Boston.com,
WineToday.com, GolfDigest.com and Abuzz.com. The Internet Operations also
include various Internet operations of The Regionals and exclude GolfDigest.com.
The TCD group's operating results as presented in the financial statements
included in the Form S-3 and in Note 19 of the Notes to the Consolidated
Financial Statements reflect the effect of various inter-group agreements and
policies, including a license agreement, a services agreement and established
tax sharing policies.
Beginning in 2000, and coinciding with the effective date of these various
arrangements (January 1, 2000), the Company's management has determined that its
reportable segments will consist of newspapers, broadcast, magazines and the
operations of the TCD group. These segments will be evaluated regularly by key
management in assessing performance and allocating resources.
F-10
ACQUISITIONS/DISPOSITIONS
The Company acquired an Internet knowledge management concern ("Abuzz") on July
22, 1999, for $5.1 million in cash and $25.0 million in the stock of the
Company's subsidiary that acquired Abuzz ("Acquisition Subsidiary") (see Note 2
in the Notes to the Consolidated Financial Statements). In the event that the
Company has not issued Class C Stock to the public by December 31, 2000, the
former stockholders of Abuzz and certain optionees of Acquisition Subsidiary
have the right to require Acquisition Subsidiary to redeem their shares for an
amount no less than $25.0 million in aggregate. After the Class C Stock is
issued, the Company may be required to issue additional shares of Class C Stock,
if Acquisition Subsidiary's shares held by former shareholders of Abuzz and
certain optionees of Acquisition Subsidiary are exchangeable into Class C Stock
at or below a value of $25.0 million. The Company has reflected this $25.0
million in "Accrued expenses" on the Company's Consolidated Balance Sheets as of
December 26, 1999.
Upon completion of the issuance of Class C Stock to the public, shares of
Acquisition Subsidiary stock may be exchanged for Class C Stock at an exchange
ratio intended to maintain the same percentage of ownership in the TCD group
immediately prior to the public issuance as the exchanged shares held in
Acquisition Subsidiary. If this exchange had occurred at December 26, 1999, the
former stockholders of Abuzz would have been entitled to exchange their shares
in Acquisition Subsidiary for 4.2% of Class C Stock.
On January 7, 2000, the Company acquired certain assets and liabilities of a
newspaper, the Worcester Telegram & Gazette, in Worcester, Mass., for
approximately $295.0 million in cash. The cost of this acquisition was funded
through the Company's commercial paper and medium-term note programs.
On February 17, 2000, the Company made a decision to offer for sale the Santa
Barbara News-Press in Santa Barbara, Calif., Daily World in Opelousas, La.,
Daily News in Palatka, Fla., Lake City Reporter in Lake City, Fla., The News-Sun
in Sebring/Avon Park, Fla., The News-Leader in Fernandina Beach, Fla., and Marco
Island Eagle in Marco Island, Fla. The net assets of these newspapers have been
included in the caption "Assets held for sale" in the Company's Consolidated
Balance Sheets as of December 26, 1999, at their carrying value. The sale is
expected to be completed by December 31, 2000. The results of the operations for
these newspapers are not material to the Company.
CAPITAL EXPENDITURES
The Company estimates that capital expenditures for 2000 will range from $120.0
million to $140.0 million, compared with $73.4 million in 1999, $81.6 million in
1998 and $160.2 million in 1997. The 1998 capital expenditures exclude $78.0
million related to the Company's Edison facility lease renegotiations (see Note
14 of the Notes to the Consolidated Financial Statements).
DEPRECIATION AND AMORTIZATION
The Company expects that depreciation and amortization expense will be $205.0
million to $210.0 million for 2000, compared with $197.5 million in 1999, $188.2
million in 1998 and $173.9 million in 1997.
YEAR 2000 DISCLOSURE
We have completed the implementation of our year 2000 remediation plan on a
timely basis, and such remediation plan as implemented addressed all mission
critical systems. We are not aware of any adverse effects of year 2000 issues on
the Company. This includes the Company's systems and operations, and vendor,
customer and service provider relationships.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998 the Financial Accounting Standard's Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"), which is effective for all
quarters of fiscal years beginning after June 15, 1999. SFAS No. 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.
In June 1999 the FASB issued SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of Financial Accounting
Standards Statement No. 133 ("SFAS No. 137"). SFAS No. 137 amended the effective
date for SFAS No. 133 from June 15, 1999, to June 15, 2000. The Company is
currently determining the effect of SFAS No. 133 and SFAS No. 137 on the
Company's Consolidated Financial Statements.
FACTORS THAT COULD AFFECT OPERATING RESULTS
This Form 10-K contains forward-looking statements. Additional written and oral
forward-looking statements may be made by the Company from time to time in SEC
filings and otherwise. The Company cautions readers that results predicted by
forward-looking statements, including, without limitation, those relating to the
Company's:
o future business prospects
o revenues
o working capital
o liquidity
o capital needs
o interest costs and
o income
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those indicated in the forward-looking statements. The
risks and uncertainties include those listed below as well as other risks and
factors identified from time to time in the Company's filings with the SEC.
F-11
ADVERTISING REVENUES
Advertising is the Company's most significant source of revenue. Competition
from other forms of media available in the Company's various markets, including
direct marketing and the Internet, affects the Company's ability to attract and
retain advertisers and to increase advertising rates. Advertising could be
negatively affected by an economic downturn in any of the Company's markets.
Advertising revenues cause the Company's quarterly consolidated results to vary
by season. Second-quarter and fourth-quarter advertising volume is higher than
first- and third-quarter volume since economic activity tends to be lower after
the holidays and in the summer. National and local economic conditions,
particularly in the New York City and Boston metropolitan regions, affect the
levels of the Company's retail, national and most particularly, classified
advertising revenue. Structural changes in the retail environment may also
depress the level of advertising revenue.
CIRCULATION REVENUES
Circulation is a significant source of revenue for the Company. Circulation
revenue and the Company's ability to achieve price increases for its print
products are affected by competition from other publications and other forms of
media available in the Company's various markets. Decreased consumer spending on
discretionary items like newspapers and magazines and the decreasing number of
newspaper readers among young people could also negatively affect circulation.
PAPER PRICES
Newsprint and magazine paper are the Company's most important raw material and
represent a significant portion of the Company's operating costs. The Company's
operating results could be adversely affected to the extent that such
historically volatile raw material prices increase materially.
LABOR RELATIONS
Advances in technology and other factors have allowed the Company to lower costs
by reducing the size of its work force. There is no assurance that the Company
will continue to be able to reduce costs in this way. A significant portion of
the Company's employees are unionized and the Company's results could be
adversely affected if labor negotiations were to restrict its ability to
maximize the efficiency of its operations. In addition, if the Company
experienced labor unrest, its ability to produce and deliver its largest
products could be impaired.
NEW PRODUCTS IN NEW MARKETS
There are substantial uncertainties associated with the Company's efforts to
develop new products and services for evolving markets. The success of these
ventures will be determined by the Company's efforts, and in some cases by those
of its partners, fellow investors and licensees. Initial timetables for the
introduction and development of new products or services may not be achieved and
price/profitability targets may not prove feasible. External factors, such as
the development of competitive alternatives and market response, may cause new
markets to move in unanticipated directions.
The Company may also consider the acquisition of specific properties or
businesses that fall outside its traditional lines of business if it deems such
properties sufficiently attractive.
PRODUCT PORTFOLIO; ACQUISITIONS
From time to time, the Company evaluates the various components of its portfolio
of products and may, as a result, buy or sell different properties. Such
acquisitions or divestitures may affect the Company's costs, revenues and
profitability.
Acquisitions involve risks, including difficulties in integrating acquired
operations, diversions of management resources, debt incurred in financing such
acquisitions and unanticipated problems and liabilities.
F-12
TELEVISION BROADCASTING
The Company's television stations are subject to continuing technological and
regulatory developments that may affect their future profitability. The advent
of digital broadcasting is one such development. The Federal Communications
Commission ("FCC") adopted rules in 1997 under which all television stations are
required to change to a new system of digital broadcasting. The direct hardware
cost of this change will be substantial and the new digital stations are
unlikely to produce significant additional revenue until consumers have
purchased a substantial number of digital television receivers or until other
sources of revenue to be derived from the digital spectrum have been developed.
Additionally, the new digital transmission systems to be used by television
stations, cable systems and direct broadcast satellites could greatly increase
the number of electronic video services with which the Company's stations
compete.
INTERNET BUSINESSES
The Company expects to make substantial investments in its Internet businesses
for the foreseeable future. These are highly risky businesses which are likely
to incur losses. The Company's Internet businesses have a limited operating
history, are dependent on advertising revenue and the continued growth and
acceptance of the Internet and subject to all risks of Internet businesses, such
as evolving regulation and technology, changes in consumer preferences and
intense competition.
----------------------------
The foregoing list of factors should not be construed as exhaustive or as any
admission regarding the adequacy of disclosure made by the Company.
The Company disclaims any intention or obligation to update or revise
forward-looking statements, whether as a result of new information, future
events or otherwise.
MARKET RISK
The Company's qualitative and quantitative market risk is principally associated
with market interest rate fluctuations related to its debt obligations and stock
market price fluctuations with respect to marketable securities (see Note 7 and
Note 15 to the Notes to the Consolidated Financial Statements). Any such market
risks are not considered significant by the Company.
F-13
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
---------------------------------------------
December 26, December 27, December 28,
(In thousands, except per share data) 1999 1998 1997
- ------------------------------------------------------------------------------------------------
REVENUES
Advertising $ 2,254,932 $ 2,073,540 $ 1,999,844
Circulation 686,478 677,703 670,258
Other 189,219 185,462 196,316
- ------------------------------------------------------------------------------------------------
Total 3,130,629 2,936,705 2,866,418
- ------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs
Raw materials 321,397 354,872 324,654
Wages and benefits 621,260 608,152 584,016
Other 436,183 418,196 381,790
- ------------------------------------------------------------------------------------------------
Total 1,378,840 1,381,220 1,290,460
Selling, general and administrative expenses 1,180,507 1,040,265 1,120,856
- ------------------------------------------------------------------------------------------------
Total 2,559,347 2,421,485 2,411,316
- ------------------------------------------------------------------------------------------------
OPERATING PROFIT 571,282 515,220 455,102
Income from joint ventures 17,900 21,014 13,990
Interest expense, net 50,718 43,333 42,115
Net gain on dispositions of assets -- 12,619 10,388
- ------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 538,464 505,520 437,365
Income taxes 228,287 218,890 175,064
- ------------------------------------------------------------------------------------------------
Income before extraordinary item 310,177 286,630 262,301
Extraordinary item, net of tax -- (7,716) --
- ------------------------------------------------------------------------------------------------
NET INCOME $ 310,177 $ 278,914 $ 262,301
- ------------------------------------------------------------------------------------------------
Average number of common shares outstanding
Basic 175,587 188,762 193,040
Diluted 179,244 192,846 197,150
- ------------------------------------------------------------------------------------------------
Basic earnings per share
Earnings before extraordinary item $ 1.77 $ 1.52 $ 1.36
Extraordinary item, net of tax -- (.04) --
- ------------------------------------------------------------------------------------------------
Net income $ 1.77 $ 1.48 $ 1.36
- ------------------------------------------------------------------------------------------------
Diluted earnings per share
Earnings before extraordinary item $ 1.73 $ 1.49 $ 1.33
Extraordinary item, net of tax -- (.04) --
- ------------------------------------------------------------------------------------------------
Net income $ 1.73 $ 1.45 $ 1.33
- ------------------------------------------------------------------------------------------------
Dividends per share $ .41 $ .37 $ .32
- ------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
F-14
CONSOLIDATED BALANCE SHEETS
December 26, December 27,
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
CURRENT ASSETS
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 63,861 $ 35,991
Accounts receivable (net of allowances: 1999 - $39,749; 1998 - $34,364) 366,754 331,933
Inventories 28,650 32,287
Deferred income taxes 53,611 40,612
Assets held for sale 37,796 --
Other current assets 64,236 71,994
- ---------------------------------------------------------------------------------------------------------
Total current assets 614,908 512,817
- ---------------------------------------------------------------------------------------------------------
INVESTMENT IN JOINT VENTURES 121,940 122,273
- ---------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Land 67,149 71,935
Buildings, building equipment and improvements 789,504 818,811
Equipment 1,307,365 1,307,869
Construction and equipment installations in progress 31,145 24,885
- ---------------------------------------------------------------------------------------------------------
Total - at cost 2,195,163 2,223,500
Less accumulated depreciation 976,767 897,304
- ---------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 1,218,396 1,326,196
- ---------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS ACQUIRED
Costs in excess of net assets acquired 1,223,944 1,204,021
Other intangible assets acquired 436,674 428,974
- ---------------------------------------------------------------------------------------------------------
Total 1,660,618 1,632,995
Less accumulated amortization 355,600 305,422
- ---------------------------------------------------------------------------------------------------------
Intangible assets acquired - net 1,305,018 1,327,573
- ---------------------------------------------------------------------------------------------------------
MISCELLANEOUS ASSETS 235,540 176,250
- ---------------------------------------------------------------------------------------------------------
Total $3,495,802 $3,465,109
- ---------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
F-15
December 26, December 27,
(In thousands, except share data) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Commercial paper outstanding $ -- $ 124,100
Accounts payable 191,706 163,783
Accrued payroll and other related liabilities 105,257 87,265
Accrued expenses 193,553 166,761
Unexpired subscriptions 80,161 81,080
Current portion of long-term debt and capital lease obligations 102,837 1,867
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 673,514 624,856
- ---------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES
Long-term debt 512,627 513,695
Capital lease obligations 85,700 84,123
Deferred income taxes 141,033 165,268
Other 634,270 545,697
- ---------------------------------------------------------------------------------------------------------------------
Total other liabilities 1,373,630 1,308,783
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 2,047,144 1,933,639
- ---------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Serial preferred stock of $1 par value - authorized 200,000 shares - none issued -- --
Common stock of $.10 par value
Class A - authorized 300,000,000 shares; issued: 1999 - 177,971,194;
1998 - 185,763,418 (including treasury shares: 1999 - 5,000,000;
1998 - 5,000,000) 17,797 18,576
Class B - convertible - authorized 847,240 shares; issued: 1999 - 847,240;
1998 - 849,602 (including treasury shares: 1999 - none and 1998 - none) 85 85
Retained earnings 1,600,743 1,677,469
Common stock held in treasury, at cost (173,137) (162,051)
- ---------------------------------------------------------------------------------------------------------------------
1,445,488 1,534,079
Accumulated other comprehensive income (loss):
Unrealized gain on marketable securities 5,753 --
Foreign currency translation adjustments (2,583) (2,609)
- ---------------------------------------------------------------------------------------------------------------------
Total accumulated other comprehensive income (loss) 3,170 (2,609)
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,448,658 1,531,470
- ---------------------------------------------------------------------------------------------------------------------
Total $ 3,495,802 $ 3,465,109
- ---------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
F-16
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
------------------------------------------------
December 26, December 27, December 28,
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 310,177 $ 278,914 $ 262,301
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 197,493 188,237 173,897
Business process/technology reengineering charge -- -- 10,100
Undistributed earnings of affiliates (4,839) (2,822) (3,494)
Net gain on dispositions -- (12,619) (10,388)
Deferred income taxes (44,632) (2,010) (26,559)
Long-term retirement benefit obligations 38,452 33,643 25,556
Other - net 13,108 (4,446) 10,913
Changes in operating assets and liabilities, net of acquisitions/dispositions
Accounts receivable - net (38,743) (646) (29,216)
Inventories 3,122 (153) 1,152
Other current assets 43,121 36,449 17,315
Accounts payable 29,263 (25,797) 7,064
Accrued payroll and accrued expenses 53,583 9,691 6,686
Unexpired subscriptions 990 (1,541) 4,359
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 601,095 496,900 449,686
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from dispositions 11,434 23,661 39,727
Additions to property, plant and equipment (73,407) (81,578) (160,168)
Other investing proceeds 8,704 14,725 10,560
Other investing payments (29,589) (12,974) (6,782)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (82,858) (56,166) (116,663)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Commercial paper (repayments) borrowings - net (124,100) 124,100 (45,500)
Long-term obligations
Increase 103,861 98,433 --
Reduction (2,358) (190,847) (3,847)
Capital shares
Issuance 27,961 7,208 9,930
Repurchase (423,715) (480,857) (162,615)
Dividends paid to stockholders (72,016) (69,600) (61,865)
Preferred stock redemption -- -- (1,753)
Other financing proceeds -- -- 344
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (490,367) (511,563) (265,306)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments 27,870 (70,829) 67,717
Cash and cash equivalents at the beginning of the year 35,991 106,820 39,103
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year $ 63,861 $ 35,991 $ 106,820
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements and Supplemental Disclosures
to Consolidated Statements of Cash Flows.
