FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended September 29, 1996
----------------------------------
THE NEW YORK TIMES COMPANY
---------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 1-5837 13-1102020
---------------------------- ---------------------------- ----------------------------
(State or other jurisdiction of Commission file number (I.R.S. Employer Identification No.)
incorporation or organization)
229 WEST 43RD STREET, NEW YORK, NEW YORK
-------------------------------------------------
(Address of principal executive offices)
10036
-----
(Zip Code)
Registrant's telephone number, including area code 212-556-1234
------------
I ndicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /.
Number of shares of each class of the registrant's common stock outstanding
as of November 3, 1996 (exclusive of treasury shares):
Class A Common Stock 96,314,646 shares
Class B Common Stock 428,316 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
--------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
(Dollars and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
---------------------- --------------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
1996 1995 1996 1995
---------- ---------- ------------ ------------
(13 Weeks) (39 Weeks)
Revenues
Advertising................................................ $ 422,299 $ 385,065 $ 1,299,204 $ 1,213,888
Circulation................................................ 134,087 139,315 442,755 407,659
Other...................................................... 72,657 48,598 154,813 132,454
---------- ---------- ------------ ------------
Total.................................................. 629,043 572,978 1,896,772 1,754,001
---------- ---------- ------------ ------------
Costs and Expenses
Production Costs
Raw Materials............................................ 85,920 90,499 288,418 256,165
Wages and Benefits....................................... 140,682 135,053 413,062 400,020
Other.................................................... 107,425 97,224 308,773 291,004
---------- ---------- ------------ ------------
Total.................................................. 334,027 322,776 1,010,253 947,189
Selling, General and Administrative Expenses............... 232,149 207,595 680,509 624,061
Impairment Loss............................................ 126,763 -- 126,763 --
---------- ---------- ------------ ------------
Total.................................................. 692,939 530,371 1,817,525 1,571,250
---------- ---------- ------------ ------------
Operating (Loss) Profit...................................... (63,896) 42,607 79,247 182,751
Income from Joint Ventures................................... 6,395 3,476 13,287 8,010
Interest Expense, Net of Interest Income..................... 7,975 5,577 20,375 19,653
Gain on Dispositions, Net.................................... 25,085 11,291 32,836 11,291
---------- ---------- ------------ ------------
(Loss) Income Before Income Taxes............................ (40,391) 51,797 104,995 182,399
Income Taxes................................................. 7,293 19,591 73,153 79,578
---------- ---------- ------------ ------------
Net (Loss) Income............................................ $ (47,684) $ 32,206 $ 31,842 $ 102,821
---------- ---------- ------------ ------------
---------- ---------- ------------ ------------
Average Number of Common Shares Outstanding.................. 97,008 96,343 97,472 96,983
Per Share of Common Stock
Net (Loss) Income.......................................... $ (0.49) $ .33 $ .33 $ 1.06
Cash Dividends............................................. .14 .14 .42 .42
See notes to condensed consolidated financial statements.
2
THE NEW YORK TIMES COMPANY
--------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands)
September 29, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
- ------
Current Assets
- --------------
Cash and short-term investments................................................... $ 43,769 $ 91,442
Accounts receivable, net.......................................................... 286,023 277,974
Inventories
Newsprint and magazine paper.................................................... 20,261 36,965
Work-in-process, etc............................................................ 5,679 5,879
------------- ------------
Total inventories............................................................. 25,940 42,844
Other current assets.............................................................. 82,459 47,394
------------- ------------
Total current assets.......................................................... 438,191 459,654
------------- ------------
Other Assets
- ------------
Investment in joint ventures........................................................ 140,222 129,206
Property, plant and equipment (less accumulated depreciation of
$784,890 in 1996 and $740,864 in 1995)............................................ 1,359,967 1,276,066
Intangible assets acquired (less accumulated amortization of
$194,773 in 1996 and $207,489 in 1995)............................................ 1,476,282 1,394,844
Miscellaneous assets................................................................ 104,905 116,960
------------- ------------
TOTAL ASSETS.................................................................. $ 3,519,567 $3,376,730
------------- ------------
------------- ------------
See notes to condensed consolidated financial statements.
3
THE NEW YORK TIMES COMPANY
--------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands)
September 29, December 31,
1996 1995
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
- -------------------
Accounts and notes payable........................................................ $ 156,262 $ 156,722
Accrued payroll and other related liabilities..................................... 82,219 74,560
Accrued expenses.................................................................. 236,137 200,576
Unexpired subscriptions........................................................... 90,854 81,919
Current portion of capital lease obligations...................................... 3,397 3,139
------------- ------------
Total current liabilities..................................................... 568,869 516,916
------------- ------------
Other Liabilities
- -----------------
Long-term debt.................................................................... 743,463 589,193
Capital lease obligations......................................................... 47,591 48,680
Deferred income taxes............................................................. 130,508 168,715
Other............................................................................. 460,321 441,124
------------- ------------
Total other liabilities....................................................... 1,381,883 1,247,712
------------- ------------
Stockholders' Equity
- --------------------
Capital shares.................................................................... 12,774 12,705
Additional capital................................................................ 633,271 618,570
Earnings reinvested in the business............................................... 1,252,903 1,262,022
Common stock held in treasury, at cost............................................ (330,133) (281,195)
------------- ------------
Total stockholders' equity.................................................... 1,568,815 1,612,102
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................... $ 3,519,567 $3,376,730
------------- ------------
------------- ------------
See notes to condensed consolidated financial statements.
