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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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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 29, 1996 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 43D 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 American 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. V . 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 March 27, 1997, was approximately $3.45 billion. As of such date,
non-affiliates held 47,798 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 March 27, 1997, was as follows: 97,611,723 shares of Class A Common
Stock and 425,001 shares of Class B Common Stock.
DOCUMENT INCORPORATED BY REFERENCE PART
Proxy Statement for the 1997 Annual Meeting of Stockholders ................................... III
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INDEX TO THE NEW YORK TIMES COMPANY
1996 FORM 10-K
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PART I
ITEM NO. PAGE
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1. Business......................................................................... 1
Introduction................................................................... 1
Summary of Segment Information............................................... 1
Newspapers..................................................................... 1
The New York Times........................................................... 2
Circulation................................................................ 2
Advertising................................................................ 2
Production and Distribution................................................ 3
The Boston Globe............................................................. 4
Circulation................................................................ 4
Advertising................................................................ 5
Production................................................................. 5
Regional Newspapers.......................................................... 5
Information Services......................................................... 6
New Ventures................................................................. 6
Magazines...................................................................... 7
New Ventures................................................................. 8
Broadcasting................................................................... 8
Forest Products Investments and Other Joint Ventures........................... 9
Forest Product Investments................................................... 9
Other Joint Ventures......................................................... 9
Raw Materials.................................................................. 10
Competition.................................................................... 10
Employees...................................................................... 11
2. Properties....................................................................... 11
3. Legal Proceedings................................................................ 12
4. Submission of Matters to a Vote of Security Holders.............................. 12
Executive Officers of the Registrant........................................... 12
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................................ 15
6. Selected Financial Data.......................................................... 15
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 15
8. Financial Statements and Supplementary Data...................................... 15
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 15
PART III
10. Directors and Executive Officers of the Registrant............................... 15
11. Executive Compensation........................................................... 15
12. Security Ownership of Certain Beneficial Owners and Management................... 15
13. Certain Relationships and Related Transactions................................... 15
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................. 16
PART I
ITEM 1. 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, magazines, television and radio stations,
electronic information and publishing and interests in forest products
companies.
The Company currently classifies its businesses into the following segments:
Newspapers: THE NEW YORK TIMES ("THE TIMES"); THE BOSTON GLOBE, a daily
newspaper, and the BOSTON SUNDAY GLOBE (both editions, "THE GLOBE"); 18
other daily and three non-daily newspapers in Alabama, California, Florida,
Louisiana, North Carolina and South Carolina ("Regional Newspapers");
various newspaper on-line products; newspaper distributors in the New York
City and Boston metropolitan areas; news, photo and graphics services and
news and features syndication; TIMESFAX; THE NEW YORK TIMES INDEX; and
licensing of electronic data bases and microform, CD-ROM products and the
trademarks and copyrights of THE TIMES.
Magazines: GOLF DIGEST, GOLF WORLD, GOLF SHOP OPERATIONS, TENNIS, TENNIS
BUYER'S GUIDE, CRUISING WORLD, SAILING WORLD, SNOW COUNTRY and SNOW COUNTRY
BUSINESS. In March 1997, the Company announced its intention to sell TENNIS,
TENNIS BUYER'S GUIDE, CRUISING WORLD, SAILING WORLD, SNOW COUNTRY and SNOW
COUNTRY BUSINESS.
Broadcasting: television stations WTKR-TV in Norfolk, Virginia; WREG-TV
in Memphis, Tennessee; KFOR-TV in Oklahoma City, Oklahoma; WNEP-TV in
Wilkes-Barre/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.
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.
SUMMARY OF SEGMENT INFORMATION
In 1996, the Company's consolidated revenues increased to $2,615,026,000
from $2,409,069,000 in 1995. The increase in revenues was principally due to
higher advertising and circulation rates at the Newspaper Group and the
additional revenues associated with the Company's recently acquired television
stations. The Company's net income in 1996 was $84,534,000, or $.87 per share,
compared with $135,860,000, or $1.40 per share, in 1995. Exclusive of special
factors set forth on page F-4 on this Form 10-K, annual earnings from ongoing
operations would have been $1.91 per share in 1996, compared with $1.41 per
share in 1995. A summary of segment information for the three years ended
December 29, 1996, is set forth on pages F-2 and F-3 of this Form 10-K. Also see
"Management's Discussion and Analysis" on pages F-4 through F-10 of this Form
10-K.
The Company changed its fiscal year-end to the last Sunday in December,
beginning with the fiscal year ended December 29, 1996.
NEWSPAPERS
The Newspaper Group had revenues of $2,335,346,000 in 1996, compared with
$2,161,022,000 in 1995, and an operating profit of $179,611,000 in 1996,
compared with $212,634,000 in 1995. (These amounts include certain special items
for 1996 which are discussed in more detail in "Management's Discussion and
Analysis" on page F-4 of this Form 10-K.) Operating profit for the year after
special items increased due to higher advertising and circulation revenues
resulting from higher rates.
The Newspaper Group segment consists of two categories: Newspapers
(consisting of THE NEW YORK TIMES, THE BOSTON GLOBE, 21 Regional Newspapers,
newspaper distributors, and Information Services) and New Ventures (consisting
of projects developed in electronic media by THE TIMES, THE GLOBE and the
Regional Newspapers, as well as various new media investments). The Newspapers
category had revenues of $2,326,784,000 in 1996 and an operating profit of
$195,176,000 in 1996, while the New Ventures category had revenues of $8,562,000
and an operating loss of $15,565,000.
THE NEW YORK TIMES
CIRCULATION
THE TIMES, a standard-size weekday and Sunday newspaper which commenced
publication in 1851, is circulated in each of the 50 states, the District of
Columbia and worldwide. Approximately 62% of the weekday (Monday through Friday)
circulation is sold in the 31 counties that make up the greater New York City
area, which includes New York City, Westchester and parts of upstate New York,
Connecticut and New Jersey; 38% is sold elsewhere. On Sundays, approximately 60%
of the circulation is sold in the greater New York City area and 40% elsewhere.
According to reports of 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, 1996, of all seven-day United States
newspapers, THE TIMES's weekday and Sunday circulations were the largest.
THE TIMES's average weekday and Sunday circulations for the three 12-month
periods ended September 30, 1996, as audited by ABC (except as indicated), are
shown in the table below:
Weekday Sunday
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(Thousands of copies)
1996 (unaudited)................................................... 1,112.6 1,702.4
1995............................................................... 1,124.3 1,720.3
1994............................................................... 1,148.8 1,742.2
During the year ended December 29, 1996, the average weekday circulation of
THE TIMES decreased by approximately 17,800 copies to 1,102,900 copies and the
average Sunday circulation of THE TIMES decreased by approximately 32,100 copies
to 1,680,500 copies. Approximately 56% of the weekday circulation and 49% of the
larger Sunday circulation were sold through home and office delivery; the
remainder was sold primarily on newsstands. THE TIMES's increasing percentage of
home and office delivery is part of its continuing strategy to improve the
stability of its circulation base and provide enhanced value to its advertisers.
The weekly rate charged to subscribers for home-delivered copies of THE
TIMES in the New York City metropolitan area is $7.20. The suggested newsstand
price of THE TIMES within the New York City metropolitan area is $.60 on
weekdays and $2.50 on Sundays. The suggested newsstand price in the New
England-Middle Atlantic states outside the New York City metropolitan area is
$1.00 on weekdays and $3.00 on Sundays. The suggested newsstand price of the
National Edition, distributed throughout the rest of the country, is $1.00 on
weekdays and $4.00 on Sundays.
ADVERTISING
THE TIMES published 3,768,400 inches of advertising in 1996, compared with
3,811,100 inches in the comparable 1995 period. Both figures include part-run
volume, which totaled 1,000,400 inches in 1996, compared with 1,054,300 inches
in 1995.
2
Total volume in THE TIMES for the two years ended December 29, 1996, 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)
1996 620.2 1,229.6 918.2 1,000.4 3,768.4 296,839
1995(2) 662.3 1,173.8 920.7 1,054.3 3,811.1 303,553
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(1) All totals exclude preprint inches.
(2) For comparability, 1995 has been restated to conform with the 1996
presentation.
The table includes volume for THE NEW YORK TIMES MAGAZINE, which published 3,009
pages of advertising in 1996, compared with 2,809 pages in 1995.
Advertising rates for THE TIMES increased an average of 9.5% in January
1996, and 6.5% in January 1997.
PRODUCTION AND DISTRIBUTION
THE TIMES is processed through electronic editing terminals and sent
electronically to high-resolution image setters. THE TIMES's program to enable
editors to paginate the newspaper, by electronically designing and constructing
the news text, headlines and graphics on the newspaper page rather than having
them pasted up manually, was virtually completed in 1996. In 1997, one last
remaining section will be paginated and the news and advertising on each page of
the newspaper will be merged electronically.
Generally, THE TIMES is printed at its Manhattan production facility, its
production and distribution facility in Edison, New Jersey, and its new
production and distribution facility in College Point, Queens. The College Point
facility began to come on line in 1996, and will become fully operational in the
second half of 1997. The Manhattan facility will be phased out during 1997.
When the transition is complete, the Edison and College Point facilities
will print all the advance sections of the Sunday newspaper (except THE NEW YORK
TIMES MAGAZINE and the Television section) and all of the weekday New York
edition. The Edison facility houses six 10-unit Goss Colorliner presses; College
Point has five of the same presses. Both facilities have the capacity to print
in color and have modern, automated packaging and distribution equipment.
THE TIMES has agreements with two commercial printing companies to print THE
NEW YORK TIMES MAGAZINE and its Television section. On February 18, 1997, THE
TIMES began to distribute copies of the newspaper from two Northeast printing
sites with which it has entered into contract printing agreements. These sites
are near Boston (at THE GLOBE) and in Springfield, Virginia.
The National Edition of THE TIMES is printed under contract at eight sites:
in the Midwest from printing sites in Chicago, Illinois, and Warren, Ohio; in
the West from printing sites in Torrance and Walnut Creek, California, and
Tacoma, Washington; in the Southwest from a printing site in Austin, Texas; and
in the Southeast from printing sites in Atlanta, Georgia, and Ft. Lauderdale,
Florida. Satellite transmission of page images to the National Edition printing
sites permits early-morning delivery to homes and newsstands in many major
markets. THE TIMES entered into an agreement, effective January 1, 1997, with a
national magazine distribution company to become the exclusive sales and
marketing representative for the National Edition. During 1996, THE TIMES
entered into agreements with approximately 30 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 weekdays to homes and
newsstands.
3
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 and central and
northern New Jersey. In June 1996 City & Suburban acquired the business of
Imperial Delivery Service, Inc., a newspaper wholesaler that distributed
newspapers and other periodicals throughout Long Island (New York) and the
counties of Westchester (New York) and Fairfield (Connecticut). In October 1996,
City & Suburban expanded its operations into central New Jersey. Approximately
69% of THE TIMES's single-copy daily circulation and 70% of its single-copy
Sunday circulation in the New York City metropolitan area are delivered to
retail outlets through City & Suburban. Approximately 88% of THE TIMES's daily
home-delivered circulation and 91% of its Sunday home-delivered circulation are
delivered to depots through City & Suburban.
THE BOSTON GLOBE
THE GLOBE is owned and published by the Company's subsidiary, Globe
Newspaper Company (as used herein, "THE GLOBE" may also be used to refer to
Globe Newspaper Company).
CIRCULATION
THE GLOBE is distributed throughout New England, although its circulation is
concentrated in the Boston metropolitan area. According to ABC reports, as of
September 29, 1996, the weekday circulation of THE GLOBE was the 14th largest of
any weekday newspaper; circulation of the Sunday edition was the ninth largest
of any Sunday newspaper published in the United States; and its weekday and
Sunday circulation was the largest of all newspapers published in either Boston
or New England.
The following table shows the average weekday and Sunday paid circulation of
THE GLOBE for the editions and the periods indicated, as reported to or audited
by ABC.
Period Weekday Sunday
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(Thousands of copies)
26 Weeks ended September 29, 1996.................................. 471.0 763.1
52 Weeks ended March 31, 1996...................................... 492.9 785.4
During the year ended December 29, 1996, the average weekday circulation of
THE GLOBE decreased 25,500 copies below 1995 to 472,200 copies and the average
Sunday circulation decreased by 26,600 copies below 1995 to 762,700 copies.
Approximately 71% of THE GLOBE's total weekday circulation and 60% of THE
GLOBE's total Sunday circulation are sold through home or office delivery; the
remainder are sold primarily on newsstands. Virtually all of THE GLOBE's
home-delivered circulation is delivered through THE GLOBE's distribution
subsidiary, Community Newsdealers, Inc. During 1996, THE GLOBE and its
subsidiary, Retail Sales, Inc., assumed greater direct control of single copy
distribution to further improve the stability of its circulation base. In
December 1996, such distribution accounted for approximately 60% of average
daily single copy distribution (up from 54% in January 1996) and 53% of its
average Sunday single copy distribution (up from 45% in January 1996).
The weekly rate charged to subscribers for home-delivered copies of THE
GLOBE is $5.00 within the 30-mile radius of Boston and $5.50 outside of the
30-mile radius. The suggested newsstand price of THE GLOBE throughout its
circulation area is $.50 on weekdays and $2.00 on Sundays.
4
ADVERTISING
THE GLOBE's total advertising volume by category of advertising for the two
years ended December 29, 1996, 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)
1996 764.5 549.5 1,332.8 304.4 2,951.2 686,628
1995(2) 809.4 570.8 1,246.7 304.1 2,931.0 721,187
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(1) All totals exclude preprint inches.
(2) For comparability, 1995 has been restated to conform with the 1996
presentation.
Advertising rates in each category of advertising were adjusted in 1996. The
latest increase in retail advertising rates occurred on September 1, 1996.
Increases in classified and national advertising rates occurred effective April
1, 1996, and July 1, 1996, respectively. These rate increases ranged from 5% to
8%.
PRODUCTION
THE GLOBE's pagination project, which started in 1989, continued according
to plan, as full-page output increased in 1996 to a weekly average of 1,100
pages per week, or almost 90% of THE GLOBE's pages produced weekly. THE GLOBE
plans to complete pagination of the remaining portions of the newspaper during
1997.
All editions of THE GLOBE are printed and prepared for delivery at its main
Boston plant or its Billerica, Massachusetts, satellite plant. Both of the
plants use Goss Metroliner offset presses. THE GLOBE also owns a Sunday
pre-print storage, inserting and packaging plant in Westwood, Massachusetts.
REGIONAL NEWSPAPERS
The Company currently owns 18 daily and three non-daily smaller-city
newspapers.
Daily Newspapers Non-Daily Newspapers
SARASOTA HERALD-TRIBUNE THE NEWS-SUN (Sebring/
(Fla.) Avon Park, Fla.)
THE PRESS DEMOCRAT (Santa MARCO ISLAND EAGLE
Rosa, Cal.) (Fla.)
THE LEDGER (Lakeland, Fla.) NEWS-LEADER
THE GAINESVILLE SUN (Fla.) (Fernandina Beach, Fla.)
SANTA BARBARA
NEWS-PRESS (Cal.)
SPARTANBURG
HERALD-JOURNAL (S.C.)
WILMINGTON MORNING STAR
(N.C.)
STAR-BANNER (Ocala, Fla.)
TIMES DAILY
(Florence, Ala.)
THE TUSCALOOSA NEWS (Ala.)
THE GADSDEN TIMES (Ala.)
THE COURIER (Houma, La.)
TIMES-NEWS
(Hendersonville, N.C.)
DAILY WORLD (Opelousas, La.)
THE DISPATCH (Lexington, N.C.)
DAILY COMET (Thibodaux, La.)
PALATKA DAILY NEWS (Fla.)
LAKE CITY REPORTER (Fla.)
The regional daily newspapers' weekday circulation for the year ended
December 29, 1996, decreased 23,600 copies to 730,100 copies, and Sunday
circulation decreased 14,200 copies to 789,700 copies; the circulation of the
non-dailies decreased 2,000 copies to 34,000 copies. Advertising volume, stated
on the basis of six columns per page, was 15,560,600 inches in 1996, compared
with 15,525,100 inches in 1995. These figures exclude the circulation numbers
and advertising volume of seven newspapers which were
5
sold in 1995. (See Note 2 of Notes to Consolidated Financial Statements.)
Preprints distributed in 1996 were 929,486,000, compared with 915,930,000 in
1995 (in each case, not including preprints distributed by the seven Regional
Newspapers sold in 1995).
All of the Regional Newspapers are produced by photocomposition and offset
printing.
INFORMATION SERVICES
The New York Times Syndication Sales Corporation ("Syndication Sales")
operates The New York Times News Service, The New York Times Syndicate and the
licensing and reprint permission operations of THE TIMES. The 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. Syndication Sales maintains two sites (introduced in 1995) on the
World Wide Web with news about computers and health.
NYT Business Information Services, through the group's Index department and
Times On-Line Services, Inc., produces THE NEW YORK TIMES INDEX, a print
publication. The Company licenses LEXIS/ NEXIS, Dow Jones Business Information
Services, UMI, Knight-Ridder Information, Inc., DataTimes and Online Computer
Library Center, Incorporated to store, market and distribute its on-line
computer data bases. The Company also licenses UMI to produce and sell THE NEW
YORK TIMES INDEX and THE TIMES on microform and CD-ROM.
In 1996, the Company continued to expand its distribution of TIMESFAX, a
six- to eight-page synopsis of THE TIMES delivered to customers' facsimile
machines or personal computers in markets where THE TIMES is not easily
available. In addition to distribution by satellite to cruise ships and U.S.
Navy vessels, TIMESFAX is distributed to hotels, governments and corporations in
over 50 countries and territories. It can also be accessed via the Internet.
NYT Custom Publishing designs, writes, edits, produces, sells and markets
magazines for clients under contract, including IBM and Four Seasons Hotels
Limited. The Company has announced that the NYT Custom Publishing division is
for sale.
