FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended June 29, 1997
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Commission file number 1-5837
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THE NEW YORK TIMES COMPANY
--------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-1102020
- ------------------------ ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
229 WEST 43RD STREET, NEW YORK, NEW YORK
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(Address of principal executive offices)
10036
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(Zip Code)
Registrant's telephone number, including area code 212-556-1234
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
---- -----
Number of shares of each class of the registrant's common stock outstanding as
of August 3, 1997 (exclusive of treasury shares):
Class A Common Stock 95,465,416 shares
Class B Common Stock 425,001 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
--------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
(Dollars and shares in thousands, except per share data)
Three Months Ended Six Months Ended
---------------------------- -----------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
---------------------------- -----------------------------
(13 Weeks) (26 Weeks)
Revenues
Advertising..................................... $ 504,996 $ 449,685 $ 981,544 $ 881,302
Circulation..................................... 169,132 163,363 337,686 325,919
Other........................................... 47,819 36,458 95,178 69,860
------------ ------------ -------------- ------------
Total.......................................... 721,947 649,506 1,414,408 1,277,081
------------ ------------ -------------- ------------
Production Costs
Raw Materials................................... 76,280 96,382 149,757 201,949
Wages and Benefits.............................. 139,898 135,546 293,070 272,380
Other........................................... 119,708 106,132 234,353 211,248
------------ ------------ -------------- ------------
Total.......................................... 335,886 338,060 677,180 685,577
Selling, General and Administrative Expenses..... 258,712 228,926 508,624 448,361
------------ ------------ -------------- ------------
Total.......................................... 594,598 566,986 1,185,804 1,133,938
------------ ------------ -------------- ------------
Operating Profit................................. 127,349 82,520 228,604 143,143
Income from Joint Ventures....................... 3,052 2,210 4,367 6,892
Interest Expense, Net of Interest Income......... 11,389 5,962 19,707 12,400
Net Gain on Disposition.......................... - 7,751 - 7,751
------------ ------------ -------------- ------------
Income Before Income Taxes....................... 119,012 86,519 213,264 145,386
Income Taxes..................................... 34,063 39,707 76,476 65,860
------------ ------------ -------------- ------------
Net Income....................................... $ 84,949 $ 46,812 $ 136,788 $ 79,526
------------ ------------ -------------- ------------
------------ ------------ -------------- ------------
Weighted Average Number of Common and
Common Equivalent Shares....................... 99,835 97,755 100,450 97,703
Earnings Per Common and
Common Equivalent Share........................ $.85 $.48 $1.36 $.81
Cash Dividends Per Common Share.................. $.16 $.14 $ .31 $.28
See notes to condensed consolidated financial statements.
2
THE NEW YORK TIMES COMPANY
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands)
June 29, December 29,
1997 1996
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ASSETS (Unaudited)
- ------
Current Assets
- --------------
Cash and short-term investments............................................... $ 38,525 $ 39,103
Accounts receivable - net..................................................... 302,278 309,164
Inventories
Newsprint and magazine paper................................................. 26,568 28,778
Work-in-process, etc......................................................... 5,175 5,030
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Total inventories........................................................... 31,743 33,808
Other current assets.......................................................... 89,756 96,697
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Total current assets........................................................ 462,302 478,772
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Other Assets
- ------------
Investment in joint ventures.................................................. 137,079 137,255
Property, plant and equipment (less accumulated depreciation
of $864,305 in 1997 and $807,120 in 1996).................................... 1,397,270 1,358,029
Intangible assets acquired
Cost in excess of net assets acquired (less accumulated amortization
of $198,576 in 1997 and $184,196 in 1996).................................... 1,013,607 1,041,672
Other intangible assets acquired (less
accumulated amortization of $31,789
in 1997 and $23,384 in 1996)................................................. 392,086 396,042
Miscellaneous assets.......................................................... 133,361 128,101
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TOTAL ASSETS ............................................................... $ 3,535,705 $ 3,539,871
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See notes to condensed consolidated financial statements.