F-17
SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOW INFORMATION
Years Ended
------------------------------------------
December 26, December 27, December 28,
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------
Cash payments during the year for
- -------------------------------------------------------------------------------------
Interest (net of amount capitalized) $ 50,050 $ 49,025 $ 39,122
- -------------------------------------------------------------------------------------
Income taxes $210,951 $177,261 $169,115
- -------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING TRANSACTIONS
1. In February 1999 the Company purchased a minority interest in
TheStreet.com for $15.6 million, of which $3.6 million was in cash and
$12.0 million represents an irrevocable credit for future advertising to
be used by TheStreet.com through February 2003. Investment and deferred
revenue accounts were increased by $12.0 million accordingly. A total of
$1.7 million of advertising credits were utilized in 1999.
2. The Company renegotiated its lease agreement in 1998 for its Edison
newspaper printing facility, extending the capitalized lease commitment
for an additional 10 years. Accordingly, the capitalized lease value was
increased to $78.0 million, with a corresponding increase to $78.0 million
of the capital lease obligation (see Note 14 of the Notes to Consolidated
Financial Statements).
3. The Company acquired Abuzz Technologies, Inc. on July 22, 1999, for $5.1
million in cash and $25.0 million in the stock of a subsidiary of the
Company (see Note 2 of the Notes to Consolidated Financial Statements).
OTHER
Amounts in these Consolidated Statements of Cash Flows are presented on a
cash basis and may differ from those shown in other sections of the
financial statements.
F-18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital Stock
------------------------------------------- Additional
5 1/2 % Class A Class B Paid-in
(In thousands, except share and per share data) Preference Common Common Capital
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 30, 1996 $1,753 $22,124 $113 $651,888
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income
Foreign currency translation adjustments (net
of tax of $1,411)
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Dividends, preference - $4.125 per share
Dividends, common - $.32 per share
Issuance of shares
Retirement units - 17,190 Class A shares 202
Employee stock purchase plan -
1,598,570 Class A shares 8,335
Stock options - 2,161,926 Class A shares 532 101,304
Other stock issuances - 7,700 Class A shares (91)
Stock conversions - 7,030
Repurchase of stock - 5,932,000 Class A shares
Preferred stock redemption (1,753)
Proceeds from the sale of put options 344
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 28, 1997 -- 22,656 113 761,982
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income
Foreign currency translation adjustments (net
of tax of $926)
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Dividends, common - $.37 per share
Issuance of shares
Retirement units - 152,866 Class A shares (1,088)
Employee stock purchase plan -
1,427,273 Class A shares (3,764)
Stock options - 1,559,185 Class A shares 339 76,295
Repurchase of stock - 14,784,000 Class A shares
Treasury stock retirement - 44,477,000 shares (4,420) (28) (833,425)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 27, 1998 -- 18,576 85 --
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income
Foreign currency translation adjustments (net
of tax of $55)
Change in unrealized gains on marketable
securities (net of tax of $4,708)
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Dividends, common - $.41 per share
Issuance of shares
Retirement units - 16,407 Class A shares (615)
Employee stock purchase plan -
1,523,292 Class A shares 1 (15,261)
Stock options - 2,529,597 Class A shares 361 87,134
Stock conversions - 2,362 shares
Repurchase of stock - 11,864,000 Class A shares
Treasury stock retirement - 11,407,000 shares (1,141) (71,258)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 26, 1999 $ -- $17,797 $ 85 $ --
- ----------------------------------------------------------------------------------------------------------------------------
Common
Stock Accumulated
Held in Other
Retained Treasury, Comprehensive
(In thousands, except share and per share data) Earnings at cost Income (Loss) Total
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 30, 1996 $1,291,219 $(341,645) $ (176) $1,625,276
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 262,301 262,301
Foreign currency translation adjustments (net
of tax of $1,411) (1,334) (1,334)
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income 260,967
Dividends, preference - $4.125 per share (72) (72)
Dividends, common - $.32 per share (61,793) (61,793)
Issuance of shares
Retirement units - 17,190 Class A shares 202 404
Employee stock purchase plan -
1,598,570 Class A shares 18,730 27,065
Stock options - 2,161,926 Class A shares (77,423) 24,413
Other stock issuances - 7,700 Class A shares 91 --
Stock conversions - 7,030
Repurchase of stock - 5,932,000 Class A shares (145,554) (145,554)
Preferred stock redemption (1,753)
Proceeds from the sale of put options 344
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 28, 1997 1,491,655 (545,599) (1,510) 1,729,297
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 278,914 278,914
Foreign currency translation adjustments (net
of tax of $926) (1,099) (1,099)
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income 277,815
Dividends, common - $.37 per share (69,600) (69,600)
Issuance of shares
Retirement units - 152,866 Class A shares 1,897 809
Employee stock purchase plan -
1,427,273 Class A shares 35,803 32,039
Stock options - 1,559,185 Class A shares (61,433) 15,201
Repurchase of stock - 14,784,000 Class A shares (454,091) (454,091)
Treasury stock retirement - 44,477,000 shares (23,500) 861,373 --
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 27, 1998 1,677,469 (162,051) (2,609) 1,531,470
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 310,177 310,177
Foreign currency translation adjustments (net
of tax of $55) 26 26
Change in unrealized gains on marketable
securities (net of tax of $4,708) 5,753 5,753
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income 315,956
Dividends, common - $.41 per share (72,016) (72,016)
Issuance of shares
Retirement units - 16,407 Class A shares 532 (83)
Employee stock purchase plan -
1,523,292 Class A shares 49,101 33,841
Stock options - 2,529,597 Class A shares (37,152) 50,343
Stock conversions - 2,362 shares
Repurchase of stock - 11,864,000 Class A shares (410,853) (410,853)
Treasury stock retirement - 11,407,000 shares (314,887) 387,286 --
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 26, 1999 $1,600,743 $(173,137) $ 3,170 $1,448,658
- --------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The New York Times Company (the "Company") is engaged in diversified activities
in media. The Company's principal businesses are newspapers, magazines and
broadcasting. The Company also has equity interests in a Canadian newsprint mill
and a "supercalendered" (glossy paper used in magazines) paper mill. The
Company's major source of revenue is advertising from its newspaper business.
The newspapers generally operate in the Northeast, Southeast and California
markets.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company after
elimination of intercompany items.
FISCAL YEAR
The Company's fiscal year-end is the last Sunday in December. Fiscal years 1999,
1998 and 1997 each comprise 52 weeks.
INVENTORIES
Inventories are stated at the lower of cost or current market value. Inventory
cost is generally based on the last-in, first-out ("LIFO") method for newsprint
and magazine paper and the first-in, first-out ("FIFO") method for other
inventories.
INVESTMENTS
Investments in which the Company has at least a 20%, but not more than 50%,
interest are accounted for under the equity method. Investment interests below
20% are accounted for under the cost method.
MARKETABLE SECURITIES
The Company determines the appropriate classification of marketable securities
at the time of purchase and re-evaluates such designation at each balance sheet
date. Marketable securities have been classified as available-for-sale and are
carried at fair value, with unrealized holding gains and losses reported as a
separate component of the Consolidated Statements of Stockholders' Equity and in
the Consolidated Balance Sheets, in the caption "Accumulated other comprehensive
income (loss)".
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost; and depreciation is computed
by the straight-line method over the shorter of estimated asset service lives or
lease terms. The Company capitalizes interest costs as part of the cost of
constructing major facilities and equipment.
INTANGIBLE ASSETS ACQUIRED
Cost in excess of net assets acquired is primarily the excess of cost over the
fair market value of tangible net assets acquired. Each quarter the Company
evaluates whether there has been a permanent impairment in any of its intangible
assets, including goodwill. An impairment in value is considered to have
occurred when the undiscounted future operating cash flows generated by the
acquired businesses are not sufficient to recover the carrying values of the
intangible assets. If it is determined that an impairment in value has occurred,
the excess of the purchase price over the net assets acquired and intangible
assets will be written down to the present value of the future operating cash
flows to be generated by the acquired businesses. The excess costs that arose
from acquisitions after October 31, 1970, are being amortized by the
straight-line method mainly over 40 years. The remaining portion ($13.0
million), which arose from acquisitions before November 1, 1970, is not being
amortized since management believes there has been no decrease in value. Other
intangible assets acquired consist primarily of advertiser and subscriber
relationships and mastheads, which are being amortized over their remaining
lives, ranging from three to 40 years for various software licenses and a life
of 40 years for mastheads on various acquired properties.
SUBSCRIPTION REVENUES AND COSTS
Proceeds from subscriptions and related costs, principally agency commissions,
are deferred at the time of sale and are included in the Consolidated Statements
of Income on a pro rata basis over the terms of the subscriptions.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign companies are translated at year-end
exchange rates. Results of operations are translated at average rates of
exchange in effect during the year. The resulting translation adjustment is
included as a separate component of the Consolidated Statements of Stockholders'
Equity and in the Stockholders' Equity section of the Consolidated Balance
Sheets, in the caption "Accumulated other comprehensive income (loss)."
EARNINGS PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share (see Note
5). Basic earnings per share is calculated by dividing net earnings available to
common shares by average common shares outstanding. Diluted earnings per share
is calculated similarly, except that it includes the dilutive effect of the
assumed exercise of securities, including the effect of shares issuable under
the Company's incentive plans (see Note 12). All per share amounts included in
the footnotes are the same for basic and diluted earnings per share unless
otherwise noted.
F-20
CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid debt instruments with original
maturities of three months or less to be cash equivalents.
INVESTMENT TAX CREDITS
The Company uses the deferred method of accounting for investment tax credits.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results could
differ from these estimates.
RECLASSIFICATIONS
For comparability, certain 1998 and 1997 amounts have been reclassified to
conform with the 1999 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"), which is effective for all quarters of fiscal years beginning after June
15, 1999. SFAS No. 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 reflect any changes in the derivative's fair value
from its operating income. In June 1999 the FASB issued SFAS No. 137, Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of Statement of Financial Accounting Standards Statement No. 133 ("SFAS No.
137"). SFAS No. 137 amended the effective date for SFAS No. 133 from June 15,
1999 to June 15, 2000. The Company is currently determining the effect of SFAS
No. 133 and SFAS No. 137 on the Company's Consolidated Financial Statements.
- --------------------------------------------------------------------------------
2. ACQUISITIONS/DISPOSITIONS
ACQUISITIONS
On July 22, 1999, a subsidiary of the Company ("Acquisition Subsidiary")
acquired Abuzz Technologies, Inc. ("Abuzz"), an Internet knowledge management
concern. The principal business of Abuzz involves a software solution that
facilitates connecting people with questions to people with answers.