4
THE NEW YORK TIMES COMPANY
--------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
----------------------------
September 29, September 30,
1996 1995
------------- -------------
(39 Weeks)
OPERATING ACTIVITIES:
- ---------------------
Net cash provided by operating activities........................................... $ 267,683 $ 197,910
------------- -------------
INVESTING ACTIVITIES:
- ---------------------
Acquisitions, net of cash acquired.................................................. (249,620) (71,214)
Net proceeds from dispositions...................................................... 16,893 27,536
Purchases of marketable securities.................................................. -- (39,370)
Proceeds from sale of marketable securities......................................... -- 39,370
Additions to property, plant and equipment.......................................... (157,048) (152,504)
Other-net........................................................................... (1,690) (5,122)
------------- -------------
Net cash used in investing activities............................................... (391,465) (201,304)
------------- -------------
FINANCING ACTIVITIES:
- ---------------------
Long-term obligations
Increase.......................................................................... 153,900 400,000
Reduction......................................................................... (2,558) (274,864)
Capital Shares
Issuance.......................................................................... 582 1,302
Repurchase........................................................................ (34,877) (46,536)
Dividends paid to stockholders...................................................... (40,989) (40,760)
Other-net........................................................................... 51 259
------------- -------------
Net cash provided by financing activities........................................... 76,109 39,401
------------- -------------
(Decrease) increase in cash and short-term investments.............................. (47,673) 36,007
Cash and short-term investments at the beginning of the year........................ 91,442 41,419
------------- -------------
Cash and short-term investments at the end of the quarter........................... $ 43,769 $ 77,426
------------- -------------
------------- -------------
See notes to condensed consolidated financial statements.
5
THE NEW YORK TIMES COMPANY
--------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. GENERAL
a. The accompanying Notes to Condensed Consolidated Financial Statements
should be read in conjunction with the Notes to Consolidated Financial
Statements included in the annual report on Form 10-K for the year ended
December 31, 1995 for The New York Times Company (the "Company") filed
with the Securities and Exchange Commission. In the opinion of
management, all adjustments necessary for a fair presentation of the
results of operations for the interim periods have been included. Because
of the seasonal nature of the business, results for the interim periods
are not necessarily indicative of a full year's operations.
b. Earnings per share is computed after preference dividends and is based
on the weighted average number of Class A and Class B common shares
outstanding during the periods. The dilutive effect of the Company's
common stock equivalents (shares under option) was insignificant or
anti-dilutive, thus, fully-diluted earnings per share is not presented.
c. Certain reclassifications have been made to the 1995 Condensed
Consolidated Financial Statements to conform with classifications used at
September 29, 1996.
2. IMPAIRMENT LOSS
In September 1996, the Company recorded a non-cash accounting charge related
to an impairment of certain long-lived assets as required by the Financial
Accounting Standards Board No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of ("SFAS 121 charge"). As a
result of the Company's recently completed strategic review process, updated
analyses were prepared to determine if there was impairment of any long-lived
asset and 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 flow and resulted in the pre-tax non-cash
charge of $126,763,000 ($94,500,000 after-tax or $.97 per share).
The SFAS 121 charge has no impact on the Company's 1996 cash flow or 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,
which resulted in the acceleration of amortization expense for certain
intangible assets. In the aggregate, the net effect of the change on
depreciation and amortization expense is not anticipated to have a material
effect on earnings per share in the future.
6
3. INCOME TAXES
The variances between the effective tax rate on income before income taxes
and the federal statutory rate are as follows:
Three Months Ended Nine Months Ended
------------------------------------------ ------------------------------------------
September 29, September 30, September 29, September 30,
1996 1995 1996 1995
-------------------- -------------------- -------------------- --------------------
% of % of % of % of
(Dollars in thousands) Amount Pre-tax Amount Pre-tax Amount Pre-tax Amount Pre-tax
- --------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Pre-tax income*............ $ 61,288 100.0% $ 40,506 100.0% $ 198,923 100.0% $ 171,108 100.0%
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Tax at federal statutory
rate..................... 21,451 35.0% 14,177 35.0% 69,623 35.0% 59,888 35.0%
State and local income
taxes, net of federal
benefits................. 4,266 7.0% (2,006) (5.0%) 12,551 6.3% 7,181 4.2%
Amortization of
nondeductible intangible
assets acquired.......... 1,807 2.9% 1,485 3.7% 7,140 3.6% 8,010 4.7%
Foreign income............. (427) (0.7%) (184) (0.5%) (1,528) (0.7%) (1,404) (0.8%)
Other net.................. 667 1.1% (215) (0.4%) 2,327 1.1% (431) (0.3%)
--------- --------- --------- --------- --------- --------- --------- ---------
Income taxes at effective
tax rate*................ 27,764 45.3% 13,257 32.8% 90,113 45.3% 73,244 42.8%
SFAS 121 charge............ (32,264) -- (32,264) --
Gain on Dispositions,
Net...................... 11,793 6,334 15,304 6,334
--------- --------- --------- ---------
Income Tax Expense......... $ 7,293 $ 19,591 $ 73,153 $ 79,578
--------- --------- --------- ---------
--------- --------- --------- ---------
- --------------------------
* Exclusive of the 1996 SFAS 121 charge and the Gain on Dispositions, Net in
1996 and 1995.