3
THE NEW YORK TIMES COMPANY
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands)
June 29, December 29,
1997 1996
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LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
- ------------------------------------
Current Liabilities
- -------------------
Commercial paper........................................................... $ 74,200 $ 45,500
Accounts payable........................................................... 175,289 171,853
Accrued payroll and other related liabilities.............................. 82,668 84,458
Accrued expenses........................................................... 236,253 258,468
Unexpired subscriptions.................................................... 83,221 90,059
Current portion of capital lease obligations............................... 3,606 3,359
------------ ------------
Total current liabilities................................................. 655,237 653,697
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Other Liabilities
- -----------------
Long-term debt............................................................. 589,958 589,693
Capital lease obligations.................................................. 46,181 46,939
Deferred income taxes...................................................... 155,109 188,560
Other...................................................................... 466,125 435,850
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Total other liabilities................................................... 1,257,373 1,261,042
------------ ------------
Total Liabilities........................................................... 1,912,610 1,914,739
- ----------------- ------------ ------------
Stockholders' Equity
Capital stock.............................................................. 13,020 12,872
Additional paid in capital................................................. 694,068 663,007
Earnings reinvested in the business........................................ 1,397,387 1,290,899
Common stock held in treasury, at cost..................................... (481,380) (341,646)
------------ ------------
Total stockholders' equity................................................ 1,623,095 1,625,132
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................. $ 3,535,705 $ 3,539,871
------------ ------------
------------ ------------
See notes to condensed consolidated financial statements.
4
THE NEW YORK TIMES COMPANY
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(Dollars in thousands)
For the Six Months Ended
---------------------------------
June 29, June 30,
1997 1996
---------------------------------
(26 Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net cash provided by operating activities............................................. $ 190,982 $ 154,325
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Acquisitions, net of cash acquired..................................................... - (16,695)
Additions to property, plant and equipment............................................. (94,777) (98,113)
Net proceeds from disposition.......................................................... 11,522 16,878
Other - net............................................................................ (300) (1,724)
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Net cash used in investing activities.................................................. (83,555) (99,654)
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CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Commercial paper increase - net......................................................... 28,700 -
Long-term debt reduction................................................................ (1,884) (1,665)
Capital Shares
Issuance.............................................................................. 5,053 1,931
Repurchase............................................................................ (110,154) (5,331)
Dividends paid to stockholders.......................................................... (30,064) (27,410)
Other - net............................................................................. 344 -
--------- ----------
Net cash used in financing activities................................................... (108,005) (32,475)
--------- ----------
Decrease (increase) in cash and short-term investments.................................. (578) 22,196
Cash and short-term investments at the beginning of the year............................ 39,103 91,442
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Cash and short-term investments at the end of the quarter............................... $ 38,525 $ 113,638
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SUPPLEMENTAL INFORMATION
- ------------------------
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.
NONCASH ACTIVITY
- ----------------
Repurchases of common stock in connection with certain exercises under the
Company's stock option plans increased treasury stock by $30,146 and $10,094 in
1997 and 1996, respectively. Additional paid in capital increased by a
corresponding amount.
See notes to condensed consolidated financial statements.
5
THE NEW YORK TIMES COMPANY
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. General
The accompanying Notes to Condensed Consolidated Financial Statements
should be read in conjunction with the Notes to Consolidated Financial
Statements included in the annual report on Form 10-K for the year ended
December 29, 1996, for The New York Times Company (the "Company") filed with
the Securities and Exchange Commission. In the opinion of management, all
adjustments necessary for a fair presentation of the financial position and
results of operations, as of and for the interim period ended, have been
included. Due to the seasonal nature of the Company's business, results for
the interim periods are not necessarily indicative of a full year's
operations.
Certain reclassifications have been made to the 1996 Condensed
Consolidated Financial Statements to conform with classifications used at
June 29, 1997.