The purchase price of Abuzz amounted to $30.1 million and resulted in an
increase to goodwill of $23.8 million and other intangible assets of $7.7
million, all of which will be amortized over five years. The purchase price
included $5.1 million in cash and $25.0 million in the stock of Acquisition
Subsidiary. After the acquisition, the Company owned 95.8% and the former
stockholders of Abuzz and certain optionees of Acquisition Subsidiary owned 4.2%
of Acquisition Subsidiary. The operating results of Abuzz are not material to
the Company's Consolidated Financial Statements.
In the event that the Company has not issued a certain new class of stock
("Class C Stock") to the public by December 31, 2000 (see Note 18), the former
stockholders of Abuzz and certain optionees of Acquisition Subsidiary shall have
the right to require Acquisition Subsidiary to redeem their shares for an amount
no less than $25.0 million in aggregate. After the Class C Stock is issued, the
Company may be required to issue additional shares of Class C Stock, if
Acquisition Subsidiary's shares held by former shareholders of Abuzz and certain
optionees of Acquisition Subsidiary are exchangeable into Class C Stock at or
below a value of $25.0 million. The Company has reflected this $25.0 million in
"Accrued expenses" on the Company's Consolidated Balance Sheets.
Upon completion of the issuance of Class C Stock to the public, shares of
Acquisition Subsidiary stock may be exchanged for Class C Stock at an exchange
ratio intended to maintain the same percentage of ownership in the TCD group
immediately prior to the public issuance as the exchanged shares held in
Acquisition Subsidiary. If this exchange had occurred at December 26, 1999, the
former stockholders of Abuzz would have been entitled to exchange their shares
in Acquisition Subsidiary for 4.2% of Class C Stock.
See Note 18 on Subsequent Events relating to the acquisition of the Worcester
Telegram & Gazette on January 7, 2000.
DISPOSITIONS
During the second quarter of 1998 the Company recorded an $8.0 million pre-tax
gain from the satisfaction of a post-closing requirement related to the 1997
sale of assets of the Company's tennis, sailing and ski magazines (see below).
This gain increased earnings per share by $.02.
During the first quarter of 1998, the Company recorded a $4.6 million pre-tax
gain resulting from the sale of equipment. The gain increased earnings per share
by $.01.
In November 1997 the Company sold the assets of its tennis, sailing and ski
magazines and certain small properties, and exited a golf tee-time reservation
operation. These transactions resulted in a $10.4 million net pre-tax gain. This
gain increased earnings per share by $.03.
See Note 18 on Subsequent Events relating to the Company's decision to sell
certain newspaper properties.
F-21
- --------------------------------------------------------------------------------
3. BUSINESS PROCESS/TECHNOLOGY REENGINEERING CHARGE
In 1997 the Company recorded a pre-tax noncash accounting charge of $10.1
million ($5.7 million after-tax, or $.03 per share) as a result of adopting the
provisions of Emerging Issues Task Force No. 97-13, Accounting for Costs
Incurred in Connection with a Consulting Contract or an Internal Project That
Combines Business Process Reengineering and Information Technology
Transformation ("EITF No. 97-13"). This charge related to certain expenses
associated with the Company's business process/technology reengineering program.
This charge had no impact on the Company's 1997 cash flow.
- --------------------------------------------------------------------------------
4. INVESTMENT IN JOINT VENTURES
Investment in Joint Ventures consists of equity ownership interests in two paper
mills ("Forest Products Investments") and the International Herald Tribune
S.A.S. ("IHT"). The results of the IHT are not material to the operations of the
Company.
The Forest Products Investments consist of a Canadian newsprint company, Donohue
Malbaie Inc. ("Malbaie"), and a partnership operating a supercalendered paper
mill in Maine, Madison Paper Industries ("Madison") (with Malbaie, the "Paper
Mills"). The equity interest in Malbaie represents a 49% ownership interest.
The Company and Myllykoski Oy, a Finnish paper manufacturing company, are
partners through subsidiary companies in Madison. The partners' interests in the
net assets of Madison at any time will depend on their capital accounts, as
defined, at such time. Through an 80%-owned subsidiary, the Company's share of
Madison's profits and losses is 40%.
The Company received distributions from Madison of $7.2 million in 1999, $8.3
million in 1998 and $9.7 million in 1997. Loan repayments were $7.0 million in
1999, $14.7 million in 1998 and $2.5 million in 1997. No contributions were made
to Madison in 1999, 1998 or 1997.
The Company received distributions from Malbaie of $5.9 million in 1999, $9.9
million in 1998 and $5.3 million in 1997. No loans or contributions were made to
Malbaie in 1999, 1998 or 1997.
There was no current portion of debt of the Paper Mills included in current
liabilities in the table below at December 26, 1999, and $5.6 million was
outstanding at December 27, 1998. The debt of the Paper Mills is not guaranteed
by the Company.
Condensed combined balance sheets of the Paper Mills were as follows:
- --------------------------------------------------------------------------------
Condensed Combined Balance Sheets
Of Paper Mills
- --------------------------------------------------------------------------------
December 26, December 27,
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Current assets $ 66,606 $ 64,703
Less current liabilities 32,912 42,544
- --------------------------------------------------------------------------------
Working capital 33,694 22,159
Fixed assets, net 200,307 203,114
Deferred income taxes and other (53,637) (60,403)
- --------------------------------------------------------------------------------
Net assets $180,364 $164,870
- --------------------------------------------------------------------------------
During 1999, 1998 and 1997 the Company's Newspaper Group purchased newsprint and
supercalendered paper from the Paper Mills at competitive prices. Such purchases
aggregated approximately $67.6 million for 1999, $79.1 for 1998 and $74.0
million for 1997.
Condensed combined income statements of the Paper Mills were as follows:
- --------------------------------------------------------------------------------
Condensed Combined Income Statements
of Paper Mills
- --------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Net sales and
other income $237,519 $248,611 $234,290
Costs and
expenses 192,941 188,665 196,415
- --------------------------------------------------------------------------------
Income before taxes 44,578 59,946 37,875
Income tax expense 5,525 8,826 5,577
- --------------------------------------------------------------------------------
Net income $ 39,053 $ 51,120 $ 32,298
- --------------------------------------------------------------------------------
The condensed combined financial information of the Paper Mills excludes the
income tax effects attributable to Madison, since it is a partnership. Such tax
effects (see Note 8) have been included in the Company's Consolidated Financial
Statements.
F-22
- --------------------------------------------------------------------------------
5. EARNINGS PER SHARE
Basic and diluted earnings per share for the years ended December 26, 1999,
December 27, 1998, and December 28, 1997, were as follows:
- -------------------------------------------------------------------------------------------
(In thousands, except per share data) 1999 1998 1997
- -------------------------------------------------------------------------------------------
Basic earnings per share computation
Numerator
Net income $310,177 $278,914 $262,301
Less cumulative preference stock dividends -- -- 72
- -------------------------------------------------------------------------------------------
Income available to common stockholders $310,177 $278,914 $262,229
Denominator
Average number of common shares outstanding 175,587 188,762 193,040
- -------------------------------------------------------------------------------------------
Basic earnings per share $ 1.77 $ 1.48 $ 1.36
- -------------------------------------------------------------------------------------------
Diluted earnings per share computation
Numerator
Net income $310,177 $278,914 $262,301
Less cumulative preference stock dividends -- -- 72
- -------------------------------------------------------------------------------------------
Income available to common stockholders $310,177 $278,914 $262,229
Denominator
Average number of common shares outstanding 175,587 188,762 193,040
Incremental shares for assumed exercise of securities 3,657 4,084 4,110
- -------------------------------------------------------------------------------------------
Total shares 179,244 192,846 197,150
- -------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.73 $ 1.45 $ 1.33
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. INVENTORIES
Inventories as shown in the accompanying Consolidated Balance Sheets were as
follows:
- --------------------------------------------------------------------------------
December 26, December 27,
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Newsprint and magazine paper $23,666 $27,705
Work-in-process and other
inventory 4,984 4,582
- --------------------------------------------------------------------------------
Total $28,650 $32,287
- --------------------------------------------------------------------------------
Inventories are stated at the lower of cost or current market value. Cost was
determined utilizing the LIFO method for 84% of inventory in 1999 and 88% for
1998. The replacement cost of inventory was approximately $32.1 million at
December 26, 1999, and $38.1 million at December 27, 1998.
F-23
- --------------------------------------------------------------------------------
7. DEBT
Long-term debt consists of the following:
- --------------------------------------------------------------------------------
December 26, December 27,
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
5.77% Senior Notes due 2000(a) $100,000 $100,000
7.625% Notes due 2005, net of 246,116 245,599
unamortized debt costs of
$3,884 in 1999, and $4,401
in 1998, effective interest rate
7.996%(b)
8.25% Debentures due 2025 (due 69,675 69,647
2005 at option of Company),
net of unamortized debt costs of
$2,225 in 1999 and $2,253 in
1998, effective interest rate
8.553%(b)
5.0%-7.125% Medium-Term Notes 196,836 98,449
due 2003 and 2008, net of
unamortized debt costs of $1,164
in 1999 and $551 in 1998(c)
- --------------------------------------------------------------------------------
Total notes and debentures 612,627 513,695
- --------------------------------------------------------------------------------
Less current portion 100,000 --
- --------------------------------------------------------------------------------
Total long-term debt $512,627 $513,695
- --------------------------------------------------------------------------------
(a) In October 1993 the Company issued senior notes totaling $200.0 million with
interest payable semi-annually. Five-year notes totaling $100.0 million were
issued at an annual rate of 5.50%, and the remaining $100.0 million were issued
as six and one-half year notes at an annual rate of 5.77%. In October 1998
$100.0 million due on the five-year notes was paid. On April 28, 2000, $100.0
million of the five-year senior notes will be due.
(b) In March 1995 the Company completed a public offering of $400.0 million of
unsecured notes and debentures. The offering consisted of 10-year notes
aggregating $250.0 million maturing March 15, 2005, at an annual rate of 7.625%
and 30-year debentures aggregating $150.0 million maturing March 15, 2025, at an
annual rate of 8.25%. The debentures are callable after ten years. Interest is
payable semi-annually on March 15 and September 15 on both the notes and the
debentures.
In 1998, the Company made a tender offer for any and all of its $150.0 million
of outstanding publicly-held 8.25% debentures due March 15, 2025. 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 reduced interest
expense and generated a positive return on a net present value basis. Total cash
paid in connection with the tender offer was $89.3 million. The Company recorded
an extraordinary charge in 1998 of $13.7 million ($7.7 million net of tax or
$.04 per share) in connection with this debt extinguishment.
(c) On August 21, 1998, the Company filed a $300.0 million shelf registration on
Form S-3 with the Securities and Exchange Commission ("SEC") 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. As of December 26, 1999, the Company had issued a total of
$198.0 million, excluding unamortized debt costs under the medium-term note
program. The notes have maturity dates ranging from October 8, 2003, through
November 18, 2009, and pay interest semi-annually with rates ranging from 5.0%
to 7.125%.
----------------------------
Based on borrowing rates currently available for debt with similar terms and
average maturities, the fair value of long-term debt, excluding the current
portion, was $552.6 million at December 26, 1999, and $555.8 million at December
27, 1998.
In July 1999 the Company increased its borrowing capacity under a revolving
credit agreement 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.
The revolving credit agreements permit borrowings, which bear interest at the
Company's option (i) for domestic borrowings: based on a certificates of deposit
rate, a Federal Funds rate, a base rate or a quoted rate; or (ii) for Eurodollar
borrowings: based on the LIBOR rate, plus various margins based on the Company's
credit rating. The revolving credit agreements include provisions that require,
among other matters, specified levels of stockholders' equity. The amount of
stockholders' equity in excess of the required levels was $509.2 million at
December 26, 1999.
In July 1999 the Company increased its ability to issue commercial paper from
$300.0 million to $400.0 million, which is supported by the Company's revolving
credit agreements. Borrowings are in the form of unsecured notes sold at a
discount with maturities ranging up to 270 days.
At December 26, 1999, the Company had no commercial paper outstanding. At
December 27, 1998, the Company had $124.1 million in commercial paper
outstanding with an annual weighted average interest rate of 5.3% and an average
of 41 days to maturity.
Total debt as of December 26, 1999, including capital leases (see Note 14),
amounted to $701.2 million. See Note 18 on Subsequent Events relating to the
increase in debt associated with the acquisition of the Worcester Telegram &
Gazette on January 7, 2000. Total additional borrowings available under all
F-24
financing arrangements amounted to $502.0 million as of December 26, 1999.
The aggregate face amount of maturities of long-term debt over the next five
years are as follows: 2000, $100.0 million; 2001, none; 2002, none; 2003, $49.5
million; 2004, none; and $470.4 million, thereafter.
Interest expense, net as shown in the accompanying Consolidated Statements of
Income were as follows:
- --------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Interest expense $52,503 $47,100 $50,433
Capitalized interest -- (173) (5,394)
Interest income (1,785) (3,594) (2,924)
- --------------------------------------------------------------------------------
Interest expense, net $50,718 $43,333 $42,115
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. INCOME TAXES
Income tax expense for each of the years presented is determined in accordance
with SFAS No. 109, Accounting for Income Taxes.
Reconciliations between the effective tax rate on income before income taxes and
the federal statutory rate (exclusive of a favorable tax adjustment of $18.0
million in fiscal 1997 resulting from the completion of the Company's federal
income tax audits for periods through 1992 and gains on dispositions in each
period) are presented below.