The variance between the effective tax rate on the SFAS 121 charge and the
Gain on Dispositions, Net and the federal statuory rate is primarily due to the
nondeductibility of certain assets and state and local taxes included in the tax
calculation.
4. ACQUISITIONS/DISPOSITIONS
a. Acquisitions
---------------
In July 1996, the Company acquired KFOR-TV in Oklahoma City, Oklahoma
and WHO-TV in Des Moines, Iowa ("New Television Stations"). The acquisition
was accounted for as a purchase. Accordingly, the operating results have
been included in the consolidated financial statements from the acquisition
date. The aggregate cost of the acquisition was approximately $234,075,000,
of which approximately $232,925,000 was paid in cash with the balance
representing accrued liabilities. The purchases resulted in increases in
intangible assets of approximately $193,272,000 (consisting primarily of
network affiliation agreements, FCC licenses and other intangible assets);
property plant and equipment of $33,532,000 and other assets of $9,468,000.
Net liabilities assumed as a result of the transaction totaled approximately
$2,197,000.
In June 1996, the Company acquired a newspaper distribution business
("Newspaper Distribution Business") that distributes The Times and other
newspapers and periodicals throughout Long Island, Westchester and Fairfield
counties in the New York City metropolitan area. The acquisition was
accounted for as a purchase. Accordingly, the operating results have been
included in the consolidated
7
financial statements from the acquisition date. The aggregate cost of the
acquisition was $30,673,000, of which $16,695,000 was paid in cash,
$9,915,000 in notes and accounts receivable which were forgiven and the
remainder representing short-term notes and assumed liabilities. The
purchase resulted in increases of intangible assets of approximately
$27,644,000 (consisting primarily of a customer list) and accounts
receivable and equipment of $3,029,000.
In June 1995, the Company acquired WTKR-TV in Norfolk, Virginia. The
acquisition was accounted for as a purchase. Accordingly, the operating
results have been included in the consolidated financial statements from the
acquisition date. The aggregate net cost of the acquisition was $71,301,000,
which was paid in cash. The purchase resulted in increases in intangible
assets of approximately $61,343,000 (which consist of a network affiliation
agreement, FCC licenses and other intangible assets); property, plant and
equipment of $11,189,000, and other assets of $445,000. Net liabilities
assumed as a result of the transaction totaled approximately $1,676,000.
b. Dispositions
---------------
In September 1996, the Company recognized a gain contingency from the
disposition of a paper mill in a prior year. This resulted in a pre-tax gain
of approximately $25,085,000 ($.14 per share).
In June 1996, the Company sold its building at 110 Fifth Avenue, New
York, New York. The sale resulted in a pre-tax gain of approximately
$7,751,000 ($.04 per share).
In the third quarter of 1995, the Company completed the sales of six
small regional newspapers. The sales resulted in a net pre-tax gain of
approximately $11,291,000 ($4,957,000 after taxes, or $.05 per share). In
addition, the Company sold a small regional newspaper in the second quarter
of 1995. The sale did not have a material effect on the Company's
consolidated financial statements.
Had the acquisitions and dispositions occurred at the beginning of each
period presented, the pro forma impact on the results of operations for each
period presented would not have been material. The third quarter and nine months
of 1996 include the results of the New Television Stations, the Newspaper
Distribution Business and WTKR-TV. The third quarter and nine months of 1996 do
not include any operations from the small regional newspapers sold in 1995.
5. DEBT
In July 1996, the Company entered into $100,000,000 and $200,000,000
revolving credit and term loan agreements with a group of banks ("New
Agreements"). The New Agreements replace existing revolving credit and term loan
agreements aggregating $170,000,000. The New Agreements expire in July 1997 and
July 2001, respectively, at which time any outstanding borrowings would be
payable. At the Company's discretion, these facilities may be converted into
term loans at any time. The $100,000,000 agreement provides for an annual
facility fee of 0.0475%. The $200,000,000 agreement provides for an annual
facility fee of 0.0675% based on the Company's current credit rating.
The agreements 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 New Agreements include provisions which require, among other
matters, minimum specified levels of stockholders' equity. At September 29,
1996, approximately $863,000,000 of stockholders' equity was unrestricted under
the new agreement.
In July 1996, the Company increased its commercial paper facility to
$300,000,000 from $200,000,000. At September 29, 1996, the Company had
approximately $153,900,000 in outstanding commercial paper with maturities
ranging up to 71 days at a weighted average interest rate of approximately 5.4%.
The September 29, 1996 amount is included in long-term debt since the Company
has the intention and ability, supported by the Company's New Agreements, to
refinance these obligations for at least one year.
8
The New Agreements and commercial paper facility will be used for
acquisitions and general corporate purposes. In July 1996, the Company utilized
approximately $143,000,000 of the commercial paper facility to finance its
acquisition of the New Television Stations.