2. Income Taxes
The reasons for the variances between the effective tax rate on income
before income taxes and the federal statutory rate, exclusive of a favorable
adjustment resulting from the completion of the Company's federal tax audits
for periods through 1992 ("Favorable Tax Adjustment") in 1997 and a
disposition in 1996, are as follows:
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Three Months Ended Six Months Ended
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June 29, June 30, June 29, June 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
% of % of % of % of
(Dollars in thousands) Amount Pre-tax Amount Pre-tax Amount Pre-tax Amount Pre-tax
- ---------------------------------------------------------------------------------------------------------------------------
Tax at federal statutory rate........... $41,654 35.0% $27,569 35.0% $74,642 35.0% $48,172 35.0%
State and local taxes,
net of federal benefits................ 7,434 6.3% 4,851 6.2% 13,725 6.4% 8,533 6.2%
Amortization of nondeductible
intangible assets acquired............. 2,974 2.5% 3,060 3.8% 5,154 2.4% 5,170 3.8%
Other - net............................. 1 - 716 0.9% 955 0.5% 474 0.3%
----------------------------------------------------------------------------------
Subtotal................................ 52,063 43.8% 36,196 45.9% 94,476 44.3% 62,349 45.3%
Favorable Tax Adjustment................ (18,000) - (18,000) -
Disposition............................. - 3,511 3,511
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Income taxes............................ $34,063 $39,707 $76,476 $65,860
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6
3. Dispositions
In March 1997, the Company announced its plans 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 operating profit (loss) of these properties was not
material to the results of the Company for the second quarter and the first
six months of 1997.
4. Earnings Per Share
Earnings per share is computed after preference dividends and is based
on the weighted average number of Class A and Class B common shares
outstanding during the period. The 1997 second-quarter and six-month
calculations reflect primary earnings per share including incremental shares
associated with stock options in accordance with Accounting Principles Board
Opinion No.15, "Earnings Per Share" ("APB 15"). Fully diluted earnings per
share for the second quarter and the first six months of 1997 is not
presented since dilution is not material. The potential dilutive effect of
stock options on 1996 earnings per share was not material.
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"), which supersedes APB 15. SFAS 128 is effective for periods
after December 15, 1997, at which time earnings per share for periods prior
to the effective date will be restated. SFAS 128 simplifies the computation
of earnings per share by replacing the presentation of primary earnings per
share with a presentation of basic earnings per share which excludes the
dilutive effect of common stock equivalents such as stock options, warrants
and other convertible securities. SFAS 128 requires dual presentation of
basic and diluted earnings per share by entities with complex capital
structures. Diluted earnings per share under SFAS 128 is computed similarly
to fully diluted earnings per share under APB 15.
Pro forma dual presentation of basic and diluted earnings per share for
the second quarter and six months ended June 29,1997, assuming the adoption
of SFAS 128 in the first quarter of 1997, is as follows:
Three Months Ended Six Months Ended
June 29,1997 June 29,1997
----------------- ------------------
Basic Earnings Per Share $.88 $1.41
Diluted Earnings Per Share $.85 $1.36
5. Debt Obligations
The Company currently maintains $300,000,000 in revolving credit
agreements, $100,000,000 of which was renewed in July 1997 and has been
extended through July 1998, and $200,000,000 of which had an original
maturity of July 2001 and has been extended through July 2002. The extended
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. In addition, these agreements include provisions
which require, among other matters, specified levels of stockholders' equity.
At June 29, 1997, approximately $896,500,000 of stockholders' equity was
unrestricted under these agreements. At June 29, 1997, and December 29,
1996, the Company had commercial paper outstanding of $74,200,000 and
$45,500,000, respectively, which is supported by the revolving credit
agreements.
7
6. Stock Repurchase Program
During the first six months of 1997, the Company paid approximately
$100,200,000 to repurchase approximately 2,500,000 shares of Class A Common
Stock. Approximately 1,900,000 of these shares were purchased under an
agreement with an investment firm. The agreement provides for a settlement
amount ("Settlement Amount") in cash or in shares of Class A Common Stock, at
the Company's discretion, based on the Company's weighted average stock price
as defined in the agreement. The current estimated Settlement Amount is
approximately $15,000,000.
At December 29, 1996, approximately $6,200,000 remained under a May
1996 stock repurchase authorization. In February 1997, the Board of
Directors authorized additional expenditures of up to $150,000,000. To date,
including the estimated Settlement Amount, approximately $41,000,000 remain
from the February 1997 authorization. Stock repurchases under this program
exclude shares reacquired in connection with certain exercises under the
Company's stock option plans.