Information Services also develops and markets new services, including
CD-ROM disks, database marketing and multimedia education services.
As of January 1997, Information Services was restructured and Syndication
Sales, NYT Business Information Services, and TIMESFAX became a part of THE NEW
YORK TIMES.
NEW VENTURES
In 1994, the Company created and introduced @TIMES, an on-line service which
carries information from THE TIMES on America Online. This service, now renamed
The New York Times on America Online, is one of the most frequently accessed
services on America Online. THE NEW YORK TIMES's website, The New York Times on
the Web, is located at "nytimes.com." and went on-line in January 1996. The New
York Times on the Web has attracted almost 1 million registered users with an
average of over 3 million pages per week viewed by users of the site. In the
fall of 1995, a new subsidiary of THE GLOBE, Boston Globe Electronic Publishing,
Inc., launched its Internet site located at "Boston.com." Its goal is to become
the principal information provider for Internet users interested in New England.
During 1996, both Boston.com and The New York Times on the Web generated
advertising revenue. THE TIMES and THE GLOBE have participated in the
development of Careerpath.com, the leading employment database on the Internet.
Several Regional Newspapers have created on-line services tailored to their
local market interests and needs. Also, the SARASOTA HERALD-TRIBUNE operates a
24-hour local news cable television channel which reaches approximately 90,000
subscribers.
6
In April 1995, the Company acquired a majority interest in Video News
International ("VNI"), a worldwide video newsgathering operation specializing in
low-cost, high-quality footage for sale globally to major television and cable
networks. In December 1996, VNI ceased operations. In January 1997, the Company
established a unit to pursue certain programming ventures utilizing THE NEW YORK
TIMES and other content.
In September 1995, the Company invested in OVATION, a visual and performing
arts cable television network, which launched in April 1996. OVATION is
available through 29 U.S. cable systems as well as in St. Lucia, West Indies,
and Bermuda. OVATION currently reaches 800,000 subscribers.
MAGAZINES
The Company's Magazine Group had revenues of $161,077,000 in 1996, compared
with $162,941,000 in 1995, and operating profit of $24,778,000 in 1996, compared
with $28,741,000 in 1995.
The Magazine Group segment consists of two categories: Magazines (including
those publications set forth in the table below) and New Ventures (including
computerized systems for golf tee time reservations, on-line magazine services
and related activities in the sports/leisure field). The Magazines category had
revenues of $160,039,000 in 1996 and an operating profit of $32,537,000 in 1996,
while the New Ventures category had revenues of $1,038,000 and an operating loss
of $7,759,000 in 1996. The Magazine Group's revenues for 1996 include
$10,000,000 relating to the non-competition agreement entered into in connection
with the sale of the Women's Magazines Division on July 26, 1994, to Gruner+Jahr
Printing and Publishing Co. The terms of the sale included a four-year
$40,000,000 non-competition agreement. (See Note 2 of Notes to Consolidated
Financial Statements.)
As of December 29, 1996, the Company published the magazines listed in the
chart below:
PUBLICATION
MAGAZINE CYCLE SUBJECT/AUDIENCE RATE BASE
- -------------------------------------------------- ------------------ -------------------- ---------
Golf Digest....................................... Monthly Golf 1,500,000
Tennis............................................ Monthly Tennis 800,000
Snow Country...................................... 8 issues per year Skiing/mountain 475,000
lifestyle
Cruising World.................................... Monthly Recreational sailors 146,000
Golf World........................................ 46 issues per year Golf 145,000
Sailing World..................................... Monthly Racing sailors 65,000
Golf Shop Operations.............................. 10 issues per year Golf trade 23,266(3)
Snow Country
Business........................................ 3 issues per year Ski trade 20,244(3)
Tennis Buyer's Guide.............................. 5 issues per year Tennis trade 11,813(3)
PERCENTAGE PERCENTAGE
INCREASE INCREASE
(DECREASE) IN (DECREASE) IN
AVERAGE ADVERTISING
AVERAGE CIRCULATION ADVERTISING PAGES
MAGAZINE CIRCULATION(1) OVER 1995 PAGES(2) OVER 1995
- -------------------------------------------------- ------------ ------------- ----------- -------------
Golf Digest....................................... 1,504,100 (0.3) 1,252 (4.0)
Tennis............................................ 800,600 (0.5) 743 3.6
Snow Country...................................... 475,000 (0.9) 787 (3.3)
Cruising World.................................... 147,100 (2.5) 1,329 (2.6)
Golf World........................................ 146,700 0.3 1,475 (12.3)
Sailing World..................................... 65,700 (4.1) 524 (10.1)
Golf Shop Operations.............................. 17,600 2.9 1,255 (9.3)
Snow Country
Business........................................ 15,100 (4.4) 230 (15.1)
Tennis Buyer's Guide.............................. 10,100 (6.5) 134 (38.0)
- ------------------------------
(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 trade publications, as calculated by the publisher using
the same methodology as for PIB.
(3) For these trade publications, the average print order is disclosed as the
applicable measure for advertisers.
In March 1997, the Company announced its intention to sell TENNIS, TENNIS
BUYER'S GUIDE, CRUISING WORLD, SAILING WORLD, SNOW COUNTRY and SNOW COUNTRY
BUSINESS.
7
NEW VENTURES
In October 1995, the Company acquired the business of PAR Business Systems,
Inc., which provides computerized systems for golf tee time reservations and
automated pro shop business systems for the golf industry. The tee time system
is known as T-LINKS-TM- and is being operated by Golf Digest Information
Systems, Inc., an indirect subsidiary of the Company. The Magazine Group has
also commenced construction of a driving range at THE TIMES's printing facility
in Edison, New Jersey. The range will feature heated stalls and a teaching
center. The Magazine Group offers various golf and travel information and
excerpts from its publications on the World Wide Web.
BROADCASTING
The Broadcast Group had revenues of $118,603,000 in 1996, up from
$85,106,000 in 1995, and an operating profit of $30,596,000 in 1996, compared
with $18,943,000 in 1995. The Company acquired KFOR-TV, an NBC affiliate, which
serves the Oklahoma City, Oklahoma, market and WHO-TV, an NBC affiliate, which
serves the Des Moines, Iowa, market, in July 1996. (See Note 2 of Notes to
Consolidated Financial Statements.) The acquisition, Olympic advertising revenue
at KFOR-TV and WHO-TV, and higher advertising revenues at most of the Company's
other stations, including the full year's revenues at WTKR-TV (acquired in June
1995), accounted for the improved results.
The Company's television and radio stations are operated under licenses from
the Federal Communications Commission ("FCC") and are subject to FCC
regulations. The Telecommunications Act of 1996 lengthened television station
license terms from five to eight years and radio station license terms from
seven to eight years. The licenses for WREG-TV (Memphis, Tenn.), WHNT-TV
(Huntsville, Ala.), WQAD-TV (Moline, Ill.) and KFSM-TV (Fort Smith, Ark.) will
expire on August 1, 1997, April 1, 1997, December 1, 1997, and June 1, 1997,
respectively. Applications for renewal of the licenses are due four months prior
to the expiration date. The licenses of KFOR-TV (Oklahoma City, Okla.) and
WHO-TV (Des Moines, Iowa) will expire in 1998. The license for WNEP-TV
(Wilkes-Barre/Scranton, Pa.) will expire in 1999. The license for WTKR-TV was
just renewed for a five-year term expiring October 1, 2001, which will be
extended to October 1, 2004, pursuant to the FCC's implementation of the
Telecommunications Act of 1996. The Company expects its future applications for
renewal of its television station licenses will result in such 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 and compensation paid by the networks for
carrying commercial network programs. WTKR-TV, WREG-TV, WHNT-TV and KFSM-TV are
affiliated with the CBS Television Network; WNEP-TV and WQAD-TV are affiliated
with the ABC Television Network; and KFOR-TV and WHO-TV are affiliated with the
NBC Television Network.
WTKR-TV, WREG-TV, KFOR-TV, WHO-TV, WQAD-TV and KFSM-TV are in the VHF band;
WNEP-TV and WHNT-TV are in the UHF band, as are all other stations in their
markets. According to A. C. Nielsen Company, a research company which measures
audiences for television stations, Norfolk is the 40th largest television market
in the United States, Memphis is the 42nd largest, Oklahoma City is the 43rd
largest market, Wilkes-Barre/Scranton is the 49th largest, Des Moines is the
72nd largest market, Huntsville is the 81st largest, Moline is part of the Quad
Cities market, the 88th largest, and Fort Smith is the 118th largest market.
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. WQEW (AM) is the only station covering the total New York City region
that offers a format of American popular standards for the market. The licenses
of WQEW(AM) and WQXR(FM) were renewed during 1994 and will expire on
8
June 1, 1998. The Company expects its future applications for renewal of the
radio station licenses will result in such licenses being renewed for an
eight-year period.
FOREST PRODUCTS INVESTMENTS AND OTHER JOINT VENTURES
The Company has ownership interests in one newsprint mill and one
supercalendered paper mill (the "Forest Products Investments"), the
INTERNATIONAL HERALD TRIBUNE and a new venture. Income from these joint ventures
in 1996 was $18,223,000, increased from $15,029,000 in 1995. The improved
results for 1996 were due principally to higher average selling prices for paper
at the Forest Products Investments, partially offset by losses incurred by the
new venture.
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. 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 1996 Malbaie produced 196,000
metric tons of newsprint, 76,000 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").
Madison is a partnership between Northern SC Paper Corporation ("Northern") and
a subsidiary of Myllykoski Oy, a Finnish papermaking company. Through Northern,
the Company's interest in Madison is 40%. Madison produces supercalendered paper
at its facility in Madison, Maine. Madison purchases all its wood from local
suppliers, mostly under long-term contracts. In 1996 Madison produced 169,000
metric tons, 11,000 tons of which were sold to the Company. In 1997 Madison's
five largest customers (of which the fourth largest is the Company) are expected
to purchase approximately 54% of Madison's budgeted production.
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
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 VENTURES
Each of the Company and The Washington Post Company owns a one-half interest
in the International Herald Tribune S.A.S, which publishes the INTERNATIONAL
HERALD TRIBUNE. In 1996, the Company began a five-year term as managing partner
of the newspaper's operations. The newspaper is edited in Paris and printed
simultaneously in Frankfurt, Hong Kong, London, Marseille, New York, Paris,
Rome, Singapore, The Hague, Tokyo and Zurich. The International Herald Tribune
opened a new print site in Kuala Lumpur, Malaysia, and expects to open one in
Bangkok, Thailand, in the first half of 1997.
9
NYT Broadcast Holdings, Inc., a wholly-owned subsidiary of the Company, owns
10% (down from 40% at the beginning of 1996) of Popcorn Channel, L.P. The
Popcorn Channel, a basic cable network which launched in November 1995, ceased
operations in December 1996.
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 1996, THE TIMES used approximately 276,000 metric tons of newsprint,
compared to 281,000 in 1995. The 1995 amount has been restated to include
newsprint used to print the Sunday television guide in order to conform with the
1996 amount. In 1996, THE NEW YORK TIMES MAGAZINE used approximately 19,000
metric tons of supercalendered paper, a grade of magazine quality paper,
compared to 20,000 in 1995. In 1996, THE GLOBE used approximately 136,000 metric
tons of newsprint, compared to 142,000 in 1995. The 1995 amount has been
restated to include newsprint used to print the Sunday comics and the television
guide in order to conform with the 1996 amount. The Regional Newspapers used
approximately 90,500 metric tons of newsprint in 1996, compared to 94,000 in
1995. In 1996, the magazines published by the Magazine Group used approximately
14,400 metric tons of coated paper, compared to 16,100 in 1995.
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 related suppliers in which the Company
holds equity interests (see "Forest Product Investments") and unrelated
suppliers.
COMPETITION
THE TIMES competes with newspapers of general circulation in New York City
and its suburbs. THE TIMES also competes in varying degrees with national
publications such as THE WALL STREET JOURNAL and USA TODAY and with magazines,
television, radio and other media. Based on a specially prepared report by
Competitive Media Reporting, Inc., an independent agency that measures
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. 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 (daily and Sunday). THE GLOBE
also competes with other communications media, such as direct mail, magazines,
radio and television (including cable television). 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 29,
1996, THE GLOBE ranked first in advertising inches among all newspapers
published in Boston and New England.
All the magazines published by the Company compete directly with comparable
publications as well as with general interest magazines and other media, such as
newspapers and broadcasting.
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. WQXR (FM)
competes for listeners with WNYC (FM) (a non-commercial station) for the
classical music audience, and it and WQEW (AM) compete for listeners and
revenues with many adult-audience commercial radio stations and other media in
New York City and surrounding suburbs.
Syndication Sales's operations compete with several other syndicated
features and supplemental news services.
Madison and Malbaie are in a highly competitive industry.
10
EMPLOYEES
As of December 29, 1996, the Company had approximately 12,800 full-time
equivalent employees.
Approximately 3,950 full-time equivalent employees of THE TIMES and City &
Suburban are represented by 16 unions. THE TIMES has collective bargaining
agreements effective through March 30, 2000, with all of its production unions,
except for New York Newspaper Printing Pressmen's Union (which contract expires
on March 30, 2005, and covers approximately 450 employees), and with all of its
non-production unions, except for the International Brotherhood of Electricians
(which contract expires on March 30, 1999, and covers approximately 20 employees
in this non-production union) and the International Union of Operating
Engineers. (One of this non-production union's contracts with THE TIMES,
covering approximately 20 employees, expired in mid-1996; the parties are
continuing to negotiate a successor contract.) City & Suburban has collective
bargaining agreements effective through March 30, 2000, with its sole production
union and with two of its three non-production unions. City & Suburban's
contract with the United Auto Workers (covering approximately 50 employees in
this non-production union) expired in May 1995; the parties are continuing to
negotiate a successor contract. THE TIMES reached agreements with three of its
production unions (covering approximately 970 employees) on a wage package for
the period beginning March 31, 1996, and ending March 30, 2000. Wage packages
covering the same period with the other unions representing production and
non-production employees at THE TIMES and City & Suburban (approximately 3,400
employees) are being negotiated. If such negotiations are not successful, the
wage packages will be submitted to binding arbitration for resolution.
THE GLOBE and its subsidiaries employ approximately 3,000 full-time
equivalent employees. Of these, approximately 2,000 are represented by 12
unions. As of December 29, 1996, a labor agreement with one of its 11 production
unions expired. Negotiations have commenced and THE GLOBE expects them to be
successfully completed in 1997. Negotiations continue with two production
unions, one of whose contract expired on December 31, 1992 and the other on
December 31, 1995. THE GLOBE expects to conclude these negotiations successfully
in 1997 as well. Eight other production unions have contracts which continue to
be in effect with expiration dates ranging from December 31, 1998, to December
31, 2001. Its agreement for the period January 1, 1995, through December 31,
1997, with The Boston Globe Employees Association ("BGEA"), an affiliate of The
Newspaper Guild that represents non-production employees of THE GLOBE, was
ratified by the BGEA membership on March 20, 1997.
Three other entities owned by the Company (THE PRESS DEMOCRAT, WQXR and
WQEW) also have collective bargaining agreements covering certain of their
employees.
ITEM 2. PROPERTIES.
THE TIMES: The Company owns its headquarters at 229 West 43d Street, New
York, New York. The building has 15 stories and approximately 714,000 square
feet of floor space and serves as a publishing facility for THE TIMES. During
late 1995, a renovation of THE TIMES's newsroom commenced. The renovation is
expected to be complete by 1999. The renovation was designed to give THE TIMES
necessary additional space and an enhanced electrical infrastructure.
A second publishing facility is located in Edison, New Jersey. This
1,300,000 square foot production and distribution facility is occupied pursuant
to a long-term lease with renewal and purchase options. The Edison plant began
producing newspapers in 1992. The Edison facility replaced an older production
facility in Carlstadt, New Jersey, which is for sale.
The Edison facility was the first step in a plan to modernize the production
facilities of THE TIMES. To complete its modernization plan, the Company will
replace the production facility housed in the basement at its 43d Street
facility with a 515,000 square foot printing and distribution plant in College
Point, Queens, to be operational in the middle of 1997. The Company is leasing
the 31-acre site in College Point and has the option to purchase the property at
any time prior to the end of the lease in 2019. Together with the Edison plant,
the College Point facility will provide a number of benefits, including later
deadlines, increased color in the daily paper, increased flexibility in paging
and sectioning the paper and daily advertising inserts.
11
THE GLOBE owns its printing plants in Boston (652,000 square feet) and
Billerica (290,000 square feet), Massachusetts, as well as its Sunday pre-print
storage, inserting and packaging plant in Westwood, Massachusetts (115,000
square feet). THE GLOBE and its subsidiaries own or lease office and other
facilities that are suitable and adequate for their current activities.
The Regional Newspapers own their printing facilities. The Company's
Regional Newspapers, magazines, broadcast stations and information businesses
own or lease office facilities that are suitable and adequate for their current
activities. A new 180,000 square foot color printing facility is under
construction at THE LEDGER in Lakeland, Florida, and completion is expected by
the end of 1997.
The Company sold its office building at 110 Fifth Avenue in New York City in
June 1996. The building had been used by the Women's Magazines Division, which
was sold in 1994.
ITEM 3. 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.