The components of income tax expense as shown in the Consolidated Statements of
Income were as follows:
- --------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Current tax expense
Federal $194,535 $180,583 $146,550
State, local, foreign 78,384 40,317 55,073
- --------------------------------------------------------------------------------
Total current expense 272,919 220,900 201,623
- --------------------------------------------------------------------------------
Deferred tax (benefit)
expense
Federal (16,157) (10,529) (24,102)
State, local, foreign (28,475) 8,519 (2,457)
- --------------------------------------------------------------------------------
Total deferred benefit (44,632) (2,010) (26,559)
- --------------------------------------------------------------------------------
Income tax expense $228,287 $218,890 $175,064
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
% of % of % of
Amount Pretax Amount Pretax Amount Pretax
- ------------------------------------------------------------------------------------------------------------------------------------
Tax at federal statutory rate $188,463 35.0% $172,515 35.0% $149,442 35.0%
Increase (decrease)
State and local taxes - net 32,440 6.0 35,289 7.2 32,837 7.7
Amortization of nondeductible
intangible assets acquired 10,090 1.9 9,510 1.9 9,892 2.3
Other - net (2,706) (.5) (3,889) (.8) (3,832) (.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal 228,287 42.4% 213,425 43.3% 188,339 44.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Favorable tax adjustment -- -- (18,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Dispositions -- 5,465 4,725
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense $228,287 $218,890 $175,064
- ------------------------------------------------------------------------------------------------------------------------------------
F-25
Income tax benefits, which related to the exercise of options and the employee
stock purchase plan, reduced current taxes payable and increased additional
paid-in capital by $35.5 million in 1999, $32.0 million in 1998 and $38.6
million in 1997.
The benefits are attributable to federal and state tax operating loss
carryforwards totaling $7.2 million at December 26, 1999. Such loss
carryforwards expire in accordance with provisions of applicable tax laws and
have remaining lives ranging from one to 15 years. The principal portion of
these tax loss carryforwards are likely to expire unused. Accordingly, the
Company has valuation allowances amounting to $3.3 million as of December 26,
1999.
Tax expense in 1998 was reduced by $1.5 million ($2.3 million before federal tax
effect) due to a reduction in the valuation allowance attributable to state net
operating loss tax benefits.
The Company generated $16.0 million in investment tax credits in the state of
New York in connection with the construction of its College Point facility in
1997. The Company has fully utilized the investment tax credit for state income
tax purposes through December 26, 1999. For financial statement purposes, the
Company has selected the deferred method of accounting for investment tax
credits, and therefore will amortize the $16.0 million tax benefit over the
average useful life of the assets which ranges from 10 to 20 years.
In 1999 the Internal Revenue Service completed its examination of federal income
tax returns for 1993 through 1995. The examination resulted in a favorable tax
settlement which did not have a material effect on the Consolidated Financial
Statements. The audits for the years 1996 and 1997 are currently in process and
are not expected to have a material effect on the Consolidated Financial
Statements.
The components of the net deferred tax liabilities recognized on the respective
Consolidated Balance Sheets were as follows:
- --------------------------------------------------------------------------------
December 26, December 27,
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Deferred Tax Assets
Retirement, postemployment and
deferred compensation plans $211,131 $184,359
Accruals for other employee
benefits, compensation,
insurance and other 62,587 51,499
Accounts receivable allowances 11,803 25,278
Other 45,530 43,727
- --------------------------------------------------------------------------------
Total deferred tax assets 331,051 304,863
Valuation allowance (3,303) (3,749)
- --------------------------------------------------------------------------------
Net deferred tax assets 327,748 301,114
- --------------------------------------------------------------------------------
Deferred Tax Liabilities
Property, plant and equipment 257,502 261,176
Intangible assets 102,315 105,204
Investments in Joint Ventures 39,592 42,644
Other 15,761 16,746
- --------------------------------------------------------------------------------
Total deferred tax liabilities 415,170 425,770
- --------------------------------------------------------------------------------
Net deferred tax liability 87,422 124,656
- --------------------------------------------------------------------------------
Amounts included in
Other current assets 53,611 40,612
- --------------------------------------------------------------------------------
Deferred income tax liability $141,033 $165,268
- --------------------------------------------------------------------------------
As of December 26, 1999, "Accumulated other comprehensive income (loss)" in the
Company's Consolidated Balance Sheets and Consolidated Statements of
Stockholders' Equity was net of a deferred income tax liability of $2.6 million,
and net of a deferred income tax asset of $2.1 million as of December 27, 1998.
F-26
- --------------------------------------------------------------------------------
9. WORK FORCE REDUCTION CHARGES
In 1999 the Company recorded pre-tax charges of $15.5 million related to work
force reduction charges ("Buyouts"). This charge reduced earnings per share by
$.05 in 1999. In 1998 and 1997, the Company recorded pre-tax charges of $5.4
million and $8.5 million. These charges reduced earnings per share by $.02 in
1998 and 1997.
At December 26, 1999, $20.0 million and at December 27, 1998, $22.2 million of
these charges were unpaid. This balance will be principally paid within one
year.
- --------------------------------------------------------------------------------
10. PENSION PLANS
The Company sponsors several pension plans and makes contributions to several
others in connection with collective bargaining agreements, including a joint
Company-union plan and a number of joint industry-union plans. These plans cover
substantially all employees.
The Company-sponsored pension plans provide participating employees with
retirement benefits in accordance with benefit provision formulas, which are
based on years of service and final average or career pay and, where applicable,
employee contributions. Retirement benefits are also provided under supplemental
unfunded pension plans.
In accordance with SFAS No. 132, Employer's Disclosures about Pensions and Other
Postretirement Benefits, the components of net periodic pension cost for all
Company-sponsored pension plans were as follows:
- --------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Service cost $ 25,248 $ 22,093 $ 19,645
Interest cost 54,781 51,367 48,734
Expected return on plan assets (48,190) (44,521) (40,164)
Recognized actuarial loss 1,655 958 1,006
Amortization of prior service cost 576 433 433
Amortization of transition
obligation 609 637 637
- --------------------------------------------------------------------------------
Net periodic pension cost $ 34,679 $ 30,967 $ 30,291
- --------------------------------------------------------------------------------
Assumptions used in the actuarial computations were as follows:
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Discount rate 7.75% 6.75% 7.25%
Rate of increase in
compensation levels 5.00% 5.00% 5.50%
Expected long-term rate of
return on assets 9.00% 8.75% 8.75%
- --------------------------------------------------------------------------------
In connection with collective bargaining agreements, the Company contributes to
several other pension plans, including a joint Company-union plan and a number
of joint industry-union plans. Contributions are determined as a function of
hours worked or period earnings. Pension cost for these plans was $29.6 million
in 1999, $23.2 million in 1998, and $22.4 million in 1997.
The changes in benefit obligation and plan assets at September 30, 1999, and
1998 were as follows:
- --------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at prior
measurement date $ 813,224 $ 723,497
Service cost 25,248 22,093
Interest cost 54,781 51,367
Plan participants' contribution 86 226
Amendments 8,077 --
Actuarial (gain)/loss (114,015) 44,665
Special termination benefits -- 824
Benefits paid (32,016) (29,448)
- --------------------------------------------------------------------------------
Benefit obligation at current
measurement date 755,385 813,224
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at prior
measurement date 578,155 620,562
Actual return on plan assets 94,793 (18,939)
Employer contribution 6,126 5,754
Plan participants' contributions 86 226
Benefits paid (32,016) (29,448)
- --------------------------------------------------------------------------------
Fair value of plan assets at
current measurement date 647,144 578,155
- --------------------------------------------------------------------------------
Funded status (108,241) (235,069)
Unrecognized actuarial (gain)/loss (110,971) 50,904
Unrecognized transition obligation 393 1,009
Unrecognized prior service cost 10,008 2,515
Contribution paid after
measurement date 1,618 1,461
- --------------------------------------------------------------------------------
Net amount recognized $ (207,193) $(179,180)
- --------------------------------------------------------------------------------
As of December 26, 1999, the projected benefit obligation was $115.3 million and
the accumulated benefit obligation was $88.1 million. As of December 27, 1998,
the projected benefit obligation was $711.0 million and the accumulated benefit
obligation was $576.5 million.
The fair value of plan assets for funded plans was in excess of the accumulated
benefit obligation as of December 26, 1999. The fair value of plan assets for
funded plans with accumulated benefit obligations in excess of plan assets
amounted to $482.0 million as of December 27, 1998.
F-27
Additional termination benefits were provided to certain Globe mechanical union
employees who retired during 1998. The offer gave rise to a special charge to
earnings of $0.8 million under SFAS No. 88, Employers Accounting for Settlements
and Curtailments of Deferred Benefit Plans and for Termination Benefits.
The financial statement effects of the Company's Supplemental Employee
Retirement Plans were included in the tables above. The primary portion of the
Company's net obligation under these plans is included in "Other Liabilities -
Other" on the Company's Consolidated Balance Sheets.
The amount of cost recognized for employer sponsored defined contribution
pension plans for the year ended December 26, 1999, was $11.9 million, $12.0
million for the year ended December 27, 1998, and $9.8 million for the year
ended December 28, 1997.
- --------------------------------------------------------------------------------
11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
The Company provides health and life insurance benefits to retired employees
(and their eligible dependents) who are not covered by any collective bargaining
agreements if the employee meets specified age and service requirements.
In accordance with SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, the Company accrues the costs of such benefits
during the employee's active years of service.
Net periodic postretirement cost was as follows:
- --------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Components of net periodic benefit cost
Service cost $ 4,363 $ 4,129 $ 3,680
Interest cost 8,499 8,822 8,581
Recognized actuarial gain (1,167) (852) (1,535)
Amortization of prior service cost (2,231) (2,132) (1,659)
- --------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 9,464 $ 9,967 $ 9,067
- --------------------------------------------------------------------------------
The Company's policy is to fund the above-mentioned plans as claims and premiums
are paid.
The accumulated postretirement benefit obligation assumptions were as follows:
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Discount rate 7.75% 6.75% 7.25%
Estimated increase in
compensation level 5.00% 5.00% 5.50%
Healthcare cost trend
rate range 7.75%-7.25% 8.50%-7.50% 9.25%-8.00%
Grading down to
percent in the
year 2000 5.00% 5.00% 5.00%
- --------------------------------------------------------------------------------
A one-percentage point change in assumed health care cost trend rates would have
the following effects in 1999:
- --------------------------------------------------------------------------------
One-Percentage Point One-Percentage Point
(In thousands) Increase Decrease
- --------------------------------------------------------------------------------
Effect on total service
and interest cost for
1999 $ 2,314 $ (1,918)
Effect on accumulated
postretirement
benefit obligation as
of December 26, 1999 $19,665 $(16,624)
- --------------------------------------------------------------------------------
The accrued postretirement benefit liability and the change in benefit
obligation at September 30 in each year were as follows:
- --------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at prior
measurement date $ 140,149 $ 127,420
Service cost 4,363 4,129
Interest cost 8,499 8,822
Actuarial (gain)/loss (29,598) 9,195
Amendments (3,189) (6,050)
Benefits paid (4,597) (3,367)
- --------------------------------------------------------------------------------
Benefit obligation at current
measurement date 115,627 140,149
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at
prior measurement date -- --
Employer contribution 4,597 3,367
Benefits paid (4,597) (3,367)
- --------------------------------------------------------------------------------
Fair value of plan assets at
current measurement date -- --
- --------------------------------------------------------------------------------
Funded status (115,627) (140,149)
Unrecognized actuarial gain (44,965) (16,253)
Unrecognized prior service cost (15,674) (14,577)
Contribution paid after
measurement date 1,303 609
- --------------------------------------------------------------------------------
Net amount recognized $(174,963) $(170,370)
- --------------------------------------------------------------------------------
F-28
In connection with collective bargaining agreements, the Company contributes to
several welfare plans, including a joint Company-union plan and a number of
joint industry-union plans. Contributions are determined as a function of hours
worked or period earnings. Portions of these contributions, which cannot be
disaggregated, related to postretirement benefits for plan participants. Total
contributions to these welfare funds were $25.5 million in 1999, $27.0 million
in 1998, and $26.9 million in 1997. The primary portion of the Company's net
obligation under these plans is included in "Other Liabilities - Other" on the
Company's Consolidated Balance Sheets.
In accordance with SFAS No. 112, Employers' Accounting for Postemployment
Benefits, the Company accrues the cost of certain benefits provided to former or
inactive employees after employment but before retirement (such as workers'
compensation, disability benefits and health care continuation coverage) during
the employee's active years of service.
- --------------------------------------------------------------------------------
12. EXECUTIVE AND NON-EMPLOYEE DIRECTORS' INCENTIVE PLANS
Under the Company's 1991 Executive Stock Incentive Plan and the 1991 Executive
Cash Bonus Plan (together, the "1991 Executive Plans"), the Board of Directors
may authorize incentive compensation awards and grant stock options to key
employees of the Company. Awards may be granted in cash, restricted and
unrestricted shares of the Company's Class A Common Stock, retirement units
(stock equivalents) or such other forms as the Board of Directors deems
appropriate. Under the 1991 Executive Plans, stock options of up to 40 million
shares of Class A Common Stock may be granted and stock awards of up to two
million shares of Class A Common Stock may be made. In adopting the 1991
Executive Plans, shares previously available for issuance of retirement units
and stock options under prior plans are no longer available for future awards.
Retirement units are payable in Class A Common Stock generally over a period of
10 years following retirement.
Stock options currently outstanding were granted under the Company's Executive
Incentive Compensation Plan and the 1991 Executive Plans.
The Plans provide for granting of both incentive and non-qualified stock options
principally at an option price per share of 100% of the fair market value of the
Class A Common Stock on the date of grant. These options have a term of 10
years, and become exercisable in annual periods ranging from one year to four
years from the date of grant. Payment upon exercise of an option may be made in
cash, or with previously-acquired shares.