6. STOCK REPURCHASE PROGRAM
During the first nine months of 1996, the Company spent approximately
$34,900,000 to repurchase approximately 1,150,000 shares of Class A Common Stock
at an average price of $30.33 under the February 1995 authorization of
$50,000,000 and the May 1996 authorization of $32,000,000. Subsequent to
September 29, 1996, the Company spent approximately $3,100,000 to repurchase
approximately 86,500 shares of Class A Common Stock at an average price of
$35.56. To date, approximately $12,000,000 remain from the May 1996
authorization.
7. EQUITY PUT OPTIONS
In addition to the Company's stock repurchase program (see Note 6), the
Company sold put options in two private placements that entitle the holder, upon
exercise, to sell one share of Class A Common Stock to the Company at a
specified price. At September 29, 1996, approximately $1,200,000 was included in
other liabilities on the accompanying Condensed Consolidated Balance Sheets,
which represents the amount that the Company would be obligated to pay if all
the options were exercised. The proceeds from the sale of put options are
accounted for as additional paid-in capital. All put options that were
outstanding at September 29, 1996 expired in October 1996.
8. STAFF REDUCTIONS
In the nine months ended September 1996, the Company recorded approximately
$12,600,000, or $.07 per share, of pre-tax charges relating to additional staff
reductions primarily at The New York Times ("The Times") and corporate
headquarters. In the year ended 1995, the Company recorded pre-tax charges of
approximately $10,100,000, or $.06 per share, for workforce reductions at The
Times, The Boston Globe and corporate headquarters. In 1993, the Company
recorded pre-tax charges of $35,400,000, or $.23 per share, for severance and
related costs for staff reductions at The Times.
At September 29, 1996 and December 31, 1995, approximately $18,014,000 and
$17,472,000, respectively, were included in accrued expenses on the accompanying
Condensed Consolidated Balance Sheets, which represent the unpaid balance of
these pre-tax charges. The remaining cash outflows associated with these charges
are expected to occur over the next three years due to the timing of certain
union pension and welfare fund contributions.
9
Item 2. Management's Discussion and Analysis
- --------------------------------------------
Advertising and circulation revenues accounted for approximately 68% and 23%,
respectively, of the Company's revenues in the first nine months of 1996.
Advertising revenues influence the pattern of the Company's consolidated
revenues because they are seasonal in nature. Traditionally, second-quarter and
fourth-quarter advertising volume is higher than that which occurs in the first
and third quarters. Advertising volume tends to be less in these quarters
because economic activity is lower in the post-holiday season and the summer
period. Quarterly trends are also affected by the overall economy and economic
conditions that may exist in specific markets served by each of the Company's
business segments.
The cost of raw materials for the Company and the entire publishing industry
has been adversely affected by the significant increases in newsprint and
magazine paper prices throughout 1995 and into 1996. However, paper prices have
begun to decline and prices in the 3rd quarter of 1996 were lower than those in
1995. The lower prices are expected to continue through the end of 1996. The
Company currently expects that in the fourth quarter of 1996 these lower prices
will reduce the cost of raw materials in the Newspaper and Magazine Groups and
will result in slightly lower Income from Joint Ventures.
Beginning with the 1996 first quarter, equity ownership interests in
investments of between 20% and 50% held by the Company are reported on a pre-tax
basis and are included in the line "Income from Joint Ventures" in the Condensed
Consolidated Statements of Operations. These equity ownership interests include
investments in two paper mills, the International Herald Tribune S.A.S. ("IHT")
and a new venture. The 1995 amounts have been reclassified to conform with this
presentation.
The 1996 third-quarter and nine-month results were affected by the following
special factors:
- $126.8 million pre-tax non-cash accounting charge ($.97 per share for the
quarter and nine months) related to the measurement for impairment of
long-lived assets as required by Financial Accounting Standards Board No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of ("SFAS 121 charge").
- $25.1 million pre-tax gain ($.14 per share for the quarter and nine
months) resulting from the recognition of a gain contingency from the
disposition of a paper mill in a prior year.
- $7.0 million pre-tax charge for the quarter ($.04 per share) and $12.6
million pre-tax charge for the nine months ($.07 per share) for severance
and related costs resulting from work force reductions ("buyouts").
- $7.8 million pre-tax gain ($.04 per share for the nine months) from the
sale of the 110 Fifth Avenue building.
The 1995 third-quarter and nine-month results were affected by the following
special factor:
- $11.3 million pre-tax gain ($.05 per share for the quarter and nine
months) resulting from a sale of six small regional newspapers.
It is likely that the Company will continue to have severance and related
costs due to workforce reductions in 1996 and subsequent years, as the Company
responds to competitive conditions and changes in technology by reducing its
cost structure and streamlining its operations.
RESULTS OF OPERATIONS
- ---------------------
The 1996 third-quarter net loss was $47.7 million, or $.49 per share, compared
with net income of $32.2 million, or $.33 per share, in 1995. For the first nine
months of 1996, net income was $31.8 million, or $.33 per share compared, with
$102.8 million, or $1.06 per share, in 1995. Exclusive of the special factors
described above, 1996 third-quarter and nine-month net income would have been
$37.4 million, or $.38 per share, and $115.7 million, or $1.19 per share,
compared to 1995 third-quarter and nine-month net income, which would have been
$27.2 million, or $.28 per share, and $97.8 million, or $1.01 per share,
respectively. The increase in 1996 net income (exclusive of special factors) of
37.3% for the quarter and 18.3% for the nine months is principally due to
improved operations in the Newspaper and Broadcast Groups and higher earnings
from paper mills in which the Company has investments.