ITEM 4. 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 Since March 28, 1997(1)
- ------------------------------------ --- ------------ -----------------------------------------------------------
CORPORATE OFFICERS
Arthur Ochs Sulzberger....... 71 1951 Chairman (since 1973); Chief Executive Officer; Director;
Publisher of THE NEW YORK TIMES ("THE TIMES") (1963 to
1992)
Russell T. Lewis............. 49 1966(2) President and Chief Operating Officer (since
1996); President and General Manager of THE
TIMES (1993 to 1996); Deputy General Manager
of THE TIMES (1991 to 1993)
Diane P. Baker............... 42 1995 Senior Vice President, Chief Financial Officer
(since 1995) and Treasurer (since 1996); Group
Senior Vice President--Chief Financial
Officer of R.H. Macy & Co., Inc. ("Macy's")
(1993 to 1995); Senior Vice
President--Finance and Chief Financial
Officer of Macy's (1990 to 1993)
Katharine P. Darrow.......... 53 1970(3) Senior Vice President (since 1993),
Broadcasting (since 1993), Real Estate (since
1993), Corporate Communications (since 1996),
Corporate Development and Human Resources
(1993 to 1996); Vice President (1988 to
1993), Broadcasting/Information Services and
Corporate Development
- ------------------------------
(1) During the past five years, all of the executive officers listed above
have held positions which were the same or substantially similar to those
they currently hold except as indicated above.
(2) Mr. Lewis left the Company in 1973 and returned in 1977.
(3) Mrs. Darrow left the Company in 1971 and returned in 1973.
12
Employed By
Registrant Position(s) As Of
Name Age Since March 28, 1997(1)
- ----------------------------- --- ------------ -----------------------------------------------
Leonard P. Forman............ 51 1974(2) Senior Vice President (since 1996), Corporate Development,
New Ventures and Electronic Businesses; President and
Chief Executive Officer of Nynex/Newsday electronic
service joint venture (1995); Chief Operating Officer of
the Newspaper Association of America (1992 to 1994);
President and Chief Executive Officer of the Newspaper
Advertising Bureau (1989 to 1992)
John M. O'Brien.............. 54 1960 Senior Vice President (since 1996), Operations;
Executive Vice President (1992 to 1996) and
Deputy General Manager (1991 to 1996) of THE
TIMES
Donald S. Schneider.......... 50 1996 Senior Vice President (since 1996), Human
Resources; Vice President, Human Resources,
of the North American Division of Bertelsmann
Entertainment Company, a division of
Bertelsmann A.G. (1993 to 1996); Senior Vice
President, Human Resources, of Frank B. Hall
& Company (1988 to 1993)
Solomon B. Watson IV......... 52 1974 Senior Vice President (since 1996); Vice
President (1990 to 1996); General Counsel
(since 1989)
Michael Golden............... 47 1984 Vice President, Operations Development (since
1996); Executive Vice President and Publisher
of TENNIS (1994 to 1995); Executive Vice
President and General Manager of Women's
Magazines (1991 to 1994); Publisher of
MCCALL'S (1990 to 1991)
Stuart Stoller............... 41 1996 Vice President and Corporate Controller (since
1996); Controller of Coopers and Lybrand
L.L.P. (1995); Senior Vice President--Control
and Accounting of Macy's (1993 to 1995);
Group Vice President--Control and Accounting
of Macy's (1991 to 1993); Vice
President--Corporate Accounting of Macy's
(1989 to 1991)
Laura J. Corwin.............. 52 1980 Secretary (since 1989) and Corporate Counsel
(since 1993)
OPERATING UNIT EXECUTIVES
James W. FitzGerald.......... 58 1968 President, The New York Times Company Magazine
Group, Inc. (since 1985)
Stephen Golden............... 50 1967(3) Vice President, Forest Products, Health, Safety
and Environmental Affairs (since 1992);
President and General Manager of the
Company's Forest Products Group (since 1994);
Vice President, Forest Products (1990 to
1992)
- ------------------------
(1) During the past five years, all of the executive officers listed above
have held positions which were the same or substantially similar to those
they currently hold except as indicated above.
(2) Mr. Forman left the Company in 1986 and returned in 1996.
(3) Mr. Golden left the Company in 1969 and returned in 1974.
13
Employed By
Registrant Position(s) As Of
Name Age Since March 28, 1997(1)
- ----------------------------- --- ------------ -----------------------------------------------
C. Frank Roberts............. 53 1970 Vice President, Broadcasting (since 1986)
Arthur O. Sulzberger, Jr..... 45 1978 Publisher of THE TIMES (since 1992); Deputy Publisher of
THE TIMES (1988 to 1992)
William O. Taylor............ 64 1993 Publisher of THE BOSTON GLOBE (since 1978) and Chairman and
Chief Executive Officer of Globe Newspaper Company (since
1982); Director (since 1993)
James C. Weeks............... 54 1971 President, Regional Newspaper Group of the Company (since
1993); Executive Vice President, Operations, Regional
Newspaper Group (1988 to 1993)
- ------------------------------
(1) During the past five years, all of the executive officers listed above
have held positions which were the same or substantially similar to those
they currently hold except as indicated above.
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required by this item appears at page F-29 of this Form
10-K.
ITEM 6. 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.
The information required by this item appears at pages F-4 to F-10 of this
Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears at pages F-2, F-3, pages F-11
to F-28 and page F-30 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. 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 section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" on page 8 and pages 10
to 14, 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 1997 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to pages
14 to 20, but only up to and not including the section entitled "Performance
Presentation", of the Company's Proxy Statement for the 1997 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 of the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference to page
14 and pages 17 to 20, but only up to and not including the section entitled
"Performance Presentation", of the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders.
15
PART IV
ITEM 14. EXHIBITS, 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-2, F-3 and F-11 to
F-28. The report of Deloitte & Touche LLP, Independent Public
Accountants, dated February 3, 1997, is set forth on page F-29 of this
Form 10-K.
(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-2, F-3 and
F-11 to F-28. 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
------------
Statements of Computation of Primary and Fully Diluted Net Income Per Share..... Exhibit 11
Independent Auditors' Consent................................................... Exhibit 23
Consolidated Schedules for the Three Years Ended December 29, 1996:
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 Commission upon request), and incorporated by reference herein).
(3.1) Certificate of Incorporation as amended by the Class A and
Class B stockholders and as restated on September 29, 1993 (filed as an
Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated
by reference herein).
(3.2) By-laws as amended through March 20, 1997.
(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.
16
(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 September 19, 1996 (filed as an Exhibit to the Company's 10-Q
dated November 12, 1996, and incorporated by reference herein).
(10.3) The Company's 1991 Executive Cash Bonus Plan, as amended
through September 19, 1996 (filed as an Exhibit to the Company's 10-Q
dated November 12, 1996, and incorporated by reference herein).
(10.4) The Company's Non-Employee Directors' Stock Option Plan, as
amended through September 19, 1996 (filed as an Exhibit to the Company's
10-Q dated November 12, 1996, and incorporated by reference herein).
(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) 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) 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).
(10.8) 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).
(10.9) 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).
(10.10) 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).
(10.11) 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).
(10.12) 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).
17
(10.13) 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).
(10.14) 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).
(10.15) API's Supplemental Executive Retirement Plan, as amended
effective September 15, 1993 (filed as an Exhibit to the Company's Form
10-K dated March 21, 1994, and incorporated by reference herein).
(10.16) 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).
(10.17) Form of Substituted Stock Option Agreement/Incentive 87 among
API, its predecessor company and certain employees (filed as Exhibit
10.29 to Post-Effective Amendment No. 1 filed August 11, 1989, to API's
Registration Statement on Form S-4 (Registration Statement No. 33-28373)
declared effective April 28, 1989, and incorporated by reference herein).
(10.18) Form of Substituted Stock Option Agreement/Incentive 88 among
API, its predecessor company and certain employees (filed as Exhibit
10.31 to Post-Effective Amendment No. 1 filed August 11, 1989, to API's
Registration Statement on Form S-4 (Registration Statement No. 33-28373)
declared effective April 28, 1989, and incorporated by reference herein).
(10.19) The Company's Deferred Executive Compensation Plan, as
amended through November 8, 1996.
(11) Statements of Computation of Primary and Fully-Diluted Net
Income Per Share.
(21) Subsidiaries of the Company.
(23) Consent of Deloitte & Touche LLP.
(27) Financial Data Schedule.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fiscal year
ended December 29, 1996.
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: March 28, 1997
(Registrant)
THE NEW YORK TIMES COMPANY
By: /S/ LAURA J. CORWIN
...............................
Laura J. Corwin, 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 (Chief Executive Officer), March 28, 1997
Director
JOHN F. AKERS Director March 28, 1997
DIANE P. BAKER Senior Vice President, March 28, 1997
Chief Financial Officer
and Treasurer
(Principal Financial Officer)
RICHARD L. GELB Director March 28, 1997
LOUIS V. GERSTNER, JR. Director March 28, 1997
MARIAN S. HEISKELL Director March 28, 1997
A. LEON HIGGINBOTHAM, JR. Director March 28, 1997
RUTH S. HOLMBERG Director March 28, 1997
ROBERT A. LAWRENCE Director March 28, 1997
RUSSELL T. LEWIS President (Chief Operating Officer) March 28, 1997
GEORGE B. MUNROE Director March 28, 1997
CHARLES H. PRICE II Director March 28, 1997
GEORGE L. SHINN Director March 28, 1997
DONALD M. STEWART Director March 28, 1997
STUART STOLLER Vice President, Corporate Controller March 28, 1997
(Principal Accounting Officer)
JUDITH P. SULZBERGER Director March 28, 1997
WILLIAM O. TAYLOR Director March 28, 1997
CYRUS R. VANCE Director March 28, 1997
19
APPENDIX
1996 FINANCIAL REPORT
THE NEW YORK TIMES COMPANY
1996 CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Contents Page
- --------------------------------------------------------------------------------
Financial Highlights F-1
Segment Information F-2
Management's Discussion and Analysis F-4
Consolidated Statements of Income F-11
Consolidated Balance Sheets F-12
Consolidated Statements of Cash Flows F-14
Consolidated Statements of Stockholders' Equity F-16
Notes to Consolidated Financial Statements F-17
Independent Auditors' Report F-29
Management's Responsibilities Report F-29
Market Information F-29
Quarterly Information F-30
Ten-Year Supplemental Financial Data F-31
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands except per share data Year Ended
-------------------------------------------------------------------------------
December 29, December 31,
------------- --------------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
REVENUES AND INCOME
Revenues $2,615,026 $2,409,069 $2,356,782 $2,018,606 $1,772,810
Operating profit 173,280 232,749 210,899 126,028 88,116
Income (Loss) before income taxes 197,909 233,839 388,736 48,108 (491)
Income (Loss) before net cumulative effect
of accounting changes 84,534 135,860 213,349 6,123 (11,272)
Net cumulative effect of accounting changes - - - - (33,437)
Net income (loss) 84,534 135,860 213,349 6,123 (44,709)
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Property, plant and equipment - net 1,358,029 1,266,609 1,158,751 1,112,024 902,755
Total assets 3,539,871 3,389,704 3,137,631 3,215,204 1,994,974
Long-term debt and capital lease obligations 636,632 637,873 523,196 460,063 206,911
Common stockholders' equity 1,623,379 1,610,349 1,543,539 1,598,883 999,630
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Income (Loss) before net cumulative
effect of accounting changes .87 1.40 2.05 .07 (.14)
Net cumulative effect of accounting changes - - - - (.43)
Net income (loss) .87 1.40 2.05 .07 (.57)
Dividends .57 .56 .56 .56 .56
Common stockholders' equity (end of year) 16.62 16.50 15.71 14.96 12.54
- -------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS (See notes below)
Operating profit to revenues 11% 10% 9% 6% 5%
Return on average stockholders' equity 10% 8% 7% - 2%
Return on average total assets 5% 4% 3% - 1%
Long-term debt and capital lease obligations
to total capitalization 28% 28% 25% 22% 17%
Current assets to current liabilities .73 .91 .91 .89 1.08
- -------------------------------------------------------------------------------------------------------------------------------
EMPLOYEES 12,800 12,300 12,800 13,000 10,100
- -------------------------------------------------------------------------------------------------------------------------------
The following transactions are NOT reflected in the respective year income
amounts used in the applicable key ratio calculations presented above:
In 1996, the Company recorded a $126.8 million pre-tax non-cash charge ($94.5
million after taxes or $.97 per share) 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 3).
The Company also recorded gains totaling $32.8 million ($17.5 million after
taxes or $.18 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 (see
Note 2).
In 1995, the Company sold small regional newspapers (see Note 2). The sales
resulted in a pre-tax gain of approximately $11.3 million ($5.0 million after
taxes or $.05 per share).
In 1994, the Company sold its Women's Magazines Division and U.K. golf
publications, and divested a minority interest in a Canadian paper mill (see
Note 2), which resulted in a net pre-tax gain of approximately $200.9 million
($103.3 million after taxes or $.99 per share).
For 1993, return on average stockholders' equity and return on average total
assets are less than 1% due to several factors (see F-31) which lowered net
income for the year. Amounts for 1996 through 1993 include The Boston Globe
since its acquisition on October 1, 1993.
In 1992, the Company closed The Gwinnett (Ga.) Daily News and sold the
residual assets. The closing and related sale resulted in a pre-tax loss of
$53.8 million ($37.1 million after taxes or $.47 per share). Net cumulative
effect of accounting changes reflects the 1992 adoption of the change in
methods of accounting for income taxes, postretirement benefits other than
pensions and postemployment benefits.
F-1
SEGMENT INFORMATION
- -------------------------------------------------------------------------------
The Company has classified its business into the following segments and equity
interests:
NEWSPAPER GROUP: The New York Times ("The Times"), The Boston Globe ("The
Globe"), 21 regional newspapers, newspaper distributors, a news service, a
features syndicate, TimesFax, licensing operations of The New York Times
databases/microfilm and New Ventures. New Ventures include projects developed in
electronic media by The Times and The Globe.
MAGAZINE GROUP: Numerous sports-related publications and related activities in
the sports/leisure field, and New Ventures such as computerized systems for golf
tee time reservations and on-line magazine services.
BROADCAST GROUP: Eight network-affiliated television stations and two radio
stations.
JOINT VENTURES: Equity ownership interests in a newsprint mill, a
supercalendered paper mill, a one-half interest in the International Herald
Tribune S.A.S., and a new venture. The new venture ceased operations in
December 1996.
- -----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Year Ended
----------------------------------------------------------------------------
December 29, December 31, December 31,
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
REVENUES
Newspapers $ 2,335,346 $ 2,161,022 $ 2,005,047
Magazines 161,077 162,941 280,417
Broadcast 118,603 85,106 71,318
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 2,615,026 $ 2,409,069 $ 2,356,782
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Newspapers $ 179,611 $ 212,634 $ 206,790
Magazines 24,778 28,741 19,560
Broadcast 30,596 18,943 13,626
Unallocated corporate expenses (61,705) (27,569) (29,077)
- -----------------------------------------------------------------------------------------------------------------------------
Total 173,280 232,749 210,899
Income from Joint Ventures 18,223 15,029 5,126
Interest expense, net of interest income 26,430 25,230 28,162
Net gain on dispositions 32,836 11,291 200,873
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 197,909 233,839 388,736
Income taxes 113,375 97,979 175,387
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 84,534 $ 135,860 $ 213,349
- -----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
Newspaper Group operating profit for 1996 and 1995 includes charges of $31.9
million and $8.5 million, respectively, for costs related to staff
reductions. The 1996 Broadcast Group operating profit includes charges of
$0.3 million for costs related to staff reductions. Unallocated corporate
expenses for 1996 and 1995 include a charge of $11.9 million and $1.6
million, respectively, for costs related to staff reductions.
The 1996 Newspaper Group and Magazine Group operating profits include $125.7
million and $1.1 million, respectively, of the non-cash SFAS 121 charge.
Magazine Group amounts for 1994 were affected by the dispositions of the
Women's Magazines Division and the U.K. golf publications (see Note 2). The
1996, 1995 and 1994 amounts include the amortization of the income relating
to a $40.0 million non-compete agreement, associated with the disposition of
the Women's Magazines Division, which is being recognized straight-line over
four years. Amortization of this income was $10.0 million, $10.0 million and
$4.2 million in 1996, 1995 and 1994, respectively.
Broadcast Group amounts for 1996 and 1995 were affected by the acquisitions of
new television stations (see Note 2).
F-2
SEGMENT INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Year Ended
------------------------------------------------------------------------------
December 29, December 31, December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Newspapers $ 138,630 $ 132,884 $ 135,387
Magazines (7,320) (7,000) 3,426
Broadcast 14,161 8,527 6,914
Corporate 2,022 1,151 784
Investment in Joint Ventures 384 380 380
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 147,877 $ 135,942 $ 146,891
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Newspapers $ 179,762 $ 196,096 $ 188,222
Magazines 2,554 736 906
Broadcast 4,438 4,093 3,013
Corporate 20,080 11,130 794
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 206,834 $ 212,055 $ 192,935
- ----------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Newspapers $ 2,733,243 $ 2,805,061 $ 2,710,031
Magazines 92,632 89,731 81,531
Broadcast 406,053 174,363 100,874
Corporate 170,688 191,343 136,840
Investment in Joint Ventures 137,255 129,206 108,355
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 3,539,871 $ 3,389,704 $ 3,137,631
- ----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
F-3
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
OVERVIEW
Advertising and circulation revenues accounted for approximately 69% and 23%,
respectively, of the Company's revenues in 1996. Other revenues primarily
include newspaper wholesaler distribution operations and database royalties.
The Company and the entire publishing industry were adversely affected
by the significant increases in newsprint and magazine paper prices
throughout 1995 and into the first quarter of 1996. Paper prices began to
decline during the second quarter of 1996 and were lower at 1996 year-end
than at 1995 year-end. Although newsprint prices are expected to drift upward
in 1997, they are not expected to be as volatile as in the last two years.
Per share amounts in the following Management's Discussion and Analysis
are computed on an after-tax basis.
RESULTS OF OPERATIONS: 1996 COMPARED WITH 1995
In 1996, the Company reported net income of $84.5 million, or $.87 per share,
compared with $135.9 million, or $1.40 per share, in 1995.
Exclusive of the special factors described below, net income for 1996
increased 36% to $185.9 million, or $1.91 per share, from net income for 1995
of $136.7 million, or $1.41 per share. The higher 1996 net income was
principally due to improved operations in the Newspaper and Broadcast Groups
and higher earnings from the Company's investments in paper mills.