Under the Company's Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"), non-qualified options with 10-year terms are granted annually to each
non-employee director of the Company. The 1997 annual grant increased the number
of shares of Class A Common Stock a director may purchase from the Company from
2,000 to 4,000 shares at the fair market value of such shares at the date of
grant. Options for an aggregate of 0.5 million shares of Class A Common Stock
may be granted under the Directors' Plan.
Changes in the Company's stock options for the three-year period ended December
26, 1999, were as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------ ---------------------------- -------------------------------
Weighted Weighted Weighted
Number of Average Number of Average Number of Average
(Shares in thousands) Options Exercise Price Options Exercise Price Options Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding,
beginning of year 20,317 $23 19,585 $18 20,738 $14
Granted 5,271 47 4,505 34 4,436 32
Exercised (3,574) 15 (3,513) 13 (5,316) 12
Forfeited (311) 26 (260) 18 (273) 8
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding,
end of year 21,703 $30 20,317 $23 19,585 $18
- -----------------------------------------------------------------------------------------------------------------------------------
Options exercisable,
end of year 10,343 $22 10,045 $16 9,278 $13
- -----------------------------------------------------------------------------------------------------------------------------------
F-29
The Company's stock options outstanding at December 26, 1999, were as follows:
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) Options Outstanding Options Exercisable
------------------------------------------------------ ----------------------------------
Weighted Average
Number Remaining Weighted Remaining Number Weighted Average
Exercise Price Ranges of Options Contractual Life Exercise Price of Options Exercise Price
- ---------------------------------------------------------------------------------------------------------------------
$ 5-10 99 3 years $8 99 $ 8
$10-15 2,967 4 years 12 2,967 12
$15-20 4,998 7 years 17 4,161 21
$20-47 13,639 9 years 39 3,116 33
- ---------------------------------------------------------------------------------------------------------------------
21,703 $30 10,343 $22
- ---------------------------------------------------------------------------------------------------------------------
In 1999 Acquisition Subsidiary (see Note 2) adopted a stock option plan (the
"Subsidiary Plan") that provides for the grant of options in Acquisition
Subsidiary's common stock to employees of and service providers to Acquisition
Subsidiary and its affiliates. Acquisition Subsidiary has reserved 15.0 million
shares of its common stock for issuance under the Subsidiary Plan. With certain
exceptions, such options generally vest over four years as follows: 25% on the
first anniversary of the grant date and 12.5% every six months thereafter.
During 1999 Acquisition Subsidiary granted options for 8.2 million shares at an
exercise price range of $5.86 to $7.03 per share. Outstanding options under the
Subsidiary Plan as of December 26, 1999, were for 8.8 million shares at a
weighted average exercise price of $5.17 per share of which 0.7 million options
were exercisable (see below) at a weighted average exercise price of $0.17 per
share.
In connection with the acquisition of Abuzz in July 1999, unvested options to
acquire 0.4 million shares of Abuzz were exchanged into unvested options of
Acquisition Subsidiary's common stock with similar terms and conditions ("Abuzz
Rollover Options"). The average exercise price of these options is $0.19. These
options vest ratably over a two-year period. In addition, also in connection
with the acquisition of Abuzz, Acquisition Subsidiary exchanged vested options
in Abuzz for vested options of 0.7 million common shares in Acquisition
Subsidiary. The average exercise price of these options is $0.17 per share.
After Class C Stock is issued (see Note 18), each option for shares of
Acquisition Subsidiary's common stock will automatically be converted into an
option to purchase shares of Class C Stock at the same exchange ratio used to
convert Acquisition Subsidiary's common stock into Class C Stock. The exchange
ratio used to convert Acquisition Subsidiary's common stock into shares of Class
C stock is intended to give holders of Acquisition Subsidiary common stock the
same percentage of ownership in the TCD group immediately prior to the public
issuance, as they held in Acquisition Subsidiary.
In 1999 the Company recorded compensation expense of $2.0 million for 3.0
million Acquisition Subsidiary options granted in 1999 for the difference
between the exercise price and the fair market value at the date of grant.
Except for options under the Subsidiary Plan noted above, no compensation
expense has been recorded by the Company. The Company expects to recognize
future noncash compensation for accounting purposes as follows: 2000 - $2.3
million; 2001- $0.5 million and 2002 - $0.1 million, as the options vest over
their respective vesting periods.
The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations to accounting for its
stock option and employee stock purchase plans (see Note 13) ("Employee
Stock-Based Plans").
The weighted average fair values for stock option grants were $15.84 in 1999,
$9.35 in 1998 and $9.26 in 1997. The weighted average values for the Company's
Employee Stock Purchase Plan ("ESPP") rights were $8.62 in 1999, $6.67 in 1998
and $4.41 in 1997. The weighted average value for stock options under the
Subsidiary Plan was $2.16. The weighted average values were estimated at the
date of grant using the Black Scholes Option Valuation model and the assumptions
presented in the table below. There was no expected volatility assumed for the
Subsidiary Plan as such assumption is not required for non-public companies.
- --------------------------------------------------------------------------------------------------------------------------------
The
Subsidiary
Plan Stock Options ESPP Rights
---------- ----------------------------------- ------------------------------------
1999 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
Risk-free interest rate 6.19% 6.20% 4.34% 5.72% 4.15% 5.15% 5.45%
Expected life 4 years 5 years 5 years 5 years 1.1 years 1.1 years 1.1 years
Expected volatility -- 28.08% 24.90% 22.62% 28.08% 24.90% 22.62%
Expected dividend yield -- 0.87% 1.08% 1.05% 1.89% 1.39% 1.66%
- --------------------------------------------------------------------------------------------------------------------------------
F-30
Had compensation cost for the Employee Stock-Based Plans and the Subsidiary Plan
been determined over the vesting period based on the fair value at the grant
date for awards under those plans, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below.
The pro forma effect for 1999, 1998 and 1997 on the amounts presented below is
not representative of the pro forma effect in future years because it does not
take into account pro forma compensation expense related to grants made prior to
1995.
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
----------------------- ----------------------- ------------------------
(In thousands, except per share data) As reported Pro forma As reported Pro forma As reported Pro forma
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $310,177 $275,953 $278,914 $257,803 $262,301 $249,582
Basic earnings per share $ 1.77 $ 1.57 $ 1.48 $ 1.37 $ 1.36 $ 1.29
Diluted earnings per share $ 1.73 $ 1.54 $ 1.45 $ 1.34 $ 1.33 $ 1.27
- ---------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13. CAPITAL STOCK
The Company's 5 1/2% cumulative prior preference stock was redeemable at the
option of the Company on 30-days' notice at par plus accrued dividends and was
entitled to an annual dividend of $5.50 payable quarterly. The Company redeemed
all outstanding shares of its 5 1/2% cumulative prior preference stock on
October 1, 1997, at par value at a cost of $1.8 million.
The Company's serial preferred stock was subordinate to the 5 1/2% cumulative
prior preference stock. The Board of Directors is authorized to set the
distinguishing characteristics of each series prior to issuance, including the
granting of limited or full voting rights; however, the consideration received
must be at least $100 per share. No shares of serial preferred stock have been
issued.
The Company's Class A and Class B Common Stock are entitled to equal
participation in the event of liquidation and in dividend declarations. The
Class B Common Stock is convertible at the holders' option on a share-for-share
basis into Class A shares. As provided for in the Certificate of Incorporation,
the Class A Common Stock has limited voting rights, including the right to elect
30% of the directors of the Board, and the Class A and Class B Common Stock have
the right to vote together on reservation of Company stock for stock options and
other stock-related plans, on the ratification of the selection of independent
certified public accountants and, in certain circumstances, on acquisitions of
the stock or assets of other companies. Otherwise, except as provided by the
laws of the State of New York, all voting power is vested solely and exclusively
in the holders of the Class B Common Stock.
The Company paid $410.9 million in 1999 and $454.1 million in 1998 to repurchase
shares of Class A Common Stock. The Company repurchased 11.9 million shares in
1999 at an average cost of $34.63 per share and 14.8 million shares in 1998 at
an average cost of $30.72 per share. 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. During the period from December 26,
1999, through January 28, 2000, the Company paid $26.1 million to repurchase 0.6
million shares of Class A Common Stock at an average price of $46.04 per share.
As of January 28, 2000, the remaining amount of repurchase authorizations from
the Company's Board of Directors is $409.9 million. Under the authorizations,
purchases may be made from time to time either in the open market or through
private transactions. Purchases may be suspended from time to time or
discontinued. The effect of repurchases on diluted earnings per share was an
increase to earnings per share of $.07 in 1999 and $.05 in 1998.
Stock repurchases under the repurchase program exclude shares reacquired in
connection with taxes due from optionees on certain exercises under the
Company's stock option plans at a cost of $12.9 million in 1999 and $26.8
million in 1998. Also excluded from the repurchase program were repurchases of
common stock in connection with noncash exercises under the Company's stock
option plans at a cost of $24.3 million in 1999 and $34.7 million in 1998.
In 1999 the Company retired from treasury 11.4 million Class A shares. This
retirement resulted in a reduction of $387.3 million in treasury stock, $71.3
million in Additional Paid-In Capital and $314.9 million in Retained Earnings.
In 1998 the Company retired from treasury 44.2 million Class A shares and 0.3
million Class B shares. This retirement resulted in a reduction of $861.4
million in treasury stock, $833.4 million in Additional Paid-In Capital and
$23.5 million in Retained Earnings.
F-31
Under the 2000 Offering of the ESPP, eligible employees may purchase Class A
Common Stock through payroll deductions during the 2000 plan year at the lower
of $32.91 per share (85% of the average market price on October 1, 1999) or 85%
of the average market price on November 27, 2000. Between 38% to 53% of eligible
employees have participated in the ESPP in the last three years. Under the ESPP,
the Company issued 1.5 million shares in 1999, 1.4 million shares in 1998 and
1.6 million shares in 1997.
Shares of Class A Common Stock reserved for issuance were as follows:
- --------------------------------------------------------------------------------
December 26, December 27,
(Shares in thousands) 1999 1998
- --------------------------------------------------------------------------------
Stock Options
Outstanding 21,667 20,317
Available 6,296 11,256
- --------------------------------------------------------------------------------
Employee Stock Purchase Plan
Available 2,921 4,444
- --------------------------------------------------------------------------------
Voluntary Conversion of
Class B Common Stock
Available 847 849
- --------------------------------------------------------------------------------
Retirement Units and Other Awards
Outstanding 125 150
Available 1,933 1,933
- --------------------------------------------------------------------------------
Total
Outstanding 21,792 20,467
Available 11,997 18,482
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14. COMMITMENTS AND CONTINGENT LIABILITIES
OPERATING LEASES
Such lease commitments are primarily for office space and equipment. Certain
office space leases provide for rent adjustments relating to changes in real
estate taxes and other operating expenses.
Rental expense amounted to $32.8 million in 1999, $29.0 million in 1998 and
$30.4 million in 1997. The approximate minimum rental commitments under
noncancelable leases at December 26, 1999, were as follows: 2000, $11.2 million;
2001, $7.5 million; 2002, $6.1 million; 2003, $5.0 million; 2004, $3.4 million
and $9.5 million thereafter.
CAPITAL LEASES
In 1994 the Company recorded $5.0 million in a capital lease for 31 acres of
city-owned land in College Point, New York, on which the Company has completed
building a printing and distribution facility. The Company has the option to
purchase the property at any time prior to the end of the lease in 2019. Under
the terms of the lease agreement with the City of New York, the Company receives
various tax and energy cost reductions.
The Company also has a long-term lease for a building and site in Edison, N.J.
The lease provides the Company with certain early cancellation rights, as well
as renewal and purchase options. For financial reporting purposes, the Edison
lease has been classified as a capital lease; accordingly, an asset of $57.0
million (included in buildings, building equipment and improvements) was
recorded at December 28, 1997. In May 1998 the Company renegotiated its lease
for this property to extend its commitment for an additional 10 years through
2018. Accordingly, the Company increased its capitalized asset and corresponding
liability to $78.0 million.
Future minimum lease payments for all capital leases, and the present value of
the minimum lease payments at December 26, 1999, are as follows:
- --------------------------------------------------------------------------------
(In thousands) Amount
- --------------------------------------------------------------------------------
2000 $ 8,990
2001 8,805
2002 8,195
2003 7,309
2004 7,189
Later years 133,141
- --------------------------------------------------------------------------------
Total minimum lease payments 173,629
Less imputed interest (85,092)
- --------------------------------------------------------------------------------
Present value of net minimum lease
payments including current maturities $ 88,537
- --------------------------------------------------------------------------------
OTHER
There are various legal actions that have arisen in the ordinary course of
business and are now pending against the Company. These actions are generally
for amounts greatly in excess of the payments, if any, that may be required to
be made.
It is the opinion of management after reviewing these actions with legal counsel
to the Company that the ultimate liability that might result from these actions
would not have a material adverse effect on the consolidated financial
statements.
F-32
- --------------------------------------------------------------------------------
15. MARKETABLE SECURITIES
In 1999 the Company acquired a total of 1.6 million shares or approximately 6%
in TheStreet.com for $15.6 million, of which $3.6 million was in cash and $12.0
million represents an irrevocable credit for future advertising to be used by
TheStreet.com through February 2003. These marketable securities are classified
as available-for-sale as defined under Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities. These securities are reported at fair market value, and are
included in the caption "Miscellaneous Assets" in the Company's Consolidated
Balance Sheets and amounted to $26.1 million at December 26, 1999. An unrealized
gain of $5.8 million, net of income tax, is reported as a separate component of
the Consolidated Statements of Stockholders' Equity and in the Consolidated
Balance Sheets in the caption "Accumulated other comprehensive income (loss)."
There are no realized gains or losses on available-for-sale securities.