10
Revenues for the third quarter of 1996 were $629.0 million compared with
$573.0 million in the 1995 quarter, an increase of 9.8%. Revenues for the first
nine months of 1996 were $1.90 billion, an increase of 8.1% over the first
nine-month revenues of $1.75 billion in 1995. On a comparable basis, adjusted
for acquisitions and dispositions of certain properties, 1996 third-quarter
revenues increased by approximately 8.5% over 1995 and nine-month revenues
increased by approximately 7.8% over 1995.
Production costs and expenses for the third quarter of 1996 increased to
$334.0 million in 1996 from $322.8 million in 1995. The increase was due to
higher wage and benefit expenses, offset in part by lower newsprint and magazine
paper prices. Production costs and expenses for the first nine months of 1996
were $1.01 billion compared with $947.2 million in 1995. The increase was due to
higher newsprint and magazine paper prices in the first half of the year, higher
wages and benefits, and increased depreciation expenses associated with new
equipment.
Selling, general and administrative expenses for the third quarter and nine
months of 1996 were $232.1 million and $680.5 million compared with $207.6
million and $624.1 million in the 1995 comparable periods. The increases were
primarily due to buyout charges, increased salary and benefit expenses, and
increased amortization costs associated with acquisitions.
In September 1996, the Company recorded the SFAS 121 charge of $126.8
million (See Note 2 of the Notes To Condensed Financial Statements).
Operating profit before special factors, rose to $69.9 million for the third
quarter of 1996 from the operating profit of $42.6 million in 1995 and rose to
$218.6 million for the first nine months of 1996 from $182.8 million in 1995.
The improvement in operating profit in the Newspaper and Broadcast Groups was
partially offset by incremental corporate expenses associated with the Company's
reengineering program and a decrease in operating profit at the Magazine Group.
Income from Joint Ventures increased to $6.4 million for the third quarter
of 1996 from $3.5 million in 1995 and increased to $13.3 million in the first
nine months of 1996 from $8.0 million in 1995. The increases were primarily a
result of higher selling prices for paper at the mills in which the Company has
investments offset by losses incurred from a new venture.
The 1996 third-quarter earnings, excluding the SFAS 121 charge and Gains on
Dispositions, Net and before interest, income taxes, depreciation and
amortization ("EBITDA") rose to $108.3 million from $80.6 million in the 1995
quarter; EBITDA for the first nine months of 1996 rose to $330.2 million from
$292.6 million in the comparable 1995 period. Depreciation and amortization
expense was $39.0 million in the third quarter of 1996 compared with $34.5
million in 1995 and $110.9 million for the first nine months of 1996 compared
with $101.9 million in 1995.
Interest expense, net of interest income, increased to $8.0 million and
$20.4 million for the 1996 third quarter and nine months, respectively, from
$5.6 million and $19.7 million in the comparable 1995 periods. The increase was
due principally to the financing cost associated with the acquisition of the New
Television Stations in July 1996.
Gain on Dispositions, Net increased to $25.1 million for the third quarter
of 1996 from $11.3 million in 1995 and increased to $32.8 million in the first
nine months of 1996 from $11.3 million in 1995. The third quarter and nine
months include a $25.1 million gain from the recognition of a gain contingency
and a $7.8 million gain from the sale of a building (see special factors
described above). The 1995 third quarter and nine months included a $11.3
million gain resulting from a sale of six small newspapers (see special factors
described above).
The Company utilized an effective tax rate, exclusive of the taxes related
to the special factors, of 45.3% for the quarter and first nine months of 1996,
compared with an effective tax rate of 32.7% and 42.8% in the comparable 1995
periods. The variations in the rates for both periods primarily related to a
favorable state tax ruling in the third quarter of 1995.
11
SEGMENT INFORMATION
- -------------------
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 29, September 30, September 29, September 30,
(Dollars in thousands) 1996 1995 1996 1995
- ----------------------------------------------------- ------------- ------------- ------------- -------------
REVENUES
Newspapers........................................... $ 557,208 $ 507,334 $ 1,694,723 $ 1,566,569
Magazines............................................ 40,217 43,430 122,636 127,261
Broadcasting......................................... 31,618 22,214 79,413 60,171
------------- ------------- ------------- -------------
Total............................................ $ 629,043 $ 572,978 $ 1,896,772 $ 1,754,001
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
OPERATING (LOSS) PROFIT
Newspapers........................................... $ (61,281) $ 36,085 $ 82,237 $ 158,458
Magazines............................................ 6,287 7,466 19,821 28,589
Broadcasting......................................... 7,331 4,397 18,703 13,369
Unallocated Corporate Expenses....................... (16,233) (5,341) (41,514) (17,665)
------------- ------------- ------------- -------------
Total............................................ $ (63,896) $ 42,607 $ 79,247 $ 182,751
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
DEPRECIATION AND AMORTIZATION
Newspapers........................................... $ 34,780 $ 32,633 $ 102,901 $ 98,835
Magazines............................................ (1,929) (2,113) (5,518) (5,973)
Broadcasting......................................... 5,447 3,503 12,021 7,859
Corporate............................................ 651 421 1,252 857
Joint Ventures....................................... 96 95 288 285
------------- ------------- ------------- -------------
Total............................................ $ 39,045 $ 34,539 $ 110,944 $ 101,863
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
12
A discussion of the operating results of the Company's segments follows:
NEWSPAPER GROUP: The Newspaper Group consists of The New York Times ("The
Times"), The Boston Globe ("The Globe"), 21 Regional Newspapers, newspaper
wholesalers, and Information Services (which includes a news service, a features
syndicate, TimesFax, licensing operations of The Times databases and microfilm).