Consolidated revenues for 1996 were $2.62 billion, an increase of 8.5%
over revenues of $2.41 billion in 1995. On a comparable basis, adjusted for
acquisitions/dispositions, annual revenues increased by approximately 8% in
1996 over 1995. The increase in revenues on a comparable basis was primarily
due to higher advertising and circulation rates at the Newspaper Group.
Operating profit before special factors rose to $344.2 million in 1996
from $242.8 million in 1995. The improvement in operating profit from the
Newspaper and Broadcast Groups was partially offset by incremental corporate
expenses associated with the Company's reengineering initiatives and higher
net development losses in new ventures.
Production costs and expenses for 1996 increased 3.3% to $1.35 billion
from $1.30 billion in 1995. The increase was due to higher salaries and
benefits, and increased depreciation expense associated with new equipment
offset, in part, by lower newsprint and magazine paper expenses.
Selling, general and administrative expenses for 1996 increased 10.9% to
$967.1 million from $871.9 million in 1995. The increase was primarily due
to higher severance charges, salaries and benefits, and increased
amortization expense associated with new acquisitions.
Included in 1996 operating costs and expenses is a $126.8 million charge
for an impairment loss (see Note 3 of notes to consolidated financial
statements).
Earnings for 1996 were affected by the following special factors:
- $44.1 million pre-tax charge ($.25 per share) for severance and
related costs resulting from work force reductions ("buyouts").
- $126.8 million pre-tax charge ($.97 per share) resulting from a
non-cash charge relating to Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for 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) resulting from the
realization of a gain contingency from the disposition of a paper mill
in a prior year ("Gain realization").
- $7.8 million pre-tax gain ($.04 per share) from the sale of the
Company's 110 Fifth Avenue building ("Sale of a building").
Earnings for 1995 were affected by the following special factors:
- $10.1 million pre-tax charge ($.06 per share) for buyouts.
- $11.3 million pre-tax gain ($.05 per share) resulting from the sale of
six small regional newspapers ("Sale of small newspapers").
The Company's earnings for the year before interest, income taxes,
depreciation and amortization ("EBITDA"), excluding the SFAS 121 charge and
gains on dispositions, rose to $466.1 million in 1996 from $383.7 million in
1995.
Interest expense, net of interest income, increased to $26.4 million from
$25.2 million in 1995. The increase was a result of higher debt levels incurred
for acquisitions, partially offset by higher levels of capitalized interest
associated with new construction.
Net gains on dispositions were $32.8 million in 1996 and $11.3 million in
1995. The 1996 results include the Gain realization and the Sale of a building
(see special factors described above). The 1995 results include the Sale of
small newspapers (see special factors described above).
The Company's annual effective tax rate was 44.7% in 1996, exclusive of
taxes associated with the gains and the SFAS 121 charge, as compared to 41.2% in
1995. The variation in the rate was primarily due to a favorable state tax
ruling in 1995.
The following discussion provides additional information with respect to
the Company's traditional operations and new ventures:
NEWSPAPER GROUP: The New York Times ("The Times"), The Boston Globe ("The
Globe"), 21 regional newspapers, newspaper distributors, a news service, a
features syndicate, TimesFax, licensing operations of The New York Times
databases/microfilm and New Ventures. New Ventures include projects developed in
electronic media by The Times and The Globe.
F-4
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Dollars in thousands) 1996 1995
- -------------------------------------------------------------------------------
REVENUES
Newspapers $ 2,326,784 $ 2,160,065
New Ventures 8,562 957
- -------------------------------------------------------------------------------
Total Revenues $ 2,335,346 $ 2,161,022
- -------------------------------------------------------------------------------
EBITDA
Newspapers $ 454,944 $ 354,154
New Ventures (11,011) (8,636)
- -------------------------------------------------------------------------------
Total EBITDA $ 443,933 $ 345,518
- -------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Newspapers $ 195,176 $ 221,685
New Ventures (15,565) (9,051)
- -------------------------------------------------------------------------------
Total Operating Profit $ 179,611 $ 212,634
- -------------------------------------------------------------------------------
The Newspaper Group's operating profit for 1996, excluding buyouts and the
SFAS 121 charge associated with the Group, rose to $337.2 million from $221.1
million in 1995, on revenues of $2.3 billion and $2.2 billion, respectively. The
8% increase in revenues for the year was primarily due to higher advertising and
circulation revenues as a result of higher rates. Due to the higher rates,
certain properties experienced softness in advertising and circulation volume.
Other revenue increased 26% for the year as the Newspaper Group acquired and
expanded its wholesale newspaper delivery operations. Operating profit for the
year improved despite a 6.3% increase in the Group's average cost of newsprint,
exclusive of a LIFO credit, over 1995.
Average circulation of daily newspapers on a comparable basis for the year
was as follows:
- -----------------------------------------------------------------------------
Weekday Sunday
- -----------------------------------------------------------------------------
(Copies in thousands) 1996 % Change 1996 % Change
- -----------------------------------------------------------------------------
AVERAGE CIRCULATION
The New York Times 1,102.9 -1.6 1,680.5 -1.9
The Boston Globe 472.2 -5.1 762.7 -3.4
Regional Newspapers 730.1 -3.1 789.7 -1.8
- -----------------------------------------------------------------------------
Advertising volume on a comparable basis for the year was as follows:
- -------------------------------------------------------------------------------
(Inches in thousands) 1996 % Change
- -------------------------------------------------------------------------------
ADVERTISING VOLUME (excluding preprints)
The New York Times 3,768.4 -1.1
The Boston Globe 2,951.2 +0.7
Regional Newspapers 15,560.6 +0.2
- -------------------------------------------------------------------------------
Advertising volume at The Times decreased 1.1% over 1995. Zoned, retail and
classified categories showed decreases of 5.1%, 6.4%, and 0.2%, respectively,
while national experienced an increase of 4.8%.
At The Globe, advertising volume for the year increased 0.7% over 1995.
Classified and zoned categories showed increases of 6.9% and 0.1%, respectively,
offset by decreases in retail and national categories of 5.5% and 3.7%,
respectively. Preprint distribution in 1996 was down 4.8% over 1995.
Advertising volume at the Regional Newspapers increased 0.2% over 1995.
Legal and classified categories showed increases of 11.9% and 4.0%,
respectively, offset by decreases in retail and national categories of 3.5% and
1.2%, respectively. Preprint distribution in 1996 was up 1.5% over 1995.
MAGAZINE GROUP: The Magazine Group is comprised of a number of sports-related
publications and related activities in the sports/leisure fields, and New
Ventures such as computerized systems for golf tee-time reservations and on-line
magazine services.
The revenues for the Group include a $40.0 million non-compete agreement
associated with the divestiture of the Women's Magazine Division, which is being
recognized straight-line over four years ending in July 1998.
- ----------------------------------------------------------------------------
(Dollars in thousands) 1996 1995
- ----------------------------------------------------------------------------
REVENUES
Sports/Leisure Magazines $ 150,039 $ 152,819
Non-Compete 10,000 10,000
New Ventures 1,038 122
- ----------------------------------------------------------------------------
Total Revenues $ 161,077 $ 162,941
- ----------------------------------------------------------------------------
EBITDA
Sports/Leisure Magazines $ 25,555 $ 22,876
New Ventures (7,026) (1,135)
- ----------------------------------------------------------------------------
Total EBITDA $ 18,529 $ 21,741
- ----------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Sports/Leisure Magazines $ 22,537 $ 19,971
Non-Compete 10,000 10,000
New Ventures (7,759) (1,230)
- ----------------------------------------------------------------------------
Total Operating Profit $ 24,778 $ 28,741
- ----------------------------------------------------------------------------
The Magazine Group's operating profit for 1996, excluding the SFAS 121
charge associated with the Group, was $25.8 million in 1996 compared with
$28.7 million in 1995, on revenues of $161.1 million and $162.9 million,
respectively. The decreases for the year were primarily related to the higher
net development losses from its new ventures. (See Recent Developments on
page F-9.)
Advertising pages, as reported to Publisher's Information Bureau, for Golf
Digest decreased 4.0% to 1,252 pages and for Tennis increased 3.6% to 743 pages.
BROADCAST GROUP: The Broadcast Group is comprised of eight network-affiliated
television stations and two radio stations.
- -------------------------------------------------------------------------
(Dollars in thousands) 1996 1995
- -------------------------------------------------------------------------
Revenues $ 118,603 $ 85,106
- -------------------------------------------------------------------------
EBITDA $ 44,757 $ 27,470
- -------------------------------------------------------------------------
Operating Profit $ 30,596 $ 18,943
- -------------------------------------------------------------------------
The Broadcast Group's operating profit, excluding buyouts associated with
the Group, was $30.9 million in 1996, compared with $18.9 million in 1995, on
revenues of $118.6 million and $85.1 million, respectively.
The revenue and operating profit increases were principally attributable
to the performance 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 ("New Television Stations"). These
three stations contributed $11.3 million of operating profit in 1996.
F-5
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- ------------------------------------------------------------------------------
JOINT VENTURES: Income from Joint Ventures increased to $18.2 million in 1996
from $15.0 million in 1995. The increase was primarily the result of higher
average selling prices for paper at the mills in which the Company has
investments, offset by losses incurred from a new venture. The new venture
ceased operations in December 1996.
RESULTS OF OPERATIONS: 1995 COMPARED WITH 1994
In 1995, the Company reported net income of $135.9 million, or $1.40 per share,
compared with net income of $213.3 million, or $2.05 per share, in 1994.
Exclusive of the special factors described below, annual earnings from
ongoing operations would have been $1.41 per share in 1995, compared with $1.06
per share in 1994, an increase of 33%. The improvement in ongoing operations in
1995 earnings was primarily due to higher revenues from the Company's newspaper
and broadcast properties and higher earnings from the Company's investments in
paper mills.
Consolidated revenues for 1995 increased to $2.41 billion from $2.36
billion in 1994. Excluding the revenues attributable to the operations divested
during 1995 and 1994, annual revenues on a comparable basis were up 8% over
1994. The growth in revenues for the year was driven by strong revenues at the
newspaper and broadcast properties.
Production costs and expenses for 1995 increased 3.3% to $1.30 billion from
$1.26 billion in 1994. The increase was primarily due to higher newsprint and
magazine paper expenses, and higher salaries and benefits expenses.
Selling, general and administrative expenses for 1995 decreased 1.3% to
$871.9 million from $883.2 million in 1994. The decrease was due to the absence
of costs and expenses associated with the 1995 and 1994 divestitures offset, in
part, by higher salaries and benefits costs and buyouts.
Earnings for 1995 were affected by the following special factors:
- $10.1 million pre-tax charge ($.06 per share) for buyouts.
- $11.3 million pre-tax gain ($.05 per share) on the Sale of small
newspapers.
Earnings for 1994 were affected by the following special factor:
- $200.9 million net pre-tax gain ($.99 per share) relating to the
divestitures of the Women's Magazines Division, U.K. golf publications
("Divested magazines") and a minority interest in Gaspesia Pulp &
Paper Company Ltd. ("Gaspesia"), a Canadian newsprint mill.
The Company's earnings for the year before interest, income taxes,
depreciation and amortization ("EBITDA"), excluding the net gains from the 1995
and 1994 divestitures, rose to $383.7 million from $362.9 million in the
comparable 1994 period.
Interest expense, net of interest income, declined to $25.2 million from
$28.2 million in 1994. The 1995 decline was due to higher levels of capitalized
interest in connection with new construction and a lower rate of interest on the
Company's outstanding debt, offset by higher debt balances.
Net gains on dispositions were $11.3 million in 1995 and $200.9 million in
1994. The 1995 results include the Sale of small newspapers and the 1994 results
include the net gains associated with the Divested magazines and Gaspesia.
Exclusive of taxes related to the 1995 and the 1994 divestitures, the
annual effective income tax rate for 1995 was 41.2%, as compared with 41.4% in
1994. The 1995 tax rate includes the effects of a 1995 favorable state tax
ruling. The 1994 rate includes the utilization of capital loss carryforwards.
The following discussion provides additional information with respect to
the Company's traditional operations and new ventures:
NEWSPAPER GROUP:
- -------------------------------------------------------------------------------
(Dollars in thousands) 1995 1994
- -------------------------------------------------------------------------------
REVENUES
Newspapers $ 2,160,065 $ 2,005,047
New Ventures 957 -
- -------------------------------------------------------------------------------
Total Revenues $ 2,161,022 $ 2,005,047
- -------------------------------------------------------------------------------
EBITDA
Newspapers $ 354,154 $ 342,177
New Ventures (8,636) -
- -------------------------------------------------------------------------------
Total EBITDA $ 345,518 $ 342,177
- -------------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Newspapers $ 221,685 $ 206,790
New Ventures (9,051) -
- -------------------------------------------------------------------------------
Total Operating Profit $ 212,634 $ 206,790
- -------------------------------------------------------------------------------
Excluding buyouts associated with the Group, operating profit in 1995 was
$221.1 million compared with $206.8 million in 1994. Revenues increased to $2.16
billion in 1995 from $2.01 billion in the prior year. Operating profit improved
despite a significant increase in newsprint prices over 1994. Increased
advertising and circulation rates and cost controls enabled the Group to
overcome a $76.2 million increase for the year in newsprint costs (net of
conservation programs).
Revenues increased approximately 8% for the year. The increase was
attributable to higher advertising rates and volume, higher circulation
revenues and database royalties. The Times experienced a 15% increase in
circulation revenues while The Globe recorded an 11% increase for the year.
At the 21 Regional Newspapers, circulation revenue grew 7% for the year.
F-6
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- -------------------------------------------------------------------------------
Average circulation of daily newspapers on a comparable basis for the year
was as follows:
- --------------------------------------------------------------------------
Weekday Sunday
- --------------------------------------------------------------------------
(Copies in thousands) 1995 % Change 1995 % Change
- --------------------------------------------------------------------------
AVERAGE CIRCULATION
The New York Times 1,120.7 -1.9 1,712.6 -1.8
The Boston Globe 497.7 -1.3 789.3 -1.9
Regional Newspapers 753.7 -2.3 803.9 -1.6
- --------------------------------------------------------------------------
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. Advertising volume on a comparable basis for the year was as
follows:
- ------------------------------------------------------------------------------
(Inches in thousands) 1995 % Change
- ------------------------------------------------------------------------------
ADVERTISING VOLUME (excluding preprints)
The New York Times 3,831.2 +2.6
The Boston Globe 2,946.9 +2.2
Regional Newspapers 15,525.1 +1.1
- ------------------------------------------------------------------------------
Advertising volume at The Times increased 2.6% over 1994. Zoned and
national advertising categories increased 14.6% and 1.3%, respectively, while
retail and classified advertising experienced decreases of 3.8% and 2.8%,
respectively.
At The Globe, advertising volume for the year increased 2.2% over 1994.
Advertising increased in all categories except retail, which declined 2.1%.
Advertising volume for the 21 Regional Newspapers increased 1.1% over 1994.
Classified advertising increased 8.0%, while the retail category decreased 2.1%.
MAGAZINE GROUP:
- -------------------------------------------------------------------------
(Dollars in thousands) 1995 1994
- -------------------------------------------------------------------------
REVENUES
Sports/Leisure Magazines $ 152,819 $ 144,777
New Ventures 122 -
Non-Compete 10,000 4,167
1994 Divested Magazines - 131,473
- -------------------------------------------------------------------------
Total Revenues $ 162,941 $ 280,417
- -------------------------------------------------------------------------
EBITDA
Sports/Leisure Magazines $ 22,876 $ 21,967
New Ventures (1,135) -
1994 Divested Magazines - 1,019
- -------------------------------------------------------------------------
Total EBITDA $ 21,741 $ 22,986
- -------------------------------------------------------------------------
OPERATING PROFIT (LOSS)
Sports/Leisure Magazines $ 19,971 $ 19,439
New Ventures (1,230) -
Non-Compete 10,000 4,167
1994 Divested Magazines - (4,046)
- -------------------------------------------------------------------------
Total Operating Profit $ 28,741 $ 19,560
- -------------------------------------------------------------------------
The revenues for the Group include a $40.0 million non-compete agreement,
associated with the divestiture of the Women's Magazine Division, which is being
recognized straight-line over four years beginning August 1994.
Operating profit for the Group was $28.7 million in 1995, compared with
$19.6 million in 1994, on revenues of $162.9 million and $280.4 million,
respectively. The decrease in revenues for the year was primarily due to the
revenues attributable to the Women's Magazines Division and the U.K. golf
publications, which were sold in the third quarter of 1994.
Excluding the operations of the 1994 Divested magazines and the non-compete
income, revenues for 1995 increased approximately 6% due to higher advertising
revenues at Golf Digest and Golf World USA offset, in part, by sluggish
advertising at Tennis magazine. Operating profit for the Group increased
slightly due to improved revenues offset by higher paper prices and subscription
costs.
Advertising pages, as reported to Publisher's Information Bureau, for Golf
Digest decreased 1.3% to 1,304 pages and for Tennis decreased 12.9% to 717
pages.
BROADCAST GROUP: The Broadcast Group consisted of six network-affiliated
television stations and two radio stations.
- ----------------------------------------------------------------------------
(Dollars in thousands) 1995 1994
- ----------------------------------------------------------------------------
Revenues $85,106 $71,318
- ----------------------------------------------------------------------------
EBITDA $27,470 $20,540
- ----------------------------------------------------------------------------
Operating Profit $18,943 $13,626
- ----------------------------------------------------------------------------
The Broadcast Group's operating profit increased 39% over 1994. The Group's
operating profit was $18.9 million in 1995, compared with $13.6 million in 1994,
on revenues of $85.1 million and $71.3 million, respectively. Increased results
for the year were due to higher local advertising revenues, higher network
compensation and the added operations of WTKR-TV, Norfolk, Va., which was
acquired in June 1995.