- --------------------------------------------------------------------------------
16. OTHER LIABILITIES
The components of the "Other Liabilities-Other" balance on the Company's
Consolidated Balance Sheets were as follows:
- --------------------------------------------------------------------------------
December 26, December 27,
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
Pension plan obligation $207,193 $179,180
Obligation for postretirement benefits
other than pensions and postemployment
benefits 174,963 170,370
Deferred compensation obligation 84,497 63,493
Other 167,617 132,654
- --------------------------------------------------------------------------------
Total $634,270 $545,697
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17. SEGMENT INFORMATION
Operating segments represent components of the Company's business that are
evaluated regularly by key management in assessing performance and resource
allocation. The Company has determined that its reportable segments consist of
its Newspaper, Broadcast and Magazine Groups. For the years presented herein,
the Newspaper Group is comprised of the following operating segments, each of
which has its own management: The New York Times, The Boston Globe, and 21 other
newspapers. The economic characteristics, products, services, production
process, customer type and distribution methods for the operating segments of
the Newspaper Group are substantially similar and have therefore been aggregated
as a reportable segment.
The Broadcast and Magazine Groups are managed separately and have different
economic characteristics from those of the Newspaper Group, and are therefore
shown as separate reportable segments.
Revenues from individual customers, revenues between business segments, and
revenues, operating profit and identifiable assets of foreign operations are not
significant.
For the years presented herein, the following are the Company's reportable
operating segments:
NEWSPAPER GROUP
The New York Times, The Boston Globe, the Company's 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 operations. See Note 18 on Subsequent Events relating to the
Internet Operations and the Company's decision to sell certain newspaper
properties.
Beginning in 2000 the Worcester Telegram & Gazette, acquired on January 7, 2000
(see Note 18), and The Globe will be presented as the New England Newspaper
Group.
BROADCAST GROUP
Eight network-affiliated television stations and two radio stations.
MAGAZINE GROUP
Three golf publications and related activities in the golf field.
F-33
The Company's Statements of Income on a segment basis were as follows:
Years Ended
--------------------------------------------------
December 26, December 27, December 28,
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
REVENUES
Newspapers $ 2,869,908 $ 2,664,396 $ 2,557,080
Broadcast 150,131 151,175 144,506
Magazines 110,590 121,134 164,832
- ------------------------------------------------------------------------------------------------------------
Total $ 3,130,629 $ 2,936,705 $ 2,866,418
- ------------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Newspapers $ 556,279 $ 477,782 $ 434,057
Broadcast 45,833 45,120 39,368
Magazines 18,038 22,110 28,332
Unallocated corporate expenses (48,868) (29,792) (46,655)
- ------------------------------------------------------------------------------------------------------------
Total 571,282 515,220 455,102
- ------------------------------------------------------------------------------------------------------------
Income from Joint Ventures 17,900 21,014 13,990
Interest expense, net 50,718 43,333 42,115
Net gain on dispositions of assets -- 12,619 10,388
- ------------------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 538,464 505,520 437,365
Income taxes 228,287 218,890 175,064
- ------------------------------------------------------------------------------------------------------------
Income before extraordinary item 310,177 286,630 262,301
Extraordinary item, net of tax - debt extinguishment -- (7,716) --
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 310,177 $ 278,914 $ 262,301
- ------------------------------------------------------------------------------------------------------------
Newspaper Group operating profit includes Buyouts of $15.4 million for 1999,
$2.5 million for 1998 and $7.5 million for 1997. Internet-related operations
included in the Newspaper Group included losses of $21.6 million in 1999, $13.0
in 1998 and $7.3 in 1997.
The Broadcast Group operating profit includes Buyouts of $0.1 million for 1999;
and $1.9 million for 1998.
Magazine Group amounts include the amortization of the income relating to a
non-compete agreement associated with the disposition of the Women's Magazines
Division. The benefit under this agreement, amounting to $40.0 million, was
recognized on a straight-line basis over four years ending in July 1998.
Amortization of this income was $5.8 million in 1998 and $10.0 million in 1997.
In 1998 the Magazine Group operating profit includes a charge of $3.0 million
for Buyouts.
Magazine Group results were affected by the sale of the assets of its tennis,
sailing and ski magazines and an exit of a golf tee-time reservation operation
in 1997 (see Note 2).
In 1998 unallocated corporate expenses included a benefit of $2.0 million from
the reversal of a Buyout accrual. Unallocated corporate expenses include a
charge for Buyouts of $1.0 million for 1997. Unallocated corporate expenses for
1997 also include a $10.1 million noncash charge related to the adoption of EITF
97-13 (see Note 3).
Revenues from individual customers, revenues between business segments, and
revenues, operating profit and identifiable assets of foreign operations are not
significant.
Advertising, circulation and other revenue, by major product of the Newspaper
Group, were as follows:
- --------------------------------------------------------------------------------
% Change
----------------
(In millions) 1999 1998 1997 99-98 98-97
- --------------------------------------------------------------------------------
The New York Times
Advertising $1,192.0 $1,058.9 $ 989.5 12.6 7.0
Circulation 452.6 440.6 426.0 2.7 3.4
Other 144.4 142.1 144.2 1.6 (1.4)
- --------------------------------------------------------------------------------
Total $1,789.0 $1,641.6 $1,559.7 9.0 5.3
- --------------------------------------------------------------------------------
The Boston Globe
Advertising $ 477.5 $ 448.2 $ 440.3 6.5 1.8
Circulation 133.7 133.4 134.5 0.2 (0.8)
Other 14.0 8.2 7.8 70.7 5.3
- --------------------------------------------------------------------------------
Total $ 625.2 $ 589.8 $ 582.6 6.0 1.2
- --------------------------------------------------------------------------------
Regional Newspapers
Advertising $ 362.7 $ 341.7 $ 323.2 6.1 5.7
Circulation 76.9 77.3 77.6 (0.5) (0.4)
Other 16.1 14.0 14.0 15.6 --
- --------------------------------------------------------------------------------
Total $ 455.7 $ 433.0 $ 414.8 5.3 4.4
- --------------------------------------------------------------------------------
Total Newspaper Group
Advertising $2,032.2 $1,848.8 $1,753.0 9.9 5.5
Circulation 663.2 651.3 638.1 1.8 2.1
Other 174.5 164.3 166.0 6.2 (1.0)
- --------------------------------------------------------------------------------
Total $2,869.9 $2,664.4 $2,557.1 7.7 4.2
- --------------------------------------------------------------------------------
F-34
The Company's segment depreciation and amortization, capital expenditures and
identifiable assets reconciled to consolidated amounts were as follows:
- ------------------------------------------------------------------------------------
Years Ended
-------------------------------------------------
December 26, December 27, December 28,
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Newspapers $ 168,656 $ 166,485 $ 160,192
Broadcast 17,369 17,662 17,919
Magazines 1,372 (4,361) (7,330)
Corporate 9,744 8,099 2,764
Investment in Joint Ventures 352 352 352
- ------------------------------------------------------------------------------------
Total $ 197,493 $ 188,237 $ 173,897
- ------------------------------------------------------------------------------------
CAPITAL EXPENDITURES(1)
Newspapers $ 49,886 $ 54,178 $ 117,346
Broadcast 10,475 4,331 7,225
Magazines 465 631 3,205
Corporate 12,581 22,438 32,392
- ------------------------------------------------------------------------------------
Total $ 73,407 $ 81,578 $ 160,168
- ------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Newspapers $ 2,614,891 $ 2,669,290 $ 2,711,180
Broadcast 377,303 387,764 409,742
Magazines 60,524 62,147 56,236
Corporate 321,144 223,635 312,971
Investment in Joint Ventures 121,940 122,273 133,054
- ------------------------------------------------------------------------------------
Total $ 3,495,802 $ 3,465,109 $ 3,623,183
- ------------------------------------------------------------------------------------
(1) Capital expenditures exclude additions to capitalized leases for the
Edison Facility in 1998 (see Note 14)
- --------------------------------------------------------------------------------
18. SUBSEQUENT EVENTS
On January 7, 2000, the Company acquired certain assets and liabilities of a
newspaper, the Worcester Telegram & Gazette, in Worcester, Mass., for
approximately $295.0 million in cash. The cost of this acquisition was funded
through the Company's commercial paper and medium-term note program. The Company
is currently in the process of determining the allocation of the purchase price.
The Worcester Telegram & Gazette had total revenues and operating profit of
$76.7 million and $16.8 million for 1999 and total assets were $243.2 million as
of December 31, 1999.
Total debt, including commercial paper and capital leases, as of January 28,
2000, increased to $931.2 million. Total additional borrowings available under
all financing arrangements decreased to $272.0 million as of January 28, 2000.
These changes from December 26, 1999, resulted primarily from the acquisition of
the Worcester Telegram & Gazette.
On January 20, 2000, the Board of Directors of the Company authorized, subject
to shareholder approval, the issuance of Class C Stock. On January 28, 2000, the
Company filed a registration statement with the SEC on Form S-3 (the "Form S-3")
related to a proposed initial public offering of Class C Stock, which is
intended to track the performance of the Company's Internet business division,
Times Company Digital (the "TCD group").
Upon completion of the issuance of Class C Stock, the holders of Class C Stock
will vote with the holders of Class A Common Stock on all matters on which the
Class A holders vote.
After shareholder approval and the completion of the proposed stock offering,
the Company intends to separate for financial reporting purposes the TCD group
and the "NYT group" (the Company excluding the TCD group except for a retained
interest in the TCD group) (See Note 19). The NYT group includes all of the
other business segments: Newspaper, Broadcast and Magazines, except for the
businesses that comprise the TCD group. The NYT group also includes a retained
interest in the TCD group which is currently 100%. This retained interest will
decline to reflect the issuance of Class C Stock to the public. The Company
currently provides financial data on its Internet operations which are included
in the Newspaper Group (the "Internet Operations"). The Internet Operations
principally include all Internet-related operations of the Company. However, the
operating results of Internet Operations are not indicative of the operating
results of TCD group's operations. The TCD group includes NYTimes.com,
NYToday.com, Boston.com, WineToday.com, GolfDigest.com and Abuzz.com. The
Internet Operations include various Internet operations of The Regionals and
exclude GolfDigest.com.
On February 17, 2000, the Company made a decision to offer for sale the Santa
Barbara News-Press in Santa Barbara, Calif., Daily World in Opelousas, La.,
Daily News in Palatka, Fla., Lake City Reporter in Lake City, Fla., The News-Sun
in Sebring/Avon Park, Fla., The News-Leader in Fernandina Beach, Fla., and Marco
Island Eagle in Marco Island, Fla. The net assets of these newspapers have been
included in the caption "Assets held for sale" in the Company's Consolidated
Balance Sheets as of December 26, 1999, at their carrying value. The sale is
expected to be completed by December 31, 2000. The results of operations for
these newspapers are not material to the Company.
F-35
- --------------------------------------------------------------------------------
19. CONSOLIDATING INFORMATION
After shareholder approval and the proposed offering discussed in Note 18, the
Company intends to separate for financial reporting purposes the TCD group and
the NYT group. Below is the consolidating financial information of the NYT group
and the TCD group. The financial information reflects the businesses of the TCD
group and the NYT group including the allocation of revenues and expenses
between the TCD group and the NYT group in accordance with the Company's
allocation policies. The NYT group presented below excludes its retained
interest in the TCD group.
The allocations are comprised as follows: a) classified advertising revenues
from the NYT group to the TCD Group for displaying classified advertising from
NYT Group publications on the TCD Group's Web sites, b) Internet license fees
charged by the NYT group to the TCD group for the use of the trademarks and
copyrights owned by the NYT group, and c) an allocation of Corporate expenses
for general and administrative services and shared processing services.
Additionally, the income tax benefit relating to the operations of the TCD
group, which could be utilized on a consolidated basis, were allocated. The
Company believes that the aforementioned allocations were made on a reasonable
basis.