7. Equity Put Options
In the second quarter of 1997, the Company sold 180,000 put options in
two private placements. The put options entitle the holder, upon exercise,
to sell one share of Class A Common Stock to the Company at a specified
price. At June 29, 1997, approximately $5,430,000 was included in other
liabilities on the accompanying Condensed Consolidated Balance Sheets, which
represents the amount that the Company would be obligated to pay if all the
options were exercised. The proceeds from the sale of put options are
accounted for as additional paid-in capital. To date, 90,000 put options
have expired and the remaining unexercised put options expire on various
dates through September 1997.
8. Voluntary Staff Reductions
During the first six months of 1997, the Company recorded approximately
$2,500,000, or $.01 per share, for pre-tax charges relating to staff
reductions at corporate headquarters and The New York Times. At June 29,
1997, and December 29, 1996, approximately $23,044,000 and $49,052,000,
respectively, were included in liabilities in the accompanying Condensed
Consolidated Balance Sheets, which represent the unpaid balance of total
pre-tax charges relating to staff reductions. This balance will be
principally paid within one year.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Advertising and circulation revenues accounted for approximately 69%
and 24%, respectively, of the Company's revenues in the first six months of
1997. Advertising revenues influence the pattern of the Company's
consolidated revenues because they are seasonal in nature. Traditionally,
second-quarter and fourth-quarter advertising volume is higher than that
which occurs in the first and third quarters since economic activity tends to
be lower in the post-holiday season and the summer period. Quarterly trends
are also affected by the overall economy and economic conditions that may
exist in specific markets served by each of the Company's business segments.
Newsprint is the major component of the Company's cost of raw
materials. Newsprint prices, which were at historic highs in the first
quarter of 1996, began to decline during the second quarter of 1996, and fell
dramatically by year end. Newsprint prices increased in the first half of
1997. A subsequent price increase may occur in the second half of the year
which could further increase the Company's cost of newsprint by the end of
1997 or the beginning of 1998. However, the Company's cost of newsprint for
1997 will remain significantly lower than 1996.
The special factors that affected the 1997 and 1996 reported results
were as follows:
1997
----
- $18.0 million Favorable Tax Adjustment ($.18 per share for the
second quarter and six months)
- $2.5 million pre-tax charge ($.01 per share for the six months)
for severance and related costs resulting from workforce
reductions ("buyouts").
1996
----
- $7.8 million pre-tax gain ($.04 per share for the second quarter
and six months) from the sale of the 110 Fifth Avenue building.
- $5.5 million pre-tax charge ($.02 per share for the second quarter
and $.03 per share for the six months) for buyouts.
Results of Operations
- ---------------------
The 1997 second-quarter net income was $84.9 million, or $.85 per
share, compared with net income of $46.8 million, or $.48 per share, in the
second quarter of 1996. For the first six months of 1997, net income rose to
$136.8 million, or $1.36 per share, from $79.5 million, or $.81 per share, in
1996. Exclusive of the Favorable Tax Adjustment and other special factors
described above, 1997 second-quarter net income increased 48.7% to $66.9
million, or $.67 per share, from $45.0 million, or $.46 per share in 1996,
and 1997 net income for the six months increased 53.3% to $120.2 million, or
$1.19 per share, from $78.4 million, or $.80 per share, in 1996. The higher
1997 net income was principally due to higher advertising revenues and lower
newsprint prices in the Newspaper Group, and to the acquisition of two
television stations in the Broadcast Group in July 1996.
9
The earnings per share amounts in the second quarter and six-month
period of 1997 reflect a $.03 and $.05 per share decrease, respectively,
resulting from the inclusion of outstanding stock options in the earnings per
share calculation as required by APB 15. Included in these amounts for both
periods is $.01 per share related to the Favorable Tax Adjustment which is a
special factor. This provision of APB 15 was triggered primarily as a result
of the Company's higher stock price. The 1996 reported results did not
include the effect of outstanding stock options. Certain provisions of APB
15 will be superseded by SFAS 128, which will be adopted in the fourth
quarter of 1997, at which time earnings per share amounts will be restated.