JOINT VENTURES: Income from Joint Ventures was $15.0 million in 1995 compared
with $5.1 million in 1994. The 1995 improvement resulted principally from higher
selling prices for paper at the mills in which the Company has investments.
F-7
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $426.0 million in 1996. Such
cash, in addition to borrowed funds, was primarily used for acquisitions, the
construction of production and distribution facilities, stock repurchases and
the payment of dividends to stockholders. 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 .73 at December 29, 1996, and .91 at December 31, 1995. The decrease in
the ratio of current assets to current liabilities is primarily related to an
increase in current liabilities which resulted, in part, from the accrual of
buyouts at the end of 1996 (see Other on page F-9), commercial
paper-borrowings and a decrease in inventories. However, such increases in
current liabilities and the decrease in inventories aided the improvement in
net cash provided by operations. In 1997, the Company does not anticipate the
same level of net cash provided by operations as that resulting from working
capital improvements in 1996. Long-term debt and capital lease obligations as
a percentage of total capitalization was 28% at both December 29, 1996 and
December 31, 1995.
FINANCING: In July 1996, the Company entered into a $200.0 million revolving
credit agreement and a $100.0 million revolving credit agreement with a group of
banks ("New Agreements"). The New Agreements replaced existing revolving credit
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. The facilities covered by the New Agreements will be used for
acquisitions and general corporate purposes. Interest is payable on a quarterly
basis for both agreements. The New Agreements include provisions which require,
among other matters, specified levels of stockholders' equity. At December 29,
1996, approximately $900.0 million of stockholders' equity was unrestricted
under the New Agreements.
In July 1996, the Company increased its ability to issue commercial paper
from $200.0 to $300.0 million, which is supported by the Company's New
Agreements. In July 1996, the Company utilized approximately $143.0 million of
its commercial paper facility to finance the acquisition of the New Television
Stations. At December 29, 1996, the Company had approximately $45.5 million in
outstanding commercial paper with original maturities ranging up to 82 days, at
a weighted average interest rate of approximately 5.5%.
In 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.
ACQUISITIONS: In July 1996, the Company acquired the New Television Stations.
The aggregate cost of the acquisition was approximately $234.1 million, of
which approximately $233.6 million was paid in cash ($143.0 million was
financed using the Company's commercial paper facility) and the balance
representing assumed liabilities.
In 1996, the Company acquired newspaper distribution businesses that
distribute The Times, other newspapers and periodicals throughout the New York
City metropolitan area. The aggregate cost of these acquisitions was
approximately $31.7 million, of which approximately $14.1 million was paid in
cash, $9.8 million in notes and accounts receivable which were forgiven, and the
balance representing assumed liabilities.
CAPITAL EXPENDITURES: The Company is constructing a new production and
distribution facility at College Point in New York City, for the production
of The Times and a new printing facility in Lakeland, Florida, for a regional
newspaper. The Company estimates that the cost of the new facilities will be
approximately $383.0 million, exclusive of estimated capitalized interest of
$37.0 million. At December 29, 1996, approximately $307.0 million had been
incurred, exclusive of capitalized interest for these projects. Construction
at College Point began in August 1994 and completion is expected by the
middle of 1997. Construction in Lakeland began in June 1995 and completion is
expected by the end of 1997.
The Company currently estimates that, inclusive of the College Point and
Lakeland facilities, capital expenditures for 1997 will range from $170.0
million to $190.0 million, exclusive of capitalized interest.
STOCK REPURCHASE PROGRAM: At January 1, 1996, approximately $18.0 million
remained under a $50.0 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 1996, the Company spent
approximately $43.8 million under these authorizations. In February 1997, the
Board of Directors authorized expenditures of an additional $150.0 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. To date, approximately $152.7 million remain from
the authorizations.
IMPAIRMENT LOSS: The $126.8 million SFAS 121 charge recorded in the third
quarter of 1996 had 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 certain 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 changes on
depreciation and amortization expense is not expected to have a material affect
on net income in the future.
F-8
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
- -------------------------------------------------------------------------------
RECENT DEVELOPMENTS: In March 1997, the Company announced its intention to sell
the NYT Custom Publishing division and the following sports/leisure magazines:
Tennis, Tennis Buyer's Guide, Cruising World, Sailing World, Snow Country and
Snow Country Business. The sale of these businesses will not have a material
impact on the future results of operations or the financial position of the
Company.
NEW ACCOUNTING PRONOUNCEMENTS: In March 1997, the Financial Accounting
Standards Board issued SFAS No. 128, Earnings Per Share ("SFAS 128"),
effective for financial statements issued for periods ending after December
15, 1997. SFAS 128 will eliminate the required disclosure of primary earnings
per share which includes the dilutive effect of stock options, warrants and
other convertible securities ("common stock equivalents") and instead require
reporting of "basic" earnings per share, which will exclude common stock
equivalents. Additionally, SFAS 128 changes the methodology for fully diluted
earnings per share. Under the pronouncement, the Company anticipates that
future reported earnings per share will be higher than under current rules,
assuming stock prices remain at current or higher levels. Earnings per share
presented in these financial statements would not be affected under the new
pronouncement.
OTHER: At December 29, 1996 and December 31, 1995, approximately $49.1 million
and $17.5 million of cash payments have not yet been made from prior charges for
buyouts. The cash payments 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
This Annual Report on 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 future business
prospects, revenues, working capital, liquidity, capital needs, interest costs,
and income are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward-looking
statements, due to the following factors, among other risks and factors
identified from time to time in the Company's filings with the SEC:
ADVERTISING REVENUES: Advertising revenue is the Company's most significant
source of revenue. Competition from other forms of media available in the
Company's respective markets, including direct marketing, affects the Company's
ability to attract and retain advertisers and to increase advertising rates.
In addition, advertising and thus the Company's quarterly consolidated
results are seasonal in nature. Traditionally, second-quarter and
fourth-quarter advertising volume is higher than in the first and third
quarters. National and local economic conditions, most particularly in the
New York City and Boston metropolitan regions, influence the Company's
retail, national and, most particularly, classified advertising revenue.
CIRCULATION REVENUES: Circulation revenue 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 respective 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.
PAPER PRICES: Newsprint and magazine paper are the Company's most important raw
materials and represent a significant component of the Company's cost of goods
sold. To the extent that such raw material prices increase materially, the
Company's operating results could be adversely affected.
LABOR RELATIONS: Advances in technology and other factors have allowed the
Company to realize cost savings by reducing the size of its overall workforce.
There is no assurance that the Company will continue to be able to realize cost
savings in such manner. 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 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 not only by the Company's
efforts, but 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 which fall outside its preferred parameters if such
properties are deemed sufficiently attractive to the Company. 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-9
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONCLUDED)
PRODUCT PORTFOLIO: 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.
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 is expected to issue rules
in 1997 under which all television stations will change to a new system of
digital broadcasting. The direct hardware costs of this change will be
substantial, and the new digital transmission systems to be used by
television stations, cable systems and direct broadcast satellites will
greatly increase the number of electronic video services with which the
Company's stations compete.
The foregoing list of factors should not be construed as exhaustive or as
any admission regarding the adequacy of disclosures made by the Company prior to
the date hereof.
F-10
CONSOLIDATED STATEMENTS OF INCOME
- ----------------------------------------------------------------------------------------------------------
Dollars and shares in thousands except per share data Year Ended
-------------------------------------------------------
December 29, December 31, December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
REVENUES
Advertising $ 1,798,498 $ 1,672,598 $ 1,656,999
Circulation 593,627 551,985 545,854
Other 222,901 184,486 153,929
- ----------------------------------------------------------------------------------------------------------
Total 2,615,026 2,409,069 2,356,782
- ----------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs
Raw materials 364,237 368,152 304,360
Wages and benefits 557,543 537,159 529,701
Other 426,060 399,107 428,663
- ----------------------------------------------------------------------------------------------------------
Total 1,347,840 1,304,418 1,262,724
Selling, general and administrative expenses 967,143 871,902 883,159
Impairment loss 126,763 - -
- ----------------------------------------------------------------------------------------------------------
Total 2,441,746 2,176,320 2,145,883
- ----------------------------------------------------------------------------------------------------------
OPERATING PROFIT 173,280 232,749 210,899
Income from Joint Ventures 18,223 15,029 5,126
Interest expense, net of interest income 26,430 25,230 28,162
Net gain on dispositions 32,836 11,291 200,873
- ----------------------------------------------------------------------------------------------------------
Income before income taxes 197,909 233,839 388,736
Income taxes 113,375 97,979 175,387
- ----------------------------------------------------------------------------------------------------------
NET INCOME $ 84,534 $ 135,860 $ 213,349
- ----------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 97,293 96,854 104,070
- ----------------------------------------------------------------------------------------------------------
Per share of common stock
Net income $ .87 $ 1.40 $ 2.05
Dividends .57 .56 .56
- ----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
F-11
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------------
December 29, December 31,
1996 1995
- -----------------------------------------------------------------------------------------------------------------------
ASSETS Dollars in thousands
- -----------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and short-term investments (at cost which approximates market:
1996, $157,000; 1995, $56,891,000) $ 39,103 $ 91,442
Accounts receivable (net of allowances: 1996, $31,312,000; 1995, $25,865,000) 309,164 277,974
Inventories 33,808 42,844
Deferred subscription costs 12,308 10,333
Other current assets 84,389 50,035
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 478,772 472,628
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT IN JOINT VENTURES 137,255 129,206
- ----------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Land 64,384 65,188
Buildings, building equipment and improvements 646,029 649,131
Equipment 1,057,555 956,890
Construction and equipment installations in progress 397,181 336,264
- ----------------------------------------------------------------------------------------------------------------------
Total - at cost 2,165,149 2,007,473
Less accumulated depreciation 807,120 740,864
- ----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 1,358,029 1,266,609
- ----------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS ACQUIRED
Costs in excess of net assets acquired 1,225,868 1,383,687
Other intangible assets acquired 419,426 218,646
- ----------------------------------------------------------------------------------------------------------------------
Total 1,645,294 1,602,333
Less accumulated amortization 207,580 207,489
- ----------------------------------------------------------------------------------------------------------------------
Intangible assets acquired - net 1,437,714 1,394,844
- ----------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS ASSETS 128,101 126,417
- ----------------------------------------------------------------------------------------------------------------------
Total $ 3,539,871 $ 3,389,704
- ----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
F-12
- -------------------------------------------------------------------------------------------------------------------------------
December 29, December 31,
1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY Dollars in thousands
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Commercial paper outstanding $ 45,500 $ -
Accounts payable 171,853 156,722
Accrued payroll and other related liabilities 84,458 74,560
Accrued expenses 258,468 200,281
Unexpired subscriptions 90,059 81,919
Current portion of capital lease obligations 3,359 3,139
- ------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 653,697 516,621
- ------------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES
Long-term debt 589,693 589,193
Capital lease obligations 46,939 48,680
Deferred income taxes 188,560 181,984
Other 435,850 441,124
- ------------------------------------------------------------------------------------------------------------------------------
Total other liabilities 1,261,042 1,260,981
- ------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
5 1/2 percent cumulative prior preference stock of $100 par value - authorized
110,000 shares; outstanding: 1996 and 1995, 17,530 shares 1,753 1,753
Serial preferred stock of $1 par value - authorized 200,000 shares - none issued - -
Common stock of $.10 par value
Class A - authorized 200,000,000 shares; issued: 1996, 110,622,041 shares;
1995, 108,950,897 shares (including treasury shares: 1996, 13,349,205; 1995, 11,775,295) 11,062 10,895
Class B, convertible - authorized 600,000 shares; issued: 1996, 568,259 shares;
1995, 568,919 shares (including treasury shares: 1996 and 1995, 139,943) 57 57
Additional capital 663,007 618,570
Earnings reinvested in the business 1,290,899 1,262,022
Common stock held in treasury, at cost (341,646) (281,195)
- ------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,625,132 1,612,102
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 3,539,871 $ 3,389,704
- ------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
F-13
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Year Ended
----------------------------------------------
December 29, December 31, December 31,
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 84,534 $ 135,860 $ 213,349
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 108,787 102,271 104,624
Amortization - net 39,090 33,671 42,267
Impairment loss 126,763 - -
Equity in operations of Joint Ventures - net (21,713) (20,064) (3,240)
Cash distributions and dividends from Joint Ventures 16,957 7,980 8,224
Net gain on dispositions (32,836) (11,291) (200,873)
Proceeds from non-compete agreement - - 40,000
Deferred income taxes (6,005) (9,225) (33,732)
Changes in operating assets and liabilities, net of acquisitions
Increase in accounts receivable - net (24,192) (32,762) (18,573)
Decrease (Increase) in inventories 9,036 (12,723) (4,035)
(Increase) Decrease in deferred subscription costs and other current assets (25,821) 51,939 (17,820)
Increase in accounts payable 15,870 28,200 17,481
Increase (Decrease) in accrued payroll and accrued expenses 87,854 45,275 (6,359)
Increase in unexpired subscriptions 8,093 4,832 18,027
Other - net 39,615 (27,665) 19,839
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 426,032 296,298 179,179
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of BPI Communications, L.P. - - 55,367
Net proceeds from dispositions 16,878 27,536 243,776
Businesses acquired, net of cash acquired (247,756) (71,214) -
Additions to property, plant and equipment (211,320) (200,688) (186,203)
Purchases of marketable securities - (39,370) (88,358)
Proceeds from sales of marketable securities - 39,370 88,358
Other investing proceeds 24,815 4,960 7,725
Other investing payments (4,357) (17,873) (8,505)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (421,740) (257,279) 112,160
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Commercial paper borrowings 45,500 - (62,340)
Long-term obligations
Increase - 400,000 60,405
Reduction (3,377) (275,727) (2,707)
Capital shares
Issuance - 1,908 2,577
Repurchase (43,273) (49,987) (232,815)
Dividends paid to stockholders (55,532) (54,291) (58,287)
Other financing proceeds (payments) 51 (10,899) 1,189
- -------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (56,631) 11,004 (291,978)
- -------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS (52,339) 50,023 (639)
CASH AND SHORT-TERM INVESTMENTS AT THE BEGINNING OF THE YEAR 91,442 41,419 42,058
- -------------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT THE END OF THE YEAR $ 39,103 $ 91,442 $ 41,419
- -------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements and supplemental disclosures to
consolidated statements of cash flows.
F-14
SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------------
Dollars in thousands Year Ended
----------------------------------------------------------
December 29, December 31, December 31,
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING TRANSACTIONS
Capital lease assets and obligations incurred $ 1,929 $ 2,495 $ 5,990
============ =========== ===========
Businesses acquired
Fair value of assets acquired $ 267,536 $ 72,610
Assets forgiven (9,833) -
Liabilities assumed (9,498) (1,396)
Liabilities incurred, net of payments (449) -
------------ -----------
Net cash paid $ 247,756 $ 71,214
============ ===========
Issuance of common shares - net $ 23,155 $ 22,477 $ 38,897
============ =========== ===========
CASH FLOW INFORMATION
Cash payments during the year for
Interest (net of amount capitalized) $ 24,367 $ 29,277 $ 36,320
============ =========== ==========
Income taxes $ 133,871 $ 86,851 $ 220,973
============ =========== ===========
- -------------------------------------------------------------------------------------------------------------------
Amounts in these statements of cash flows are presented on a cash basis and may
differ from those shown in other sections of the financial statements.
During 1996, federal tax authorities issued a favorable ruling on matters
affecting The Boston Globe which had originated prior to its acquisition in
1993. As a result, accrued federal taxes were reduced by $25,000,000. In
accordance with SFAS 109, this tax benefit was excluded from income and was
applied as a reduction of goodwill.
For 1994, the increase in income taxes paid (and corresponding decrease in net
cash provided by operating activities) is in large part due to an increase in
estimated income tax payments of approximately $113,500,000 related to the net
gain on dispositions in 1994. Under Statement of Financial Accounting Standards
No. 95, "Statement of Cash Flows," all income tax payments are included in
determining net cash flow from operating activities, but the net cash proceeds
received from the dispositions are reported as an investing cash inflow.
F-15
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands
except per share data
Common
Capital Stock Earnings Stock
--------------------------------- Reinvested Held in
5 1/2 % Class A Class B Additional in the Treasury,
Preference Common Common Capital Business at cost Total
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1994 $1,784 $10,768 $57 $599,758 $1,022,958 $(34,658) $1,600,667
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 213,349 213,349
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends, preference - $5.50 per share (97) (97)
Dividends, common - $.56 per share (58,190) (58,190)
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of shares:
Retirement units, etc. -
10,889 Class A shares
from treasury (128) 271 143
Employee stock purchase plan - 1,191,323
Class A shares 2 (7,237) 29,119 21,884
Stock options - 223,700 Class A shares 35 6,928 (3,385) 3,578
Stock conversions - 1,503 shares - -
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of company stock:
10,043,900 Class A shares
307 5 1/2 percent
preference shares (31) 10 (236,245) (236,266)
Proceeds from the sale of put options 1,189 1,189
Equity put option obligations (2,660) (2,660)
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation 1,695 1,695
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 1,753 10,805 57 597,860 1,179,715 (244,898) 1,545,292
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 135,860 135,860
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends, preference - $5.50 per share (96) (96)
Dividends, common - $.56 per share (54,195) (54,195)
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of shares:
Retirement units, etc. -
21,421 Class A shares
from treasury (308) 533 225
Employee stock purchase plan - 1,100,348
Class A shares 1 (4,852) 26,023 21,172
Stock options - 297,569 Class A shares 89 22,925 (16,317) 6,697
Stock conversions - 1,202 shares - -
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of company stock: 2,054,904 Class A shares (46,536) (46,536)
Proceeds from the sale of put options 285 285
Fulfilled equity put option obligations 2,660 2,660
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation 738 738
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 1,753 10,895 57 618,570 1,262,022 (281,195) 1,612,102
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 84,534 84,534
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends, preference - $5.50 per share (96) (96)
Dividends, common - $.57 per share (55,436) (55,436)
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of shares:
Retirement units, etc. - 16,127 Class A shares
from treasury (271) 383 112
Employee stock purchase plan - 967,125
Class A shares 729 22,707 23,436
Stock options - 508,222 Class A shares 167 43,928 (39,702) 4,393
Stock conversions - 660 shares - -
- -----------------------------------------------------------------------------------------------------------------------------------
Purchase of company stock: 1,394,900 Class A shares (43,839) (43,839)
Proceeds from the sale of put options 51 51
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation (125) (125)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 29, 1996 $1,753 $11,062 $57 $663,007 $1,290,899 $(341,646) $1,625,132
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
F-16
NOTES TO 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 broadcast. 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 generally is 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.