CONSOLIDATING STATEMENTS OF INCOME
Year Ended December 26, 1999 Year Ended December 27, 1998
---------------------------------------------------- ---------------------------------------------------
The New The New
The NYT The TCD Elimina- York Times The NYT The TCD Elimina- York Times
(In thousands) Group Group tions Company Group Group tions Company
- ----------------------------------------------------------------------------- ---------------------------------------------------
REVENUES
External non-internet
revenues $ 3,100,118 $ -- $ -- $ 3,100,118 $ 2,919,237 $ -- $ -- $ 2,919,237
External internet
revenues 3,712 26,799 -- 30,511 3,294 14,174 -- 17,468
Inter-group license
fee revenue 5,000 -- (5,000) -- 5,000 -- (5,000) --
- ----------------------------------------------------------------------------- ---------------------------------------------------
Total 3,108,830 26,799 (5,000) 3,130,629 2,927,531 14,174 (5,000) 2,936,705
- ----------------------------------------------------------------------------- ---------------------------------------------------
COSTS AND EXPENSES
Production costs:
External expenses 1,363,515 15,325 -- 1,378,840 1,372,862 8,358 -- 1,381,220
Inter-group license
fee expense -- 5,000 (5,000) -- -- 5,000 (5,000) --
Selling, general and
administrative
expenses:
External expenses 1,146,300 34,207 -- 1,180,507 1,019,758 20,507 -- 1,040,265
Inter-group allocated
expenses (2,313) 2,313 -- -- (1,476) 1,476 -- --
- ----------------------------------------------------------------------------- ---------------------------------------------------
Total 2,507,502 56,845 (5,000) 2,559,347 2,391,144 35,341 (5,000) 2,421,485
- ----------------------------------------------------------------------------- ---------------------------------------------------
OPERATING PROFIT
(LOSS) 601,328 (30,046) -- 571,282 536,387 (21,167) -- 515,220
Income from joint
ventures 17,900 -- -- 17,900 21,014 -- -- 21,014
Interest expense, net 50,704 14 -- 50,718 43,333 -- -- 43,333
Net gain on disposition
of assets -- -- -- -- 12,619 -- -- 12,619
- ----------------------------------------------------------------------------- ---------------------------------------------------
Income (loss) before
income taxes and
extraordinary item 568,524 (30,060) -- 538,464 526,687 (21,167) -- 505,520
Income taxes (benefit) 240,972 (12,685) -- 228,287 228,733 (9,843) -- 218,890
- ----------------------------------------------------------------------------- ---------------------------------------------------
Income (loss) before
extraordinary item 327,552 (17,375) -- 310,177 297,954 (11,324) -- 286,630
Extraordinary item,
net of tax -- -- -- -- (7,716) -- -- (7,716)
- ----------------------------------------------------------------------------- ---------------------------------------------------
NET INCOME/(LOSS) $ 327,552 $ (17,375) $ -- $ 310,177 $ 290,238 $ (11,324) $ -- $ 278,914
- ----------------------------------------------------------------------------- ---------------------------------------------------
Year Ended December 28, 1997
--------------------------------------------------------
The New
The NYT The TCD Elimina- York Times
(In thousands) Group Group tions Company
- ---------------------------------------------------------------------------------
REVENUES
External non-internet
revenues $ 2,855,319 $ -- $ -- $ 2,855,319
External internet
revenues 973 10,126 -- 11,099
Inter-group license
fee revenue 5,000 -- (5,000) --
- ---------------------------------------------------------------------------------
Total 2,861,292 10,126 (5,000) 2,866,418
- ---------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs:
External expenses 1,283,614 6,846 -- 1,290,460
Inter-group license
fee expense -- 5,000 (5,000) --
Selling, general and
administrative
expenses:
External expenses 1,112,510 8,346 -- 1,120,856
Inter-group allocated
expenses (1,003) 1,003 -- --
- ---------------------------------------------------------------------------------
Total 2,395,121 21,195 (5,000) 2,411,316
- ---------------------------------------------------------------------------------
OPERATING PROFIT
(LOSS) 466,171 (11,069) -- 455,102
Income from joint
ventures 13,990 -- -- 13,990
Interest expense, net 42,115 -- -- 42,115
Net gain on disposition
of assets 10,388 -- -- 10,388
- ---------------------------------------------------------------------------------
Income (loss) before
income taxes and
extraordinary item 448,434 (11,069) -- 437,365
- ---------------------------------------------------------------------------------
Income taxes (benefit) 180,255 (5,191) -- 175,064
Income (loss) before
extraordinary item 268,179 (5,878) -- 262,301
- ---------------------------------------------------------------------------------
Extraordinary item,
net of tax -- -- -- --
- ---------------------------------------------------------------------------------
NET INCOME/(LOSS) $ 268,179 $ (5,878) $ -- $ 262,301
- ---------------------------------------------------------------------------------
F-36
CONSOLIDATING BALANCE SHEETS
December 26, 1999
-----------------------------------------------------------------
Reclassifi- The New
The NYT The TCD cations/ York Times
(In thousands) Group Group Eliminations Company
- ---------------------------------------------------------------------------------------------
ASSETS
Current assets $ 605,350 $ 9,558 $ -- $ 614,908
Investment in joint
ventures 121,940 -- -- 121,940
Funds allocated to the
TCD group 80,440 -- (80,440) --
Property plant
& equipment, net 1,208,601 9,795 -- 1,218,396
Intangible assets
acquired, net 1,276,134 28,884 -- 1,305,018
Miscellaneous assets 235,052 488 -- 235,540
- ---------------------------------------------------------------------------------------------
Total $ 3,527,517 $ 48,725 $ (80,440) $ 3,495,802
- ---------------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 660,978 $ 12,536 $ -- $ 673,514
Other liabilities 1,371,873 1,757 -- 1,373,630
Funds allocated from
the NYT group -- 80,440 (80,440) --
Common stock 17,882 -- -- 17,882
Retained earnings
(accumulated losses) 1,646,751 (46,008) -- 1,600,743
Common stock held
in treasury, at cost,
and other (169,967) -- -- (169,967)
- ---------------------------------------------------------------------------------------------
Total $ 3,527,517 $ 48,725 $ (80,440) $ 3,495,802
- ---------------------------------------------------------------------------------------------
December 27, 1998
-----------------------------------------------------------------
Reclassifi- The New
The NYT The TCD cations/ York Times
(In thousands) Group Group Eliminations Company
- ---------------------------------------------------------------------------------------------
ASSETS
Current assets $ 510,025 $ 2,792 $ -- $ 512,817
Investment in joint
ventures 122,273 -- -- 122,273
Funds allocated to the
TCD group 29,880 -- (29,880) --
Property plant
& equipment, net 1,323,523 2,673 -- 1,326,196
Intangible assets
acquired, net 1,327,573 -- -- 1,327,573
Miscellaneous assets 175,797 453 -- 176,250
- ---------------------------------------------------------------------------------------------
Total $ 3,489,071 $ 5,918 $ (29,880) $ 3,465,109
- ---------------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 620,185 $ 4,671 $ -- $ 624,856
Other liabilities 1,308,783 -- -- 1,308,783
Funds allocated from
the NYT group -- 29,880 (29,880) --
Common stock 18,661 -- -- 18,661
Retained earnings
(accumulated losses) 1,706,102 (28,633) -- 1,677,469
Common stock held
in treasury, at cost,
and other (164,660) -- -- (164,660)
- ---------------------------------------------------------------------------------------------
Total $ 3,489,071 $ 5,918 $ (29,880) $ 3,465,109
- ---------------------------------------------------------------------------------------------
F-37
CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 26, 1999 Year Ended December 27, 1998
------------------------------------------------ ------------------------------------------------
The New The New
The NYT The TCD Elimina- York Times The NYT The TCD Elimina- York Times
(In thousands) Group Group tions Company Group Group tions Company
- --------------------------------------------------------------------------------- ------------------------------------------------
CASH FLOWS
FROM OPERATING
ACTIVITIES
Net income/(loss) $ 327,552 $ (17,375) $ -- $ 310,177 $ 290,238 $ (11,324) $ -- $ 278,914
Adjustments to reconcile net
income to net cash provided
by operating activities 288,630 2,288 -- 290,918 215,269 2,717 -- 217,986
- --------------------------------------------------------------------------------- ------------------------------------------------
Net cash provided by operating
activities 616,182 (15,087) -- 601,095 505,507 (8,607) -- 496,900
- --------------------------------------------------------------------------------- ------------------------------------------------
CASH FLOWS
FROM INVESTING
ACTIVITIES
Net proceeds from dispositions 11,434 -- -- 11,434 23,661 -- -- 23,661
Additions to property, plant
and equipment (67,933) (5,474) -- (73,407) (78,782) (2,796) -- (81,578)
Other investing proceeds 8,704 -- -- 8,704 14,725 -- -- 14,725
Other investing payments (29,714) 125 -- (29,589) (12,974) -- -- (12,974)
- --------------------------------------------------------------------------------- ------------------------------------------------
Net cash used in investing
activities (77,509) (5,349) -- (82,858) (53,370) (2,796) -- (56,166)
- --------------------------------------------------------------------------------- ------------------------------------------------
CASH FLOWS
FROM FINANCING
ACTIVITIES
Commercial paper (repayment)
borrowings-net (124,100) -- -- (124,100) 124,100 -- -- 124,100
Long-term obligations,
net of payments 101,503 -- -- 101,503 (92,414) -- -- (92,414)
Capital shares repurchases, net
of issuances (395,754) -- -- (395,754) (473,649) -- -- (473,649)
Dividends paid to stockholders (72,016) -- -- (72,016) (69,600) -- -- (69,600)
Funds allocated to/from the
NYT group to the TCD
group (21,016) 21,016 -- -- (11,405) 11,405 -- --
Other financing proceeds
(payments) 437 (437) -- -- -- -- -- --
- --------------------------------------------------------------------------------- ------------------------------------------------
Net cash (used in) provided by
financing activities (510,946) 20,579 -- (490,367) (522,968) 11,405 -- (511,563)
- --------------------------------------------------------------------------------- ------------------------------------------------
Net increase (decrease) in cash
and short-term investments 27,727 143 -- 27,870 (70,831) 2 -- (70,829)
Cash and cash equivalents
at the beginning of the year 35,950 41 -- 35,991 106,781 39 -- 106,820
- --------------------------------------------------------------------------------- ------------------------------------------------
Cash and cash equivalents
at the end of the year $ 63,677 $ 184 $ -- $ 63,861 $ 35,950 $ 41 $ -- $ 35,991
- --------------------------------------------------------------------------------- ------------------------------------------------
Year Ended December 28, 1997
--------------------------------------------
The New
The NYT The TCD Elimina- York Times
(In thousands) Group Group tions Company
- -----------------------------------------------------------------------------
CASH FLOWS
FROM OPERATING
ACTIVITIES
Net income/(loss) $ 268,179 $ (5,878) $ -- $ 262,301
Adjustments to reconcile net
income to net cash provided
by operating activities 188,252 (867) -- 187,385
- -----------------------------------------------------------------------------
Net cash provided by operating
activities 456,431 (6,745) -- 449,686
- -----------------------------------------------------------------------------
CASH FLOWS
FROM INVESTING
ACTIVITIES
Net proceeds from dispositions 39,727 -- -- 39,727
Additions to property, plant
and equipment (159,238) (930) -- (160,168)
Other investing proceeds 10,560 -- -- 10,560
Other investing payments (6,782) -- -- (6,782)
- -----------------------------------------------------------------------------
Net cash used in investing
activities (115,733) (930) -- (116,663)
- -----------------------------------------------------------------------------
CASH FLOWS
FROM FINANCING
ACTIVITIES
Commercial paper (repayment)
borrowings-net (45,500) -- -- (45,500)
Long-term obligations,
net of payments (3,847) -- -- (3,847)
Capital shares repurchases, net
of issuances (152,685) -- -- (152,685)
Dividends paid to stockholders (61,865) -- -- (61,865)
Funds allocated to/from the
NYT group to the TCD
group (6,644) 6,644 -- --
Other financing proceeds
(payments) (1,409) -- -- (1,409)
- -----------------------------------------------------------------------------
Net cash (used in) provided by
financing activities (271,950) 6,644 -- (265,306)
- -----------------------------------------------------------------------------
Net increase (decrease) in cash
and short-term investments 68,748 (1,031) -- 67,717
Cash and cash equivalents
at the beginning of the year 38,033 1,070 -- 39,103
- -----------------------------------------------------------------------------
Cash and cash equivalents
at the end of the year $ 106,781 $ 39 $ -- $ 106,820
- -----------------------------------------------------------------------------
F-38
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
AND STOCKHOLDERS OF
THE NEW YORK TIMES COMPANY
We have audited the accompanying consolidated balance sheets of The New York
Times Company as of December 26, 1999 and December 27, 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 26, 1999. Our audits also
include the financial statement schedule listed in the Index at Item 14a. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The New York Times Company as of
December 26, 1999 and December 27, 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
26, 1999, in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
January 28, 2000
(February 17, 2000 as to Note 18)
MANAGEMENT'S RESPONSIBILITIES REPORT
The Company's consolidated financial statements were prepared by management, who
is responsible for their integrity and objectivity. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and, as such, include amounts based on management's best estimates
and judgments.
Management is further responsible for maintaining a system of internal
accounting control, designed to provide reasonable assurance that the Company's
assets are adequately safeguarded and that the accounting records reflect
transactions executed in accordance with management's authorization. The system
of internal control is continually reviewed for its effectiveness and is
augmented by written policies and procedures, the careful selection and training
of qualified personnel and a program of internal audit.
The consolidated financial statements were audited by Deloitte & Touche LLP,
independent auditors. Their audit was conducted in accordance with generally
accepted auditing standards and their report is shown on this page.
The Audit Committee of the Board of Directors, which is composed solely of
independent directors, meets regularly with the independent auditors, internal
auditors and management to discuss specific accounting, financial reporting and
internal control matters. Both the independent auditors and the internal
auditors have full and free access to the Audit Committee. Each year the Audit
Committee selects, subject to ratification by stockholders, the firm which is to
perform audit and other related work for the Company.