Revenues for the second quarter of 1997 were $721.9 million, an 11.2%
increase over the 1996 second-quarter revenues of $649.5 million. Revenues
for the first six months of 1997 were $1.4 billion, an increase of 10.8% over
revenues of $1.3 billion in 1996. On a comparable basis, adjusted for the
acquisitions of certain properties, second-quarter and six-month revenues
increased by approximately 7% over 1996.
Costs and expenses increased to $594.6 million for the second quarter of
1997 from $567.0 million in 1996, and increased to $1.19 billion for the
first six months of 1997 from $1.13 billion in 1996 primarily due to higher
wages and payroll-related costs, and promotional expenses, offset by lower
raw material costs resulting from lower paper prices.
Operating profit rose to $127.3 million for the second quarter of 1997
from $82.5 million in 1996. Operating profit rose to $228.6 million for the
first six months of 1997 from $143.1 million in 1996. The improvement in
operating profit was principally due to higher advertising revenues and lower
newsprint prices in the Newspaper Group, and to the acquisition of two
television stations in the Broadcast Group in July 1996.
The 1997 second-quarter earnings before interest, income taxes,
depreciation and amortization ("EBITDA") rose to $174.0 million from $120.3
million in the comparable 1996 period. EBITDA for the first six months of
1997 rose to $317.0 million from $220.5 million in 1996.
Income from Joint Ventures increased to $3.1 million in the second
quarter of 1997 from $2.2 million in 1996. For the first six months of 1997,
income decreased to $4.4 million from $6.9 million in 1996. The increase in
the second quarter of 1997 was attributable to the absence of a loss from a
new venture which occurred in 1996. The decrease for the six months was
primarily a result of lower selling prices for paper from the mills in which
the Company has investments, partially offset by the absence of the 1996 new
venture loss.
Interest expense, net of interest income, increased in the second
quarter and first six months of 1997. The increase was primarily a result of
lower interest income and capitalized interest associated with construction.
Excluding the $18.0 million Favorable Tax Adjustment, the Company's
effective tax rate was 43.8% for the second quarter of 1997 compared with an
effective tax rate of 45.9% in the 1996 quarter. For the first six months of
1997, the effective tax rate was 44.3% compared to 45.3% in 1996. The
variations in rates were principally attributed to a lower percentage of
non-deductible amortization.
10
Segment Information
- -------------------
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 29, June 30, June 29, June 30,
(Dollars in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(13 Weeks) (26 Weeks)
Revenues
Newspapers $637,099 $581,468 $1,258,059 $1,146,878
Magazines 46,047 41,699 86,194 82,409
Broadcasting 38,801 26,339 70,155 47,794
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Total $721,947 $649,506 $1,414,408 $1,277,081
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)
Newspapers $119,423 $ 82,372 $ 217,886 $ 143,518
Magazines 9,247 6,464 14,958 13,534
Broadcasting 11,905 7,988 17,589 11,372
Unallocated Corporate Expenses (13,226) (14,304) (21,829) (25,281)
- ---------------------------------------------------------------------------------------------------------------------
Total $127,349 $ 82,520 $ 228,604 $ 143,143
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization
Newspapers $ 40,115 $ 34,397 $ 77,014 $ 68,121
Magazines (1,736) (1,718) (3,473) (3,589)
Broadcasting 4,703 2,571 9,421 5,115
Corporate 431 256 854 601
Joint Ventures 88 95 177 192
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Total $ 43,601 $ 35,601 $ 83,993 $ 70,440
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- ---------------------------------------------------------------------------------------------------------------------
A discussion of the operating results of the Company's segments follows:
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 and microfilm and New Ventures. New Ventures include projects
developed in electronic media.