The New Ventures category consists of new projects developed in electronic media
by The Times and The Globe as well as various new media investments such as
Video News International.
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 29, September 30, September 29, September 30,
(Dollars in thousands) 1996 1995 1996 1995
- ----------------------------------------------------- ------------- ------------- ------------- -------------
REVENUES
Newspapers........................................... $ 555,471 $ 506,944 $ 1,689,187 $ 1,566,088
New Ventures......................................... 1,737 390 5,536 481
------------- ------------- ------------- -------------
Total Revenues....................................... $ 557,208 $ 507,334 $ 1,694,723 $ 1,566,569
------------- ------------- ------------- -------------
EBITDA
Newspapers........................................... $ 102,191 $ 71,963 $ 317,654 $ 261,444
New Ventures......................................... (3,000) (3,245) (6,824) (4,151)
------------- ------------- ------------- -------------
Total EBITDA......................................... $ 99,191 $ 68,718 $ 310,830 $ 257,293
------------- ------------- ------------- -------------
OPERATING (LOSS) PROFIT
Newspapers........................................... $ (54,895) $ 39,457 $ 93,026 $ 162,759
New Ventures......................................... (6,386) (3,372) (10,789) (4,301)
------------- ------------- ------------- -------------
Total Operating Profit............................... $ (61,281) $ 36,085 $ 82,237 $ 158,458
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The Group's third-quarter 1996 operating profit, excluding buyouts and the
SFAS 121 charge, rose to $62.7 million from $36.1 million in the 1995 third
quarter on revenues of $557.2 million and $507.3 million respectively. Operating
profit for the first nine months of 1996, excluding buyouts and the SFAS 121
charge, rose to $211.5 million from $158.5 million in 1995 on revenues of $1.69
billion and $1.57 billion respectively. The increase in the Group's revenues for
both the quarter and nine months was due primarily to higher advertising and
circulation revenues as a result of higher rates offset by softness in
advertising and circulation volume. The improvement in operating profit for the
third quarter included the favorable effect of a 4% decrease in the Company's
average cost of newsprint over the 1995 third quarter. Operating profit for the
nine months improved despite a 20% increase in the Company's average cost of
newsprint over the comparable 1995 period.
13
Average circulation for the three and nine months, 1996 on a comparable
basis were as follows:
Three Months Ended September 29, 1996
------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
- ---------------------------------------------------------------------- ----------- ----------- --------- -----------
AVERAGE CIRCULATION
The New York Times.................................................... 1,050.5 (1.1%) 1,635.7 (0.7%)
The Boston Globe...................................................... 472.0 (5.4%) 767.5 (4.0%)
Regional Newspapers................................................... 696.8 (2.9%) 756.8 (1.4%)
Nine Months Ended September 29, 1996
------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
- ---------------------------------------------------------------------- ----------- ----------- --------- -----------
AVERAGE CIRCULATION
The New York Times.................................................... 1,096.2 (1.0%) 1690.8 (0.7%)
The Boston Globe...................................................... 472.7 (5.5%) 766.1 (3.2%)
Regional Newspapers................................................... 729.7 (3.8%) 788.3 (2.1%)
The average circulation decline is partly attributable to the increase in
newsstand and home delivery prices and a decrease in distribution to selected
outlying areas.
14
Advertising volume on a comparable basis for the quarter and nine months was
as follows:
Three Months Ended Nine Months Ended
(Inches in thousands) September 29, September 29,
- --------------------------------------------------------------------- ---------------------- ----------------------
1996 % Change 1996 % Change
--------- ----------- --------- -----------
ADVERTISING VOLUME (EXCLUDING PREPRINTS)
The New York Times................................................... 848.2 (2.4)% 2,705.8 (2.1)%
The Boston Globe..................................................... 698.5 (0.4)% 2,131.9 (0.6)%
Regional Newspapers.................................................. 3,711.0 (0.1)% 11,382.4 (0.4)%
Advertising volume at The Times for the third quarter of 1996 decreased 2.4%
from the 1995 third quarter. The retail and zoned categories showed decreases of
5.3% and 9.0%, respectively, while national and classified showed increases of
2.9% and 0.8%. For the 1996 nine months, advertising volume decreased 2.1%. All
categories, except national, experienced declines, with retail being the most
significant with a 7.9% decrease from the 1995 nine months.