/s/ Russell T. Lewis
Russell T. Lewis
President and Chief Executive Officer
The New York Times Company
/s/ John M. O'Brien
John M. O'Brien
Senior Vice President and Chief Financial Officer
The New York Times Company
F-39
QUARTERLY INFORMATION (Unaudited)
First Quarter Second Quarter Third Quarter
--------------------------------------------------------------------------
(In millions, except per share data) 1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------
Revenues $ 739.1 $ 722.6 $ 779.4 $ 749.2 $ 729.6 $ 682.7
- -----------------------------------------------------------------------------------------------------------------
Costs and expenses
Production costs
Raw materials 87.4 88.0 82.5 89.0 67.3 83.7
Wages and benefits 150.0 150.1 160.4 158.1 150.9 145.8
Other 103.4 104.2 105.9 102.4 107.1 102.1
- -----------------------------------------------------------------------------------------------------------------
Total production costs 340.8 342.3 348.8 349.5 325.3 331.6
Selling, general and
administrative expenses 283.1 263.9 275.7 254.6 291.5 250.7
- -----------------------------------------------------------------------------------------------------------------
Operating profit 115.2 116.4 154.9 145.1 112.8 100.4
Income from Joint Ventures 4.2 4.3 3.3 3.9 4.9 6.3
Interest expense, net 11.9 10.1 12.9 10.5 12.9 10.3
Net gain on dispositions of assets -- 4.6 -- 8.0 -- --
- -----------------------------------------------------------------------------------------------------------------
Income before taxes and
extraordinary item 107.5 115.2 145.3 146.5 104.8 96.4
Income taxes 46.1 50.6 61.8 63.8 44.8 41.4
- -----------------------------------------------------------------------------------------------------------------
Income before extraordinary item 61.4 64.6 83.5 82.7 60.0 55.0
Extraordinary item, net of tax(1) -- -- -- (7.7) -- --
- -----------------------------------------------------------------------------------------------------------------
Net income $ 61.4 $ 64.6 $ 83.5 $ 75.0 $ 60.0 $ 55.0
- -----------------------------------------------------------------------------------------------------------------
Average number of common
shares outstanding
Basic 179.7 192.6 176.1 191.5 173.8 188.5
Diluted 183.1 197.2 179.3 196.1 177.7 192.3
- -----------------------------------------------------------------------------------------------------------------
Basic earnings per share
Earnings before extraordinary
item $ .34 $ .34 $ .47 $ .43 $ .35 $ .29
Extraordinary item, net of tax(1) -- -- -- (.04) -- --
- -----------------------------------------------------------------------------------------------------------------
Net income $ .34 $ .34 $ .47 $ .39 $ .35 $ .29
- -----------------------------------------------------------------------------------------------------------------
Diluted earnings per share
Earnings per share before
extraordinary item $ .34 $ .33 $ .47 $ .42 $ .34 $ .29
Extraordinary item, net of tax(1) -- -- -- (.04) -- --
- -----------------------------------------------------------------------------------------------------------------
Net income $ .34 $ .33 $ .47 $ .38 $ .34 $ .29
- -----------------------------------------------------------------------------------------------------------------
Dividends per share $ .095 $ .085 $ .105 $ .095 $ .105 $ .095
- -----------------------------------------------------------------------------------------------------------------
Fourth Quarter Year
-----------------------------------------------
(In millions, except per share data) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------
Revenues $ 882.5 $ 782.2 $ 3,130.6 $ 2,936.7
- --------------------------------------------------------------------------------------
Costs and expenses
Production costs
Raw materials 84.2 94.2 321.4 354.9
Wages and benefits 160.0 154.2 621.3 608.2
Other 119.7 109.4 436.1 418.1
- --------------------------------------------------------------------------------------
Total production costs 363.9 357.8 1,378.8 1,381.2
Selling, general and
administrative expenses 330.2 271.1 1,180.5 1,040.3
- --------------------------------------------------------------------------------------
Operating profit 188.4 153.3 571.3 515.2
Income from Joint Ventures 5.5 6.5 17.9 21.0
Interest expense, net 13.0 12.4 50.7 43.3
Net gain on dispositions of assets -- -- -- 12.6
- --------------------------------------------------------------------------------------
Income before taxes and
extraordinary item 180.9 147.4 538.5 505.5
Income taxes 75.6 63.1 228.3 218.9
- --------------------------------------------------------------------------------------
Income before extraordinary item 105.3 84.3 310.2 286.6
Extraordinary item, net of tax(1) -- -- -- (7.7)
- --------------------------------------------------------------------------------------
Net income $ 105.3 $ 84.3 $ 310.2 $ 278.9
- --------------------------------------------------------------------------------------
Average number of common
shares outstanding
Basic 172.6 182.4 175.6 188.8
Diluted 177.0 185.8 179.2 192.8
- --------------------------------------------------------------------------------------
Basic earnings per share
Earnings before extraordinary
item $ .61 $ .46 $ 1.77 $ 1.52
Extraordinary item, net of tax(1) -- -- -- (.04)
- --------------------------------------------------------------------------------------
Net income $ .61 $ .46 $ 1.77 $ 1.48
- --------------------------------------------------------------------------------------
Diluted earnings per share
Earnings per share before
extraordinary item $ .59 $ .45 $ 1.73 $ 1.49
Extraordinary item, net of tax(1) -- -- -- (.04)
- --------------------------------------------------------------------------------------
Net income $ .59 $ .45 $ 1.73 $ 1.45
- --------------------------------------------------------------------------------------
Dividends per share $ .105 $ .095 $ .41 $ .37
- --------------------------------------------------------------------------------------
All earnings per share amounts for special items below are the same for basic
and diluted earnings per share unless otherwise noted.
(1) See Note 7 of the Notes to the Consolidated Financial Statements.
F-40
The 1999 and 1998 quarters do not equal the respective year-end amounts for
earnings per share due to the weighted average number of shares outstanding used
in the computations for the respective periods. Per share amounts for the
respective quarters and years have been computed using the average number of
common shares outstanding as presented in the table on the proceeding page.
The Company's largest source of revenue is advertising, which influences the
pattern of the Company's quarterly consolidated revenues and is seasonal in
nature. Traditionally, second-quarter and fourth-quarter advertising volume is
higher than that which occurs in the first- and third-quarters. Advertising
volume tends to be lower in these quarters primarily because economic activity
is lower in the post holiday season and summer periods. 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.
Special items for 1999 and 1998 by quarter were as follows:
o Second-quarter 1999 results included a $4.0 million pre-tax charge ($.01
per share) for Buyouts.
o Third-quarter 1999 results included a $6.1 million pre-tax charge ($.02
per share) for Buyouts.
o Fourth-quarter 1999 results included a $5.3 million pre-tax charge ($0.2
per share) principally for Buyouts at The Boston Globe.
o First-quarter 1998 results included a $4.6 million pre-tax gain ($.01 per
share) from the sale of equipment.
o Second-quarter 1998 results included a $7.7 million after-tax
extraordinary item ($.04 per share) in connection with a debt
extinguishment (see Note 7). In addition, 1998 results included a $8.0
million pre-tax gain ($.02 per share) on the sale of assets of the
Company's tennis, sailing and ski magazines.
o Fourth-quarter 1998 results included a $5.4 million pre-tax charge ($.02
per share) for Buyouts.
- --------------------------------------------------------------------------------
MARKET INFORMATION
The Class A Common Stock is listed on the New York Stock Exchange. The Class B
Common Stock is unlisted and is not actively traded.
The number of security holders of record as of January 28, 2000, was as follows:
Class A Common Stock: 11,104; Class B Common Stock: 37.
The market price range of Class A Common Stock was as follows:
- --------------------------------------------------------------------------------
Quarter Ended 1999 1998
- --------------------------------------------------------------------------------
High Low High Low
March $35.94 $28.94 $34.13 $31.13
June 38.50 26.94 38.72 33.25
September 40.75 36.56 40.69 26.25
December 48.75 37.50 35.81 20.50
Year 48.75 26.94 40.69 20.50
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F-41
TEN-YEAR SUPPLEMENTAL FINANCIAL DATA
Years Ended December
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(In millions, except per share data) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
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Revenues and Income
Revenues $3,131 $ 2,937 $2,866 $2,628 $2,428 $2,397 $2,057 $1,810 $1,737 $1,808
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Operating Profit 571 515 455 173 233 211 126 88 93 129
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Income (Loss) from Joint Ventures 18 21 14 18 15 5 (53) (9) 9 8
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Income (Loss) before extraordinary item and
cumulative effect of accounting change 310 287 262 85 136 213 6 (11) 47 65
Extraordinary item (1) -- (8) -- -- -- -- -- -- -- --
Net cumulative effect of
accounting change -- -- -- -- -- -- -- (34) -- --
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Net income (loss) $ 310 $ 279 $ 262 $ 85 $ 136 $ 213 $ 6 $ (45) $ 47 $ 65
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Financial Position
Total assets $3,496 $ 3,465 $3,623 $3,540 $3,390 $3,138 $3,215 $1,995 $2,128 $2,150
Long-term debt
and capital lease obligations 598 598 535 637 638 523 460 207 213 319
Common stockholders' equity 1,449 1,531 1,729 1,623 1,610 1,544 1,599 1,000 1,073 1,056
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Basic earnings per share
Income (Loss) before extraordinary item
and cumulative effect of accounting
change $ 1.77 $ 1.52 $ 1.36 $ .43 $ .70 $ 1.02 $ .04 $ (.07) $ .30 $ .42
Extraordinary item (1) -- (.04) -- -- -- -- -- -- -- --
Net cumulative effect of accounting
change -- -- -- -- -- -- -- (.22) -- --
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Net income $ 1.77 $ 1.48 $ 1.36 $ .43 $ .70 $ 1.02 $ .04 $ (.29) $ .30 $ .42
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Diluted earnings per share
Income (Loss) before extraordinary item
and cumulative effect of accounting
change $ 1.73 $ 1.49 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.06) $ .30 $ .42
Extraordinary item (1) -- (.04) -- -- -- -- -- -- -- --
Net cumulative effect of accounting
change -- -- -- -- -- -- -- (.22) -- --
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Net income $ 1.73 $ 1.45 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.28) $ .30 $ .42
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Dividends $ .41 $ .37 $ .32 $ .29 $ .28 $ .28 $ .28 $ .28 $ .28 $ .27
Common stockholders' equity $ 8.08 $ 7.94 $ 8.77 $ 8.25 $ 8.27 $ 7.39 $ 9.42 $ 6.33 $ 6.93 $ 6.90
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Shares Outstanding
Class A and Class B Common 174 182 193 195 195 196 214 159 157 154
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Market Price (end of year) $46.88 $ 35.31 $32.03 $19.25 $14.81 $11.06 $13.13 $13.19 $11.81 $10.31
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All references to earnings per share are the same for basic and diluted unless
noted otherwise.
(1) See Note 7 of the Notes to the Consolidated Financial Statements.
F-42
All earnings per share amounts for special items below are the same for basic
and diluted earnings per share unless otherwise noted.
1999
o $15.5 million pre-tax charge ($.05 per share) principally for Buyouts at
The Globe
1998
o $4.6 million pre-tax gain ($.01 per share) from the sale of equipment
o $7.7 million after-tax extraordinary charge ($.04 per share) in connection
with the Company's repurchase of $78.1 million of its $150.0 million,
8.25% notes due in 2025
o $8.0 million pre-tax gain ($.02 per share) from the satisfaction of a
post-closing requirement related to the 1997 sale of assets of the
Company's tennis, sailing and ski magazines
o $5.4 million pre-tax charge ($.02 per share) for Buyouts
1997
o $10.4 million pre-tax gain ($.03 per share) resulting from the sale of
assets of the Company's tennis, sailing and ski magazines and certain
small properties, net of costs associated with the exit of a golf tee-time
reservation operation
o $10.1 million pre-tax noncash accounting charge ($.03 per share) related
to EITF 97-13
o $8.5 million pre-tax charge ($.02 per share) for Buyouts
o $18.0 million ($.09 per share) favorable tax adjustment
1996
o $126.8 million pre-tax noncash accounting charge ($.49 basic earnings per
share, $.48 diluted earnings per share) related to SFAS 121
o $44.1 million pre-tax charge ($.13 basic earnings per share, $.12 diluted
earnings per share) for Buyouts
o $32.9 million pre-tax gain ($.09 per share) from the sale of a building
and the realization of a gain contingency from the disposition of a paper
mill in a prior year.
1995
o $11.3 million pre-tax gain ($.03 per share) from the sales of several
small newspapers
o $10.1 million pre-tax charge ($.03 per share) for Buyouts
1994
o $200.9 million pre-tax gain ($.50 basic earnings per share, $.49 diluted
earnings per share) from the sales of the Women's Magazines Division and
U.K. golf publications, and the disposition of a minority interest in a
newsprint mill
1993
o $3.7 million pre-tax charge ($.01 per share) for rate adjustments due to a
severe snowstorm
o $4.4 million ($.02 per share) of additional tax expense for remeasurement
of deferred tax balances due to the enactment of the Revenue
Reconciliation Act of 1993
o $1.2 million ($.01 per share) of additional tax expense due to the Revenue
Reconciliation Act of 1993 which increased the federal corporate income
tax rate
o $2.6 million pre-tax gain ($.01 per share) from the sale of assets
o $35.4 million of pre-tax charges ($.12 per share) for Buyouts
o $47.0 million pre-tax noncash charge ($.28 per share) to write down a
joint venture investment
1992
o $53.8 million pre-tax loss ($.24 per share) on the closing of The Gwinnett
Daily News (GA)
o $3.1 million pre-tax gain ($.01 per share) from the sale of assets
o $28.0 million pre-tax charge ($.10 per share) for Buyouts
o $21.4 million pre-tax charge ($.08 per share) for labor disruptions,
training and start-up costs at Edison
o $34.0 million after-tax net cumulative effect of accounting changes ($.22
per share) includes the change in methods of accounting for income taxes,
postretirement benefits other than pensions and postemployment benefits
1991
o $20.0 million pre-tax charge ($.08 per share) for Buyouts at The Times
o $10.0 million reversal of a provision ($.06 per share) for income taxes
related to a favorable tax settlement
S-1
THE NEW YORK TIMES COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 26, 1999
(In thousands)
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Column A Column B Column C Column D Column E
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Additions charged Deductions for
to costs and purposes for which
Balance at expenses or accounts were set Balance at end of
Description beginning of period revenues up* period
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Year Ended December 26, 1999
Deducted from assets to which they apply
Uncollectible accounts $28,146 $43,055 $37,605 $33,596
Returns and allowances, etc 6,218 6,754 6,819 6,153
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Total $34,364 $49,809 $44,424 $39,749
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Year Ended December 27, 1998
Deducted from assets to which they apply
Uncollectible accounts $20,889 $36,221 $28,964 $28,146
Returns and allowances, etc 4,998 6,242 5,022 6,218
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Total $25,887 $42,463 $33,986 $34,364
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Year Ended December 28, 1997
Deducted from assets to which they apply
Uncollectible accounts $24,359 $22,423 $25,893 $20,889
Returns and allowances, etc 6,953 8,997 10,952 4,998
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Total $31,312 $31,420 $36,845 $25,887
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* Uncollectible account balances of $0.4 million were reclassified as assets
held for sale in 1999.