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. Costs in excess of net assets acquired consist of
excess costs of businesses acquired over values assigned to their net
tangible assets and other intangible assets. The Company evaluates quarterly
whether there has been a permanent impairment in any of its intangible
assets, inclusive of goodwill. An impairment in value will be considered to
have occurred when it is determined that the undiscounted future operating
cash flows generated by the acquired businesses are not sufficient to recover
the carrying values of such intangible assets. If it has been determined that
an impairment in value has occurred, the excess of the purchase price over
the net assets acquired and intangible assets would be written down to an
amount which will be equivalent to the present value of the future operating
cash flows to be generated by the acquired businesses. The excess costs which
arose from acquisitions after October 31, 1970 are being amortized by the
straight-line method principally over 40 years. The remaining portion of such
excess, which arose from acquisitions before November 1, 1970 (approximately
$13,000,000), is not being amortized since in the opinion of management there
has been no diminution in value. Other intangible assets acquired consist
principally of advertiser and subscriber relationships and mastheads which
are being amortized over their remaining lives, ranging from 5 to 40 years.
The general policy relating to intangible assets is a life of 5 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 the year-end exchange rates. Results of operations are
translated at the average rates of exchange in effect during the year. The
resultant translation adjustment is included as a component of stockholders'
equity.
EARNINGS PER SHARE. Earnings per share is computed after preference dividends
and is based on the weighted average number of shares of Class A and Class B
Common Stock outstanding during each year. The effect of shares issuable
under the Company's Incentive Plans (see Note 12), including stock options,
is not material and therefore is excluded from the computation.
CASH AND SHORT-TERM INVESTMENTS. For purposes of the Consolidated Statements
of Cash Flows, the Company considers all highly liquid debt instruments
purchased with maturities of three months or less to be cash equivalents. The
Company has overdraft positions at certain banks as a result of outstanding
checks, which have been reclassified to accounts payable.
DERIVATIVES. The Company enters into foreign exchange contracts as a hedge
against foreign accounts payable. Market value gains and losses are
recognized, and the resulting credit or debit offsets foreign exchange gains
on those payables. As of December 29, 1996, these contracts were immaterial.
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.
NEW ACCOUNTING PRONOUNCEMENTS. In 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of
("SFAS 121") (see Note 3) and the disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123") (see Note 12).
In March 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share ("SFAS 128"), effective for financial statements issued
for periods ending after December 15, 1997. SFAS 128 will eliminate the
required disclosure of primary earnings per share which includes the dilutive
effect of stock options, warrants and other convertible securities ("common
stock equivalents") and instead require reporting of "basic" earnings per
share, which will exclude common stock equivalents. Additionally, SFAS 128
changes the methodology for fully diluted earnings per share. Under the
pronouncement, the Company anticipates that future reported earnings per
share will be higher than under current rules, assuming stock prices remain
at current or higher levels. Earnings per share presented in these financial
statements would not be affected under the new pronouncement.
F-17
- -------------------------------------------------------------------------------
2. ACQUISITIONS/DISPOSITIONS
ACQUISITIONS: In July 1996, the Company acquired KFOR-TV in Oklahoma City,
Oklahoma, and WHO-TV in Des Moines, Iowa ("New Television Stations"). The
aggregate cost of the acquisition was approximately $234,075,000, of which
approximately $233,626,000 was paid in cash and the balance representing assumed
liabilities. The purchases resulted in increases in intangible assets of
approximately $192,644,000 (consisting primarily of network affiliation
agreements, Federal Communications Commission ("FCC") licenses and other
intangible assets), property, plant and equipment of $33,532,000, other
assets of $9,687,000, and assumed liabilities of $1,788,000.
In 1996, the Company acquired newspaper distribution businesses that
distribute The Times, other newspapers and periodicals throughout the New York
City metropolitan area. The aggregate cost of these acquisitions was
approximately $31,673,000, of which approximately $14,130,000 was paid in cash,
$9,833,000 in notes and accounts receivable which were forgiven, and the balance
representing assumed liabilities. The purchase resulted in increases in
intangible assets of approximately $28,644,000 (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
aggregate net cost of the acquisition was $71,299,000 which was paid in cash.
The purchase resulted in increases in other 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 $1,678,000.
These acquisitions have been accounted for by the purchase method. The
preliminary purchase cost allocations for the above-mentioned acquisitions are
subject to adjustment when additional information concerning asset and liability
valuations is obtained. The final asset and liability fair values may differ
from those set forth in the accompanying consolidated balance sheet at December
29, 1996, however, the changes are not expected to have a material effect on the
consolidated financial position of the Company. The consolidated financial
statements include the operating results of these acquisitions subsequent to
their respective dates of acquisition. The foregoing acquisitions, if they had
occurred on January 1 of the year prior to acquisition, would not have had a
material impact on the results of operations.
DISPOSITIONS: In connection with the divestiture of a newsprint mill in 1991,
the Company made a loan commitment of up to $26,500,000 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 realized a $25,085,000 pre-tax gain ($13,292,000 after taxes, or
$.14 per share) resulting from the realization of a gain contingency from the
divestiture of the mill.
In June 1996, the Company sold the 110 Fifth Avenue building in New York
City which the Women's Magazine Division formerly occupied. The sale resulted in
a $7,751,000 pre-tax gain ($4,240,000 after taxes, or $.04 per share).
In the third quarter of 1995, the Company completed the sales of six small
regional newspapers: The Daily Commercial (Leesburg, FL); The Daily Corinthian
(Corinth, MS), The Messenger (Madisonville, KY), The Lenoir News-Topic (Lenoir,
NC), The State Gazette (Dyersburg, TN) and The Banner-Independent (Booneville,
MS). The sales resulted in a net pre-tax gain of approximately $11,300,000
($5,000,000 after taxes, or $.05 per share). In May 1995, the Company sold The
York County Coast Star (Kennebunk, ME). The sale did not have a material effect
on the Company's consolidated financial statements. These dispositions will not
have a material impact on the future operations of the Company.
In December 1994, the Company divested its minority interest in Gaspesia
Pulp & Paper Company Ltd. ("Gaspesia"), a Canadian newsprint mill. The Company's
49% interest was transferred to Abitibi-Price, Inc., the majority owner. In
connection with the transfer, a pre-tax charge of approximately $3,100,000 ($.02
per share) was recorded. In 1993, the Company wrote down its investment in
Gaspesia by $47,000,000 ($.56 per share) to reflect its net realizable value.
In July and August 1994, the Company completed the sales of its Women's
Magazines Division and U.K. golf publications, respectively. These transactions
resulted in a pre-tax gain of approximately $204,000,000 ($1.01 per share). In
connection with the sale of the Women's Magazines Division, the Company entered
into a four-year non-compete agreement, for which it received $40,000,000. This
amount is being recognized as operating income, on a straight-line basis, over a
four-year period commencing with the closing of the sale on July 26, 1994.
The divestitures of the Women's Magazines Division, U.K. golf
publications and the minority interest in Gaspesia resulted in a net pre-tax
gain of $200,900,000 ($103,300,000 after taxes, or $.99 per share).
Pro forma operating results for the year ended December 31, 1994, had the
magazines sales occurred as of January 1, 1994 were as follows: revenues of
$2,231,942,000; net income of $115,518,000; and net income per share of $1.11.
The above pro forma results are not necessarily indicative of the operating
results that would have occurred had the sales taken place as of the beginning
of the period provided, nor necessarily indicative of results that may be
achieved in the future. The gain on the sales is not included in the above pro
forma operating results.
In February 1994, the Company completed the sale of BPI Communications,
L.P., a partnership in which the Company acquired a one-third interest through
the 1993 acquisition of The Boston Globe. The Company received approximately
$55,000,000 in 1994 from the sale. For financial reporting purposes, no gain or
loss was recognized on the sale.
F-18
- -------------------------------------------------------------------------------
3. 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 SFAS 121 which was
principally, in concept, the accounting policy used by the Company in prior
years. As a result of the Company's 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 a pre-tax non-cash charge of
$126,763,000 ($94,500,000 after-tax, or $.97 per share).
The SFAS 121 charge had 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 expected to have a material affect
on net income in the future.
- -------------------------------------------------------------------------------
4. 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. The new venture ceased
operations in December 1996. The results of IHT and the new venture are not
material to the operations of the Company.
The Forest Products Investments consist of a newsprint company, Donohue
Malbaie Inc. ("Malbaie"), and a partnership operating a supercalendered paper
mill in Maine, Madison Paper Industries ("Madison") (collectively referred to
herein as "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 $6,200,000 and
$3,650,000, in 1996 and 1995, respectively. No distributions were received in
1994. Loans to Madison by the 80%-owned subsidiary of the Company totaled
$1,769,000, $1,882,000 and $1,523,000, in 1996, 1995 and 1994, respectively. No
contributions were made to Madison in 1996, 1995 or 1994.
The Company received distributions from Malbaie of $10,757,000, $4,330,000
and $8,224,000 in 1996, 1995 and 1994, respectively. No loans or contributions
were made to Malbaie in 1996, 1995 or 1994.
In December 1994, the Company divested its minority interest in Gaspesia,
which was written down to its net realizable value in 1993 (see Note 2).
Condensed combined balance sheets of the Paper mills are as follows:
- --------------------------------------------------------------------------
CONDENSED COMBINED BALANCE SHEETS
OF PAPER MILLS
- --------------------------------------------------------------------------
Dollars in thousands December 29, December 31,
1996 1995
- --------------------------------------------------------------------------
Current assets $ 73,781 $ 94,934
Less current liabilities 36,477 88,129
- --------------------------------------------------------------------------
Working capital 37,304 6,805
Fixed assets, net 226,938 234,240
Long-term debt (245) (771)
Deferred income taxes and other (109,074) (106,667)
- --------------------------------------------------------------------------
Net assets $ 154,923 $ 133,607
- --------------------------------------------------------------------------
The current portion of debt of the Paper mills of $10,500,000 is included
in current liabilities in the above tables. At December 29, 1996, long-term debt
of the Paper mills matures as follows: 1998, $137,000; and 1999, $108,000. The
debt of the Paper mills is not guaranteed by the Company.
Condensed combined income statements of the Paper mills are as follows:
- -------------------------------------------------------------------------------
CONDENSED COMBINED INCOME STATEMENTS
OF PAPER MILLS
- -------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- -------------------------------------------------------------
Net sales and
other income $268,654 $268,377 $189,805
Costs and
expenses 203,120 216,342 180,860
- -------------------------------------------------------------
Income before taxes 65,534 52,035 8,945
Income tax expense 9,635 7,969 1,136
- -------------------------------------------------------------
Net income $ 55,899 $ 44,066 $ 7,809
- -------------------------------------------------------------
F-19
The condensed combined financial information of the Paper mills excludes
the income tax effects attributable to Madison. Such tax effects (see Note 8)
have been included in the Company's consolidated financial statements.
Adjustments from translating certain balance sheet accounts, for each of
the three years in the period ended December 29, 1996, are set forth in the
Consolidated Statements of Stockholders' Equity. The cumulative translation
adjustment (included in earnings reinvested in the business) decreased
stockholders' equity by $320,000 and $195,000 at December 29, 1996 and December
31, 1995, respectively. Upon the disposition of Gaspesia in 1994, stockholders'
equity was increased by $3,000,000, net of tax, to reflect the cumulative
translation adjustment related to Gaspesia.
During 1996, 1995 and 1994, the Company's Newspaper Group purchased
newsprint and supercalendered paper from the Paper mills (including Gaspesia
through the disposal date) at competitive prices. Such purchases aggregated
approximately $80,000,000, $59,000,000, and $107,000,000, respectively.
- -------------------------------------------------------------------------------
5. INVENTORIES
Inventories as shown in the accompanying Consolidated Balance Sheets are
composed of the following:
- -----------------------------------------------------------------------
Dollars in thousands December 29, December 31,
1996 1995
- -----------------------------------------------------------------------
Newsprint and magazine paper $28,778 $36,965
Work-in-process, etc. 5,030 5,879
- -----------------------------------------------------------------------
Total $33,808 $42,844
- -----------------------------------------------------------------------
Inventories are stated at the lower of cost or current market value. Cost is
determined utilizing the LIFO method for 78% and 70% of inventory in 1996 and
1995, respectively. The replacement cost of inventory was approximately
$36,700,000 and $54,600,000 at December 29, 1996 and December 31, 1995,
respectively.
- -------------------------------------------------------------------------------
6. LEASE COMMITMENTS
OPERATING LEASES: Such lease commitments are primarily for office space and
equipment. Certain office space leases provide for adjustments relating to
changes in real estate taxes and other operating expenses.
Rental expense amounted to $29,664,000 in 1996, $27,699,000 in 1995 and
$26,559,000 in 1994. The approximate minimum rental commitments under
noncancelable leases (exclusive of minimum sublease rentals of $292,000) at
December 29, 1996 were as follows: 1997, $15,312,000; 1998, $12,555,000; 1999,
$10,097,000; 2000, $6,840,000; 2001, $5,683,000 and $15,250,000 thereafter.
CAPITAL LEASES: In 1994, the Company recorded a $5,000,000 capital lease for
31 acres of City-owned land in College Point, New York City, on which the
Company is building a printing and distribution facility. The lease will
continue for 25 years after the start of construction with an option to
ultimately purchase the property. Under the terms of the lease agreement with
the City of New York, the Company would receive various tax and energy cost
reductions.
The Company also has a long-term lease for a building and site in
Edison, New Jersey. The lease provides the Company with certain early
cancellation rights, as well as renewal and purchase options. For financial
reporting purposes, the lease has been classified as a capital lease;
accordingly, an asset of approximately $57,000,000 (included in buildings,
building equipment and improvements at December 29, 1996 and December 31,
1995) has been recorded.
The following is a schedule of future minimum lease payments under all
capitalized leases together with the present value of the net minimum lease
payments as of December 29, 1996:
- --------------------------------------------------------
Dollars in thousands Amount
- --------------------------------------------------------
1997 $ 7,965
1998 7,765
1999 7,538
2000 7,457
2001 7,014
Later years 49,884
- --------------------------------------------------------
Total minimum lease payments 87,623
Less: amount representing interest 37,325
- --------------------------------------------------------
Present value of net minimum lease
payments including current
maturities of $3,359 $50,298
- --------------------------------------------------------
F-20
- -------------------------------------------------------------------------------
7. DEBT
Long-Term Debt consists of the following:
- -------------------------------------------------------------------------------------------
Dollars in thousands December 29, December 31,
1996 1995
- -------------------------------------------------------------------------------------------
5.50% to 5.77% Senior Notes due $200,000 $200,000
1998-2000 (a)
7.625% Notes due 2005, net of unamortized debt 244,501 244,041
costs of $5,499 in 1996, $5,959 in 1995; effective
interest rate 7.996% (b)
8.25% Debentures due 2025 (due 145,192 145,152
2005 at option of Company), net of
unamortized debt costs of $4,808 in 1996,
$4,848 in 1995; effective interest rate
8.553% (b)
- -------------------------------------------------------------------------------------------
Total Notes and Debentures 589,693 589,193
- -------------------------------------------------------------------------------------------
Less: Current Portion - -
- -------------------------------------------------------------------------------------------
Total Long-Term Debt $589,693 $589,193
- -------------------------------------------------------------------------------------------
(a) In October 1993, the Company issued senior notes totaling $200,000,000
to an insurance company with interest payable semi-annually. Five-year notes
totaling $100,000,000 were issued at an annual rate of 5.50%, and the remaining
$100,000,000 were issued as six and one-half year notes at an annual rate of
5.77%.
(b) In March 1995, the Company completed a public offering of
$400,000,000 of unsecured notes and debentures. The offering consisted of
ten-year notes aggregating $250,000,000 maturing March 15, 2005 at an annual
rate of 7.625% (the "Notes") and 30-year debentures aggregating $150,000,000
maturing March 15, 2025 at an annual rate of 8.25% (the "Debentures")
(collectively referred to herein as the "Offering"). The Debentures are
callable after ten years. Interest is payable semi-annually on March 15 and
September 15 on both the Notes and Debentures.
The net proceeds from the Offering were used to repay the principal balance
of $162,300,000 of 11.85% Notes due March 31, 1995, $50,000,000 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.
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 approximately $626,600,000 and $647,900,000 at December 29, 1996
and December 31, 1995, respectively.
- -------------------------------------------------------------------------------
In July 1996, the Company entered into a $200,000,000 revolving credit
agreement and a $100,000,000 revolving credit agreement with a group of banks
("New Agreements"). The New Agreements replaced existing revolving credit
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. The $200,000,000 agreement provides for an annual facility fee of
0.0675% based on the Company's current credit rating. The $100,000,000 agreement
provides for an annual facility fee of 0.0475%.
No borrowings under any of the above agreements were outstanding during
1996 and 1995.
In July 1996, the Company increased its ability to issue commercial paper
from $200,000,000 to $300,000,000, which is supported by the Company's New
Agreements. Borrowings are in the form of unsecured notes sold at a discount
with maturities ranging up to 270 days. At December 29, 1996, the Company had
approximately $45,500,000 in outstanding commercial paper with original
maturities ranging up to 82 days, at a weighted average interest rate of
approximately 5.5%.