At The Globe, advertising volume for the 1996 third quarter decreased 0.4%
over the 1995 third quarter. The decrease was primarily attributable to lower
volume in the retail and national categories of 9.1% and 3.5% respectively. For
the 1996 nine months, advertising volume decreased 0.6% as a result of decreases
in the retail, national and zoned categories of 7.3%, 5.2%, and 0.3%,
respectively, offset by increased advertising in the classified category of
5.1%. Preprint distribution was down 3.5% for the quarter and 6.9% for the nine
months from 1995.
Advertising volume at the Regional Newspapers decreased 0.1% and 0.4% for
the third-quarter and nine-month periods from the 1995 comparable periods
respectively. The decreases were a result of lower volume in the retail and
national advertising categories, offset by an increase in the legal and
classified categories over 1995. Preprint distribution increased 2.0% and 1.1%
for the third-quarter and nine-month periods over 1995 respectively.
MAGAZINE GROUP: The Magazine Group is comprised of a number of
publications, New Ventures such as computerized systems for golf tee-time
reservations and on-line magazine services, and related activities in the
sports/leisure fields.
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 29, September 30, September 29, September 30,
(Dollars in thousands) 1996 1995 1996 1995
- ----------------------------------------------------- ------------- ------------- ------------- -------------
REVENUES
Sports/Leisure Magazines............................. $ 37,412 $ 40,930 $ 114,402 $ 119,761
Non-Compete.......................................... 2,500 2,500 7,500 7,500
New Ventures......................................... 305 -- 734 --
------------- ------------- ------------- -------------
Total Revenues....................................... $ 40,217 $ 43,430 $ 122,636 $ 127,261
------------- ------------- ------------- -------------
EBITDA
Sports/Leisure Magazines............................. $ 6,982 $ 5,432 $ 19,438 $ 22,695
New Ventures......................................... (1,553) (79) (4,064) (79)
------------- ------------- ------------- -------------
Total EBITDA......................................... $ 5,429 $ 5,353 $ 15,374 $ 22,616
------------- ------------- ------------- -------------
OPERATING PROFIT (LOSS)
Sports/Leisure Magazines............................. $ 5,525 $ 5,045 $ 16,921 $ 21,168
Non-Compete.......................................... 2,500 2,500 7,500 7,500
New Ventures......................................... (1,738) (79) (4,600) (79)
------------- ------------- ------------- -------------
Total Operating Profit............................... $ 6,287 $ 7,466 $ 19,821 $ 28,589
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The Magazine Group's third-quarter operating profit, excluding the SFAS 121
charge, was $7.4 million in 1996, compared with $7.5 million in 1995 on revenues
of $40.2 million and $43.4 million respectively. Operating profit for the first
nine months, excluding the SFAS 121 charge, was $20.9 million in 1996, compared
with $28.6 million in 1995 on revenues of $122.6 million and $127.3 million
respectively. The decreases were primarily due to lower advertising revenues in
both the third quarter and nine months and an increase in paper costs for the
nine months of 1996 over 1995.
BROADCASTING GROUP: The Broadcasting Group is comprised of eight
network-affiliated television stations and two radio stations.
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 29, September 30, September 29, September 30,
(Dollars in thousands) 1996 1995 1996 1995
- ----------------------------------------------------- ------------- ------------- ------------- -------------
Revenues............................................. $ 31,618 $ 22,214 $ 79,413 $ 60,171
------------- ------------- ------------- -------------
EBITDA............................................... $ 12,778 $ 7,900 $ 30,724 $ 21,228
------------- ------------- ------------- -------------
Operating Profit..................................... $ 7,331 $ 4,397 $ 18,703 $ 13,369
------------- ------------- ------------- -------------
15
The Broadcasting Group's third-quarter operating profit, was $7.3 million in
the 1996 compared with $4.4 million in 1995 on revenues of $31.6 million and
$22.2 million respectively. Operating profit, excluding buyouts, was $18.9
million for the first nine months of 1996 compared with $13.4 million in 1995 on
revenues of $79.4 million and $60.2 million respectively. The revenue and
operating profit increases were principally attributable to the operations of
WTKR-TV, Norfolk, Virginia, which was acquired in June 1995, and two NBC
affiliates acquired in July 1996, KFOR-TV, Oklahoma City, Oklahoma and WHO-TV,
Des Moines, Iowa. (See Note 4 of the Notes to Condensed Consolidated Financial
Statements.)
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operating activities was $267.7 million in the 1996
third quarter compared with $197.9 million in 1995. Such cash in addition to the
utilization of funds from external sources, were primarily used to modernize
facilities and equipment, pay dividends to stockholders and for acquisitions.
The Company believes that cash generated from its operations and the
availability of funds from external sources, as discussed below, should be
adequate to cover working capital needs, planned capital expenditures, dividend
payments to stockholders and other cash requirements. The ratio of current
assets to current liabilities was .77 at September 29, 1996, and .89 at December
31, 1995, and long-term debt and capital lease obligations as a percentage of
total capitalization was 34% at September 29, 1996, and 28% at December 31,
1995.
ACQUISITIONS: In July 1996, the Company acquired KFOR-TV in Oklahoma City,
Oklahoma and WHO-TV in Des Moines, Iowa ("New Television Stations"). The
acquisition was accounted for as a purchase. Accordingly, the operating results
have been included in the consolidated financial statements from the acquisition
date. The aggregate cost of the acquisition was approximately $234.1 million, of
which approximately $232.9 million was paid in cash and the balance representing
accrued liabilities.