The New 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, specified levels of stockholders' equity. At December 29, 1996,
approximately $900,000,000 of stockholders' equity was unrestricted under the
New Agreements.
The aggregate face amount of maturities of long-term debt over the next
five years are as follows: 1997, none; 1998, $100,000,000; 1999, none; 2000,
$100,000,000; 2001, none and $400,000,000 thereafter.
Interest expense, net of capitalized interest and interest income, as shown
in the accompanying Consolidated Statements of Income consists of the following:
- ---------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ---------------------------------------------------------------------
Interest expense $50,333 $48,751 $39,823
Capitalized interest (19,574) (15,177) (4,943)
Interest income (4,329) (8,344) (6,718)
- ---------------------------------------------------------------------
Net $26,430 $25,230 $28,162
- ---------------------------------------------------------------------
F-21
- -------------------------------------------------------------------------------
8. INCOME TAXES
Income tax expense for each of the years presented is determined in
accordance with SFAS No. 109, Accounting for Income Taxes ("SFAS 109").
The components of income tax expense as shown in the Consolidated
Statements of Income is presented on the adjacent table:
- -----------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- -----------------------------------------------------------------------
Current tax expense
Federal $ 90,886 $ 105,999 $ 159,779
State, local, foreign 28,494 1,970 49,651
- -----------------------------------------------------------------------
119,380 107,969 209,430
- -----------------------------------------------------------------------
Deferred tax expense
Federal 6,076 (22,483) (20,955)
State, local, foreign (12,081) 12,493 (13,088)
- -----------------------------------------------------------------------
(6,005) (9,990) (34,043)
- -----------------------------------------------------------------------
Income tax expense $ 113,375 $ 97,979 $ 175,387
- -----------------------------------------------------------------------
The reasons for the variance between the effective tax rate on income taxes
before income and the federal statutory rate (exclusive of the impairment loss
in fiscal 1996 and net gains on dispositions in each period) are as follows:
- --------------------------------------------------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
% of % of % of
Amount Pretax Amount Pretax Amount Pretax
- --------------------------------------------------------------------------------------------------------------------------
Tax at federal statutory rate $102,143 35.0% $ 77,892 35.0% $ 65,752 35.0%
Increase (decrease) resulting from
State and local taxes - net 14,310 4.9 8,880 4.0 5,476 2.9
Capital loss tax benefits - - - - (10,000) (5.3)
Amortization of nondeductible
intangible assets acquired 12,856 4.4 11,061 5.0 11,139 5.9
Other - net 1,026 .4 (6,188) (2.8) 5,466 2.9
- --------------------------------------------------------------------------------------------------------------------------
Subtotal 130,335 44.7% 91,645 41.2% 77,833 41.4%
- --------------------------------------------------------------------------------------------------------------------------
Impairment Loss (32,264) - -
- --------------------------------------------------------------------------------------------------------------------------
Dispositions 15,304 6,334 97,554
- --------------------------------------------------------------------------------------------------------------------------
Income tax expense $113,375 $ 97,979 $175,387
- --------------------------------------------------------------------------------------------------------------------------
Tax expense in 1996 was reduced by $5,571,000 ($8,517,000 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 $2,507,000.
Tax expense in 1995 was reduced by $10,986,000 as a result of a
favorable state tax ruling and adjustments to federal, state and local tax
liabilities. A further reduction of $4,339,000 ($6,676,000 before federal tax
effect) in 1995 tax expense relates to a reduction in the valuation allowance
attributable to state and local capital and net operating loss tax benefits.
The remaining decrease in the valuation allowance is due principally to the
expiration of net operating loss tax benefits and does not affect income tax
expense.
Tax expense in 1994 was reduced by approximately $10,000,000 relating to
a decrease in the valuation allowance and $3,000,000 from the recognition of
federal capital loss tax benefits. The decrease in the valuation allowance is
associated with federal capital loss tax benefits. An increase in the
valuation allowance associated with state and local capital loss carryforward
tax benefits added approximately $688,000 (net of federal tax benefit) to
1994 tax expense.
During 1996, federal tax authorities issued a favorable ruling on matters
affecting The Boston Globe which had originated prior to its acquisition in
1993. As a result, accrued federal taxes were reduced by $25,000,000. 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 capital by $3,645,000, $837,000, and $2,434,000
during 1996, 1995 and 1994, respectively.
Foreign taxes included in income tax expense totaled $882,000, $774,000 and
$5,096,000 in fiscal 1996, 1995 and 1994, respectively. Foreign taxes are
principally applicable to the Company's equity in the operations of a Canadian
newsprint mill. In 1994, $4,759,000 of foreign taxes were attributable to the
disposition of the Company's U.K. golf publications.
F-22
Current income taxes payable are included in accrued expenses while
refundable amounts are included in other current assets.
- -----------------------------------------------------------------------------
Dollars in thousands December 29, December 31,
1996 1995
- -----------------------------------------------------------------------------
Deferred Tax Assets
Intangible assets acquired $ 17,541 $ 5,941
Accrued state and local taxes 12,852 17,033
Postretirement and
postemployment benefits 90,160 86,822
Other accrued employee benefits
and compensation 109,761 93,777
Accounts receivable allowances 20,116 14,443
Deferred income 7,940 25,996
Other 12,273 20,231
- -----------------------------------------------------------------------------
Total deferred tax assets 270,643 264,243
Valuation allowance (4,671) (10,724)
- -----------------------------------------------------------------------------
Net deferred tax assets $265,972 $253,519
- -----------------------------------------------------------------------------
At December 29, 1996, tax loss carryforwards include only state and local
tax loss benefits. The benefits are attributable to tax operating losses. Such
loss carryforwards expire in accordance with provisions of applicable tax laws
and have remaining lives ranging from 1 to 15 years. The remaining operating
loss carryforwards will result in a reduction of state and local income taxes of
approximately $5,006,000 and will expire in years through 2008.
In 1989, the FCC granted the Company a tax certificate in connection with
the sale of its cable television system. This certificate enables the Company to
defer income taxes on the gain to future years by reducing the tax bases of
various assets which would otherwise be available as tax deductions.
The components of the net deferred tax liabilities recognized on the
respective Consolidated Balance Sheets are as follows:
- -----------------------------------------------------------------------------
Dollars in thousands December 29, December 31,
1996 1995
- -----------------------------------------------------------------------------
Deferred Tax Liabilities
Property, plant and equipment $130,954 $ 94,714
Tax certificate 93,495 113,238
Nontaxable acquisition 115,514 123,880
Safe harbor tax lease 17,843 18,975
Investments in Joint Ventures 44,094 51,608
Other 17,298 10,335
- -----------------------------------------------------------------------------
Total deferred tax liabilities 419,198 412,750
- -----------------------------------------------------------------------------
Net deferred tax assets (265,972) (253,519)
- -----------------------------------------------------------------------------
Net deferred tax liability 153,226 159,231
- -----------------------------------------------------------------------------
Less amounts included in:
Other current assets (36,164) (23,533)
Accrued expenses 830 780
- -----------------------------------------------------------------------------
Deferred income taxes $188,560 $181,984
- -----------------------------------------------------------------------------
Federal income tax returns for all years through 1989 have been examined by
the Internal Revenue Service and the respective tax years have been closed by
statute. Examinations of the tax returns for the years 1990 through 1993 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.
- --------------------------------------------------------------------------------
9. VOLUNTARY STAFF REDUCTIONS
The Company recorded pre-tax charges of approximately $44,100,000, or $.25 per
share, and $10,100,000, or $.06 per share in 1996 and 1995, respectively, for
work force reductions primarily at The New York 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 work force
reductions at The Times.
At December 29, 1996 and December 31, 1995, approximately $49,052,000 and
$17,472,000, respectively, are included in accrued expenses in the accompanying
Consolidated Balance Sheets, which represents the unpaid balance of the pre-tax
charges. The remaining cash payments associated with these charges are expected
to be paid over the next three years due to the timing of certain union pension
and welfare fund contributions.
F-23
- -------------------------------------------------------------------------------
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. Funding is based on an evaluation and review of the
assets, liabilities and requirements of each plan. In 1996, the Company merged
the assets of two of the plans. Retirement benefits are also provided under
supplemental unfunded pension plans.
Net periodic pension cost for all Company-sponsored plans was $32,958,000
in 1996, $25,688,000 in 1995, and $32,730,000 in 1994. The components of net
periodic pension cost are:
- ------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Service cost $ 20,984 $ 16,413 $ 19,194
Interest cost 45,353 41,859 38,933
Actual (return) loss on plan assets (59,062) (74,904) 2,942
Curtailment loss - - 1,887
Net amortization and
deferral 25,683 42,320 (30,226)
- ------------------------------------------------------------------------------
Net periodic pension cost $ 32,958 $ 25,688 $ 32,730
- ------------------------------------------------------------------------------
As a result of the sale of the Women's Magazines Division, the Company
recognized a curtailment loss in 1994 (see Note 2). Accordingly, net periodic
pension cost relating to certain plans was remeasured at July 1994, using an
increased discount rate of 8.0%.
Assumptions used in the actuarial computations were:
- -------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------
Discount rate 7.75% 7.25% 8.25%
Rate of increase in
compensation levels 5.50% 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 $21,111,000 in 1996,
$20,679,000 in 1995, and $19,535,000 in 1994.
Plan assets which were valued as of September 30, 1996 and 1995, consist
of money market investments, investments in marketable fixed income and
equity securities, an investment in a diversified real estate equity fund and
investments in group annuity insurance contracts.
The funded status of the Company's plans which were valued at
September 30, 1996 and 1995 is as follows:
- ----------------------------------------------------------------------------
Dollars in thousands Plans Whose Plans Whose
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
- ----------------------------------------------------------------------------
December 29, 1996
- ----------------------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested benefit obligation $367,438 $ 64,312
- ----------------------------------------------------------------------------
Accumulated benefit obligation 375,492 67,789
- ----------------------------------------------------------------------------
Projected benefit obligation 454,995 71,167
Plan assets at fair value 439,184 66,459
- ----------------------------------------------------------------------------
Projected benefit obligation
in excess of plan assets 15,811 4,708
Unrecognized net gains 27,493 8,962
Unrecognized prior service cost 2,529 -
Unrecognized transition asset 419 -
Fourth-quarter contribution, net - (431)
- ----------------------------------------------------------------------------
Recorded pension liability $ 46,252 $ 13,239
- ----------------------------------------------------------------------------
December 31, 1995
- ----------------------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested benefit obligation $234,139 $198,233
- ----------------------------------------------------------------------------
Accumulated benefit obligation 239,507 205,260
- ----------------------------------------------------------------------------
Projected benefit obligation 297,317 237,302
Plan assets at fair value 269,633 178,539
- ----------------------------------------------------------------------------
Projected benefit obligation
in excess of plan assets 27,684 58,763
Unrecognized net (losses) (28,150) (2,725)
Unrecognized prior service cost 6,131 (3,445)
Unrecognized transition
(obligation) asset (1,645) 2,063
Fourth-quarter contribution, net (1,365) (8,297)
- ----------------------------------------------------------------------------
Recorded pension liability $ 2,655 $ 46,359
- ----------------------------------------------------------------------------
The Company's liability for its unfunded non-qualified plans ("the Plans")
was $71,204,000 and $64,549,000 as of December 29, 1996 and December 31,
1995, respectively. At December 29, 1996, the projected benefit obligation of
the Plans totaled $100,665,000 of which $30,257,000 ($21,645,000 of
unrecognized actuarial losses, $5,910,000 of unrecognized prior service cost
and $2,702,000 of unrecognized transition obligation) is subject to
amortization. At December 31, 1995, the projected benefit obligation of the
Plans totaled $93,048,000 of which $30,883,000 ($21,046,000 of unrecognized
actuarial losses, $6,500,000 of unrecognized prior service cost and
$3,337,000 of unrecognized transition obligation) is subject to amortization.
These amounts are not included in the funded status of the plans shown above.
An additional minimum liability of $796,000 in 1996 and $2,384,000 in 1995
relating to the unfunded status of these Plans is included in other liabilities
in the Consolidated Balance Sheets. Miscellaneous assets in both years includes
a related intangible asset of an equal amount.
F-24
- -------------------------------------------------------------------------------
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 $9,565,000 in 1996, $7,842,000 in
1995, and $12,419,000 in 1994, respectively. The decrease in 1995 cost was a
result of a plan amendment which was adopted to reduce benefits for participants
retiring after January 1, 1995. The effect of this plan amendment on the
accumulated postretirement benefit obligation was a reduction of $16,736,000.
This amount is being amortized over a period of approximately nine years
beginning in 1995. The components of this cost are as follows:
- ------------------------------------------------------------------------------
Dollars in thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Service cost for benefits
earned during the period $3,682 $2,820 $ 4,629
Interest cost on accumulated
postretirement obligation 8,250 8,142 9,376
Net amortization and deferral (2,367) (3,120) (102)
Curtailment gain (See Note 2) - - (1,484)
- ------------------------------------------------------------------------------
Net periodic postretirement cost $9,565 $7,842 $12,419
- ------------------------------------------------------------------------------
The Company's policy is to fund the above-mentioned plans as claims and premiums
are paid.
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% in the first year, grading down to 5.0% in the year 2008.
For 1995, 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 11.0% and 9.25% in the first
year, grading down to 5.0% in the year 2008.
For 1994, the accumulated postretirement benefit obligation was determined
using a discount rate of 8.25%, an estimated increase in compensation levels of
5.5% and a health care cost trend rate of between 12.0% and 10.0% in the first
year, grading down to 5.0% in the year 2008.
The following table sets forth the amounts included in Accrued Expenses and
Other Liabilities in the Consolidated Balance Sheets at December 29, 1996 and
December 31, 1995, based on valuation dates of September 30 in each year:
- -------------------------------------------------------------------------
Dollars in thousands December 29, December 31,
1996 1995
- -------------------------------------------------------------------------
Accumulated postretirement
benefit obligation
Retirees $ 51,164 $ 55,954
Fully eligible active plan participants 19,510 19,870
Other active plan participants 43,451 44,965
- -------------------------------------------------------------------------
Total 114,125 120,789
Unrecognized net gains 32,212 16,536
Unrecognized prior service cost 11,929 13,597
Fourth-quarter benefit
payments (822) (544)
- -------------------------------------------------------------------------
Total accrued postretirement
benefit liability 157,444 150,378
Current portion included in
accrued expenses 4,400 4,400
- -------------------------------------------------------------------------
Long-term accrued
postretirement benefit liability $153,044 $145,978
- -------------------------------------------------------------------------
Increasing the assumed health care cost trend rates by one percentage point
in each year and holding all other assumptions constant would increase the
accumulated postretirement benefit obligation as of December 29, 1996 by
$16,465,000, and increase the net periodic postretirement benefit cost for 1996
by $2,090,000.
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 approximately
$24,745,000, $26,034,000 and $25,460,000 in 1996, 1995 and 1994, respectively.
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 employees' active years of service.
F-25
- -------------------------------------------------------------------------------
12. EXECUTIVE AND NON-EMPLOYEE DIRECTORS'
INCENTIVE PLAN
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 or such other
forms as the Board of Directors deems appropriate. Under the 1991 Executive
Plans, stock options of up to 20,000,000 shares of Class A Common Stock may be
granted and stock awards of up to 1,000,000 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 ten 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 ten
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, 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 ten-year terms are granted
annually to each non-employee director of the Company. Each annual grant
allows the director to purchase from the Company up to 1,000 shares of Class
A Common Stock at the fair market value of such shares at the date of grant.
Options for an aggregate of 250,000 shares of Class A Common Stock may be
granted under the Directors' Plan.
Changes in the Company's stock options for each of the three years in the period
ended December 29, 1996 were as follows:
- ------------------------------------------------------------------------------------------------------------
Shares in thousands 1996 1995 1994
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------
Options outstanding,
beginning of year 10,007 $25 9,282 $24 7,361 $24
Granted 2,169 38 2,047 30 2,426 23
Exercised (1,672) 24 (910) 21 (378) 18
Forfeited (135) 28 (412) 27 (127) 25
======== ======= =======
Options outstanding, end of
year 10,369 28 10,007 25 9,282 24
======== ======= =======
Options exercisable,
end of year 5,279 24 5,273 24 4,953 23
======== ======= =======
- ------------------------------------------------------------------------------------------------------------
The following table summarizes information about the Company's stock options
outstanding as of December 29, 1996:
- ---------------------------------------------------------------------------------------------------------------------
Shares in thousands Options Outstanding Options Exercisable
-------------------------------------------------------------------- -----------------------
Weighted Average Weighted Weighted
Exercise Price Outstanding Remaining Remaining Exercisable Average
Ranges Shares Contractual Life Exercise Price Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------------
$10 - 19 352 5 years $15 352 $15
$20 - 29 5,714 7 years 24 4,260 24
$30 - 38 4,303 9 years 34 667 30
-------- --------- -------- -------------------
10,369 28 5,279 24
======== ========
F-26
- --------------------------------------------------------------------------------
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),
(collectively referred to herein as "Employee Stock Based Plans").
Accordingly, no compensation cost has been recognized for the aforementioned
plans. Had compensation cost for the Employee Stock Based Plans been
determined over the vesting period 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 fair
value of each option grant and employee stock purchase plan ("ESPP") rights
are estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions for 1996: (a) Stock
options: dividend yield, 1.88%; expected volatility, 25.91%; risk-free rate,
5.53%; expected life, 5 years; (b) ESPP rights: dividend yield, 2.0%;
expected volatility, 21.22%; risk-free rate, 5.47%; expected life, 1 year.
The fair value on the date of grant of stock options and ESPP rights offered
in 1996 was $8.12 and $5.81, respectively. The pro forma effect for 1996 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. The pro forma effect on net
income for 1995 is not material because substantially all grants were made in
December 1995. The pro forma effect and the related disclosure below is in
accordance with the disclosure provisions of SFAS 123.
- -----------------------------------------------------------------------------
Dollars in thousands 1996
------------------------------------
except per share data As reported Pro forma
- -----------------------------------------------------------------------------
Net income $84,534 $76,889
Earnings per share $ .87 $ .79
- -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
13. CAPITAL STOCK
The 5 1/2% cumulative prior preference stock, which is redeemable at the option
of the Company on 30-days notice at par plus accrued dividends, is entitled to
an annual dividend of $5.50 payable quarterly.
The serial preferred stock is 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 thirty percent of
the directors of the Board, and the Class A and Class B Common Stock have the
right to vote together on reservations 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 10,000,000 shares of Class A Common Stock for
issuance thereunder pursuant to the exercise of stock options.
In 1995, the Company spent approximately $46,500,000 to repurchase
approximately 2,055,000 shares of Class A Common Stock, at an average price
of $22.65, under the October 1994 authorization of $100,000,000 and the
February 1995 authorization of $50,000,000. In 1996, the Company spent
approximately $43,800,000 to repurchase approximately 1,395,000 shares of
Class A Common Stock, at an average price of $31.43, under the February 1995
authorization and the May 1996 authorization of $32,000,000. After December
29, 1996, the Company spent approximately $3,500,000 to repurchase
approximately 91,000 shares of Class A Common Stock at an average price of
$38.13. In February 1997, the Board of Directors authorized expenditures of
an additional $150.0 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. To date, the
remaining amount of these authorizations is approximately $152,700,000. Had
the 1996 and 1995 stock repurchases occurred as of January 1 in the respective
years, the impact on earnings per share would have been immaterial.
In addition to the Company's stock repurchase program, in 1994 the Company
began to sell equity put options in a series of private placements that entitle
the holder, upon exercise, to sell shares of Class A Common Stock to the Company
at a specified price. In 1996 and 1995, put options for 40,000 and 300,000
shares were issued for $51,000 and $285,000 in premiums, respectively, which
have been accounted for as a part of additional capital. All put options issued
have expired. Premiums received in 1995 reduced the average price of shares
repurchased during 1995 to $22.51 per share from $22.65 per share.
F-27
Under the 1997 Offering of the ESPP, eligible employees may purchase Class A
Common Stock through payroll deductions during 1997 at the lower of $30.60 per
share (85% of the average market price on November 1, 1996) or 85% of the
average market price on November 26, 1997. Approximately 35 to 40 percent of
eligible employees have participated in the ESPP in the last three years. Under
the ESPP, the Company issued approximately 967,000 shares, 1,100,000 shares and
1,191,000 shares in 1996, 1995 and 1994, respectively.
Shares of Class A Common Stock reserved for issuance were as follows:
- ---------------------------------------------------------------------------
December 29, 1996 December 31, 1995
- ---------------------------------------------------------------------------
Stock Options
Outstanding 10,368,627 10,007,225
Available 9,793,667 1,888,961
Employee Stock Purchase Plan
Available 3,735,123 4,702,248
Stock Awards Available 963,880 965,686
Voluntary Conversion of
Class B Common Stock
Available 568,259 568,919
Retirement Units Outstanding 174,844 197,000
- ---------------------------------------------------------------------------
Total 25,604,400 18,330,039
- ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------
14. SEGMENTS
The Company's segment and related information is included on pages F-2 and F-3
of this Appendix. The information for the years 1996, 1995 and 1994 appearing
therein is presented on a basis consistent with, and is an integral part of, the
consolidated financial statements. Revenues from individual customers, revenues
between business segments and revenues, operating profit and identifiable assets
of foreign operations are not significant.
- -------------------------------------------------------------------------------
15. COMMITMENTS AND CONTINGENT LIABILITIES
New printing and distribution facilities are under construction at College
Point in New York City, and Lakeland, Florida. The cost of the new facilities
is currently estimated to be $383,000,000, excluding capitalized interest of
$37,000,000. At December 29, 1996, the Company had incurred capital
expenditures of approximately $307,000,000, excluding capitalized interest.
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 would not have a material adverse effect on the consolidated financial
statements.
- -------------------------------------------------------------------------------
16. RECLASSIFICATIONS
For comparability, certain 1995 and 1994 amounts have been reclassified to
conform with the 1996 presentation.
F-28
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 29, 1996 and December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 29, 1996. 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 29, 1996 and December 31, 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
29, 1996 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.
- - Deloitte & Touche LLP -
New York, New York
February 3, 1997
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 American Stock Exchange. The Class B
Common Stock and the 5 1/2% cumulative prior preference stock are unlisted and
are not actively traded. Dividends on the preference stock were paid at the
quarterly rate of $1.375 per share during each of the last two years. The
approximate number of security holders of record as of February 28, 1997 was as
follows: Class A Common Stock: 12,949; Class B Common Stock: 40; 5 1/2%
cumulative prior preference stock: 56. The market price range of Class A Common
Stock in 1996 and 1995 is as follows:
- ------------------------------------------------------------------------------
Quarter Ended 1996 1995
- ------------------------------------------------------------------------------
High Low High Low
March 31 $30.50 $25.75 March 31 $23.50 $20.12
June 30 33.87 28.37 June 30 24.50 21.62
September 29 33.87 27.50 September 30 29.25 22.62
December 29 39.87 33.25 December 31 30.87 27.12
Year 39.87 25.75 Year 30.87 20.12
- ------------------------------------------------------------------------------
F-29
QUARTERLY INFORMATION (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
Dollars and shares in millions First Quarter Second Quarter Third Quarter
except per share data --------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------
Revenues $622.5 $571.0 $645.2 $610.0 $629.0 $573.0
- ---------------------------------------------------------------------------------------------------------
Costs and Expenses
Production costs:
Raw materials 105.9 80.0 96.6 85.7 85.9 90.5
Wages and benefits 136.8 131.4 135.6 133.6 140.7 135.1
Other 99.7 96.2 101.6 97.6 107.4 97.2
- ---------------------------------------------------------------------------------------------------------
Total 342.4 307.6 333.8 316.9 334.0 322.8
Selling, general and
administrative expenses 219.5 205.9 228.9 210.5 232.1 207.6
Impairment Loss - - - - 126.8 -
- ---------------------------------------------------------------------------------------------------------
Total 561.9 513.5 562.7 527.4 692.9 530.4
- ---------------------------------------------------------------------------------------------------------
Operating profit (loss) 60.6 57.5 82.5 82.6 (63.9) 42.6
Income from Joint Ventures 4.7 2.1 2.2 2.5 6.4 3.5
Interest expense, net 6.4 7.3 6.0 6.7 8.0 5.6
Net gain on dispositions - - 7.8 - 25.1 11.3
Income taxes 26.2 24.9 39.7 35.1 7.3 19.6
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 32.7 $ 27.4 $ 46.8 $ 43.3 $(47.7) $ 32.2
- ---------------------------------------------------------------------------------------------------------
Average number of common
shares outstanding 97.7 97.8 97.8 96.8 97.0 96.3
Per share of common stock
Net income (loss) $ .33 $ .28 $ .48 $ .45 $ (.49) $ .33
Dividends .14 .14 .14 .14 .14 .14
- ---------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Dollars and shares in millions Fourth Quarter Year
except per share data --------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------
Revenues $718.3 $655.1 $2,615.0 $2,409.1
- -----------------------------------------------------------------------------------------
Costs and Expenses
Production costs:
Raw materials 75.8 112.0 364.2 368.1
Wages and benefits 144.5 137.1 557.6 537.2
Other 117.3 108.1 426.0 399.1
- -----------------------------------------------------------------------------------------
Total 337.6 357.2 1,347.8 1,304.4
Selling, general and
administrative expenses 286.6 247.9 967.1 871.9
Impairment Loss - - 126.8 -
- -----------------------------------------------------------------------------------------
Total 624.2 605.1 2,441.7 2,176.3
- -----------------------------------------------------------------------------------------
Operating profit (loss) 94.1 50.0 173.3 232.7
Income from Joint Ventures 4.9 7.0 18.2 15.1
Interest expense, net 6.0 5.6 26.4 25.2
Net gain on dispositions - - 32.9 11.3
Income taxes 40.2 18.4 113.4 98.0
- -----------------------------------------------------------------------------------------
Net income (loss) $ 52.8 $ 33.0 $ 84.6 $ 135.9
- -----------------------------------------------------------------------------------------
Average number of common
shares outstanding 96.8 96.5 97.3 96.9
Per share of common stock
Net income (loss) $ .54 $ .34 $ .87 $ 1.40
Dividends .15 .14 .57 .56
- -----------------------------------------------------------------------------------------
The 1996 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 above.
The Company's largest source of revenues 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.
The Company and the entire publishing industry was adversely affected by
significant increases in newsprint and magazine paper prices throughout 1995
and into the first quarter of 1996.
First-quarter 1996 results included a $1.2 million pre-tax charge for
severance and related costs for work force reductions ("buyouts").
Second-quarter 1996 results included a $4.4 million pre-tax charge ($.03
per share) for buyouts and a $7.8 million pre-tax gain ($.04 per share) on the
sale of the 110 Fifth Avenue building.
Third-quarter 1996 results included a $126.8 million pre-tax non-cash
accounting charge ($.97 per share) related to the measurement for impairment
of long-lived assets as required by SFAS 121, a $25.1 million pre-tax gain
($.14 per share) resulting from the realization of a gain contingency from
the disposition of a paper mill in a prior year and a $7.0 million pre-tax
charge ($.04 per share) for buyouts.
Fourth-quarter 1996 results included a $31.5 million pre-tax charge ($.18
per share) for buyouts.
Third-quarter 1995 results included an $11.3 million pre-tax gain ($.05 per
share) from the sales of small regional newspapers.
Fourth-quarter 1995 results included a $10.1 million pre-tax charge
($.06 per share) for buyouts.
F-30
TEN-YEAR SUPPLEMENTAL FINANCIAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Year Ended December
Dollars and shares in millions ---------------------------------------------------------------------------
except per share data 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------
REVENUES AND INCOME
Revenues $2,615 $2,409 $2,357 $2,019 $1,773 $1,703 $1,776 $1,768 $1,700 $1,690
- ---------------------------------------------------------------------------------------------------------------------
Operating Profit 173 233 211 126 88 93 129 168 251 291
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) from Joint Ventures 18 15 5 (53) (9) (9) 8 (11) 35 18
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) from continuing
operations 85 136 213 6 (11) 47 65 68 161 156
Discontinued operations - - - - - - - 199 7 4
Net cumulative effect of
accounting changes - - - - (34) - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) 85 136 213 6 (45) 47 65 267 168 160
- ---------------------------------------------------------------------------------------------------------------------
BALANCE SHEET
Total assets 3,540 3,390 3,138 3,215 1,995 2,128 2,150 2,188 1,915 1,712
Long-term debt
and capital lease obligations 637 638 523 460 207 213 319 337 378 391
Common stockholders' equity 1,623 1,610 1,544 1,599 1,000 1,073 1,056 1,064 873 823
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Continuing operations .87 1.40 2.05 .07 (.14) .61 .85 .87 2.00 1.91
Discontinued operations - - - - - - - 2.52 .08 .05
Net cumulative effect of
accounting changes - - - - (.43) - - - - -
Net income (loss) .87 1.40 2.05 .07 (.57) .61 .85 3.39 2.08 1.96
Dividends .57 .56 .56 .56 .56 .56 .54 .50 .46 .40
Common stockholders'
equity (end of year) 16.62 16.50 15.71 14.96 12.54 13.70 13.68 13.63 11.02 10.04
- ---------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING (end of year)
Class A and Class B Common 97.7 97.6 98.2 106.9 79.7 78.4 77.2 78.1 79.2 82.0
- ---------------------------------------------------------------------------------------------------------------------
MARKET PRICE (end of year) 38.50 29.62 22.12 26.25 26.37 23.62 20.62 26.37 26.87 31.00
- ---------------------------------------------------------------------------------------------------------------------
1996 - Results included: a $126.8 million pre-tax non-cash accounting charge
($.97 per share) related to the measurement for impairment of long-lived
assets; $44.1 million pre-tax charge ($.25 per share) for work force
reductions; $25.1 million pre-tax gain ($.14 per share) resulting from the
realization of a gain contingency from the disposition of a paper mill in a
prior year; $7.8 million pre-tax gain ($.04 per share) on the sale of an
office building.
1995 - Results included: a net pre-tax gain of $11.3 million ($.05 per share)
from the sales of small regional newspapers; $10.1 million pre-tax charge
($.06 per share) for work force reductions.
1994 - Results included: a net pre-tax gain of $200.9 million ($.99 per
share) from the sales of the Women's Magazines Division and U.K. golf
publications and the disposition of Gaspesia.
1993 - Results included: a pre-tax $3.7 million charge ($.02 per share) for
rate adjustments due to a severe snowstorm; $4.4 million ($.05 per share) of
additional tax expense for remeasurement of deferred tax balances due to the
enactment of the 1993 Tax Act; $1.2 million ($.02 per share) of additional
tax expense due to the 1993 Tax Act which increased the federal corporate
income tax rate; a $2.6 million pre-tax gain ($.02 per share) on the sale of
assets; $35.4 million of pre-tax charges ($.23 per share) for staff
reductions at The Times; pre-tax non-cash charge of $47.0 million ($.56 per
share) against equity in operations to write down the Gaspesia investment to
its net realizable value.
1992 - Results included: $53.8 million pre-tax loss ($.47 per share) on the
closing of The Gwinnett (Ga.) Daily News; a $3.1 million pre-tax gain ($.02
per share) from the sales of assets; a $28.0 million pre-tax charge ($.20 per
share) for voluntary union staff reductions at The Times; $21.4 million
pre-tax charge ($.15 per share) for labor disruptions and training and
start-up costs at Edison. Net cumulative effect of accounting changes
reflects the 1992 adoption of the change in methods of accounting for income
taxes, postretirement benefits other than pensions and postemployment
benefits.
1991 - Results included: a $20.0 million pre-tax charge ($.15 per share) for
voluntary union staff reductions at The Times; the reversal of a provision
for income taxes of $10.0 million ($.13 per share) for a favorable tax
settlement.
1989 - Results included: an after-tax gain of $193.3 million ($2.46 per
share) from the sale of the Company's cable television operations, of which
the gain and results of operations through the 1989 sale date are included as
discontinued operations; a $30.0 million pre-tax charge ($.22 per share) for
voluntary union staff reductions at The Times; a pre-tax charge of $27.2
million ($.35 per share) for a valuation reserve against the Company's
investment in the Forest Products Investments.
F-31
SCHEDULE II
THE NEW YORK TIMES COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 29, 1996
-------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------
Deduc-
tions
for
purposes
Additions for
charged to which
Balance at costs and accounts Balance
beginning expenses or were set at end
Description of period revenues up of period
- --------------------------------------------------------------------------------------------------
Dollars in thousands
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
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 1995
Deducted from assets to which they apply
Uncollectible accounts.................... $ 22,268 $ 20,749 $ 24,075 $ 18,942
Returns and allowances, etc. ............. 5,889 9,892 8,858 6,923
----------- ----------- ----------- -----------
Total................................. $ 28,157 $ 30,641 $ 32,933 $ 25,865
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 1994
Deducted from assets to which they apply
Uncollectible accounts.................... $ 17,108 $ 23,134 $ 17,974 $ 22,268
Returns and allowances, etc. ............. 26,399 44,562 65,072 5,889
----------- ----------- ----------- -----------
Total................................. $ 43,507 $ 67,696 $ 83,046 $ 28,157
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
S-1
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 Commission upon request), and incorporated by reference herein).
(3.1) Certificate of Incorporation as amended by the Class A and
Class B stockholders and as restated on September 29, 1993 (filed as an
Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated
by reference herein).
(3.2) By-laws as amended through March 20, 1997.
(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 September 19, 1996 (filed as an Exhibit to the Company's 10-Q
dated November 12, 1996, and incorporated by reference herein).
(10.3) The Company's 1991 Executive Cash Bonus Plan, as amended
through September 19, 1996 (filed as an Exhibit to the Company's 10-Q
dated November 12, 1996, and incorporated by reference herein).
(10.4) The Company's Non-Employee Directors' Stock Option Plan, as
amended through September 19, 1996 (filed as an Exhibit to the Company's
10-Q dated November 12, 1996, and incorporated by reference herein).
(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) 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) 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).
(10.8) 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).
(10.9) 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).
(10.10) 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).
(10.11) 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).
(10.12) 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).
(10.13) 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).
(10.14) 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).
(10.15) API's Supplemental Executive Retirement Plan, as amended
effective September 15, 1993 (filed as an Exhibit to the Company's Form
10-K dated March 21, 1994, and incorporated by reference herein).
(10.16) 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).
(10.17) Form of Substituted Stock Option Agreement/Incentive 87 among
API, its predecessor company and certain employees (filed as Exhibit
10.29 to Post-Effective Amendment No. 1 filed August 11, 1989, to API's
Registration Statement on Form S-4 (Registration Statement No. 33-28373)
declared effective April 28, 1989, and incorporated by reference herein).
(10.18) Form of Substituted Stock Option Agreement/Incentive 88 among
API, its predecessor company and certain employees (filed as Exhibit
10.31 to Post-Effective Amendment No. 1 filed August 11, 1989, to API's
Registration Statement on Form S-4 (Registration Statement No. 33-28373)
declared effective April 28, 1989, and incorporated by reference herein).
(10.19) The Company's Deferred Executive Compensation Plan, as
amended through November 8, 1996.
(11) Statements of Computation of Primary and Fully-Diluted Net
Income Per Share.
(21) Subsidiaries of the Company.
(23) Consent of Deloitte & Touche LLP.
(27) Financial Data Schedule.