In June 1996, the Company acquired a newspaper distribution business that
distributes The Times and other newspapers and periodicals throughout Long
Island, Westchester and Fairfield counties in the New York City metropolitan
area. The acquisition was accounted for as a purchase. Accordingly, the
operating results have been included in the consolidated financial statements
from the acquisition date. The aggregate cost of the acquisition was $30.7
million, of which $16.7 million was paid in cash, $9.9 million in notes and
accounts receivable which were forgiven and the remainder representing
short-term notes and assumed liabilities.
FINANCING: In July 1996, the Company entered into $100.0 million and $200.0
million revolving credit and term loan agreements with a group of banks ("New
Agreements"). The New Agreements replaced existing revolving credit and term
loan agreements aggregating $170.0 million. The New Agreements expire in July
1997 and July 2001, respectively, at which time any outstanding borrowings would
be payable. At the Company's discretion, these facilities may be converted into
term loans at any time. Interest is payable on a quarterly basis for both
agreements.
In July 1996, the Company increased the commercial paper facility to $300.0
million from $200.0 million. At September 29, 1996, the Company had
approximately $153.9 million in outstanding commercial paper with maturities
ranging up to 71 days at a weighted average interest rate of approximately 5.4%.
The outstanding commercial paper is supported by the Company's New Agreements.
The New Agreements and commercial paper facility will be used for
acquisitions and general corporate purposes. In July 1996, the Company utilized
approximately $143.0 million of the commercial paper facility to finance the
acquisition of the New Television Stations.
Subsequent to September 29,1996, a former jointly-owned affiliate, Spruce
Falls Power and Paper Company Limited, repaid a $26.5 million loan receivable.
The loan repayment period was not scheduled to commence until December 1997.
16
LOSS IMPAIRMENT: The $126.8 million SFAS 121 charge has no impact on the
Company's 1996 cash flow or 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. In
conjunction with the review for impairment, the estimated useful 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 net effect of the change on depreciation and amortization
expense is not anticipated to have a material effect on earnings per share in
the future.
STOCK REPURCHASE PROGRAM: At January 1, 1996, approximately $18.0 million
remained under a $50 million authorization pursuant to a stock repurchase plan
announced in February 1995. In May 1996, the Board of Directors authorized
additional expenditures of up to $32.0 million. During the first nine months of
1996, the Company spent approximately $34.9 million under these authorizations.
Under the programs, 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. Subsequent to September 29, 1996, the Company spent
approximately $3.1 million under the May authorization noted above. To date,
approximately $12.0 million remain from the May 1996 authorization.
CAPITAL EXPENDITURES: The Company is constructing a new production and
distribution facility in College Point, New York for the production of The
Times. The Company estimates that the cost of the new facility will be
approximately $315.0 million, exclusive of capitalized interest currently
projected to be $35.0 million. At September 29, 1996, approximately $248.9
million has been incurred. Construction began in August 1994 and completion is
expected in the middle of 1997.
The Company currently estimates that, inclusive of the College Point
facility, capital expenditures for 1996 will range from $235.0 million to $250.0
million. The Company currently anticipates that depreciation and amortization
will be approximately $150.0 million to $160.0 million for 1996 compared with
$138.9 million in 1995.
OTHER: At September 29, 1996, approximately $18.0 million of payments
remain from charges associated with staff reductions. The cash outflows
associated with these charges are expected to occur over the next three years as
a result of the timing of certain union pension and welfare fund contributions.
The Company expects to fund the amounts through internally-generated funds.
FACTORS THAT COULD AFFECT OPERATING RESULTS
- -------------------------------------------
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements that involve
risks and uncertainties, including the price of newsprint and magazine paper
prices that differ from levels anticipated by the Company, national and local
economic conditions that could influence the level of retail, national and
classified advertising revenue and circulation revenue, the impact of competing
products and pricing that could affect levels (rate and volume) of advertising
and circulation generated by the markets served by the Company's business
segments, and other risks detailed from time to time in the Company's
publicly-filed documents, including its Quarterly Reports on Form 10-Q for the
period ended March 31, 1996.
17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS
------------
10.1 The Company's 1991 Executive Stock Incentive Plan, as amended
through September 19, 1996
10.2 The Company's 1991 Executive Cash Bonus Plan, as amended through
September 19, 1996
10.3 The Company's Non-Employee Director's Stock Option Plan, as amended through
September 19, 1996
11. Statements re: Computation of earnings per share
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the period for which this
report is filed.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEW YORK TIMES COMPANY
--------------------------
(Registrant)
Date: November 12, 1996
-----------------
/s/ Diane P. Baker
--------------------------------------------
Diane P. Baker
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
18
Exhibit Index to Quarterly Report Form 10-Q
-------------------------------------------
Quarter Ended September 29, 1996
-------------------------------
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
10.1 The Company's 1991 Executive Stock Incentive Plan, as amended through September 19, 1996
10.2 The Company's 1991 Executive Cash Bonus Plan, as amended through September 19, 1996
10.3 The Company's Non-Employee Director's Stock Option Plan, as amended through September 19, 1996
11. Statements of Computation of Primary and Fully-Diluted Net Income Per Share
27. Financial Data Schedule
19