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 29, June 30, June 29, June 30,
(Dollars in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(13 Weeks) (26 Weeks)
Revenues
Newspapers $634,451 $579,556 $1,253,141 $1,143,079
New Ventures 2,648 1,912 4,918 3,799
- ---------------------------------------------------------------------------------------------------------------------
Total Revenues $637,099 $581,468 $1,258,059 $1,146,878
- ---------------------------------------------------------------------------------------------------------------------
EBITDA
Newspapers $160,650 $118,472 $ 297,307 $ 215,463
New Ventures (1,112) (1,703) (2,407) (3,824)
- ---------------------------------------------------------------------------------------------------------------------
Total EBITDA $159,538 $116,769 $ 294,900 $ 211,639
- ---------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)
Newspapers $120,801 $ 84,382 $ 220,771 $ 147,921
New Ventures (1,378) (2,010) (2,885) (4,403)
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Profit $119,423 $ 82,372 $ 217,886 $ 143,518
- ---------------------------------------------------------------------------------------------------------------------
11
The Newspaper Group's operating profit was $119.4 million in the second
quarter of 1997 compared with $86.6 million, excluding buyouts, in the second
quarter of 1996. Revenues were $637.1 million in the second quarter of 1997,
compared with $581.5 million in 1996. Operating profit, excluding buyouts,
for the first six months rose to $219.4 million in 1997 from $148.8 million
in 1996, on revenues of $1.3 billion and $1.1 billion, respectively. The 10%
increase in the Group's revenues for both the quarter and six months was
primarily due to higher advertising rates and volume. The improvement in
operating profit in 1997 included the favorable effect of a 29% and 32%
decrease for the second-quarter and six-month periods, respectively, in the
Company's average cost of newsprint compared to 1996.
Average circulation of daily newspapers for the second quarter and six
months ended June 29, 1997, on a comparable basis, was as follows:
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended June 29, 1997
-----------------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
- ---------------------------------------------------------------------------------------------------------------------
Average Circulation
The New York Times 1,088.9 (0.2%) 1,673.6 0.2%
The Boston Globe 472.9 0.6% 752.7 (0.7%)
Regional Newspapers 721.3 0.3% 770.1 (0.2%)
- ---------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Six Months Ended June 29, 1997
-----------------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
- ---------------------------------------------------------------------------------------------------------------------
Average Circulation
The New York Times 1,092.6 (2.5%) 1,658.8 (3.4%)
The Boston Globe 467.6 (1.1%) 752.9 (1.6%)
Regional Newspapers 745.9 - 801.3 (0.3%)
- ---------------------------------------------------------------------------------------------------------------------
The average circulation decline for the six months is partly
attributable to the increase in newsstand and home delivery prices and a
decrease in distribution to selected outlying areas. To increase circulation,
the Company is investing in a national image campaign at The Times, as well
as other product enhancements and improvements in delivery service.
Advertising volume on a comparable basis for the second quarter and six
months was as follows:
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 29, 1997 June 29, 1997
-----------------------------------------------------------
(Inches in thousands) Volume % Change Volume % Change
- ---------------------------------------------------------------------------------------------------------------------
Advertising Volume (excluding preprints)
The New York Times 1,012 5.8% 1,940 4.4%
The Boston Globe 771 3.8% 1,479 4.3%
Regional Newspapers 3,989 (0.1%) 7,733 0.5%
- ---------------------------------------------------------------------------------------------------------------------
Advertising volume at The Times for the second quarter of 1997
increased approximately 5.8% from the 1996 second quarter. The national and
zoned categories both showed increases of 7.0%, the classified category
showed an increase of 7.3% and the retail category showed a decrease of 1.3%.
For the first six months of 1997, advertising volume increased 4.4% from the
comparable 1996 period. All categories except retail experienced increases,
with national being the most significant with a 6.8% increase from the 1996
six months. Preprint distribution was down 0.3% and 5.9% for the second
quarter and first six months, respectively.
12
At the Globe, advertising volume for the 1997 second quarter increased
3.8% over the 1996 second quarter. Advertising was higher in national,
classified and zoned categories by 5.6%, 7.8% and 1.7%, respectively, while
the retail category was down 3.8%. For the first six months of 1997,
advertising volume increased 4.3% as a result of increases in the national
and classified categories of 4.7% and 8.1%, respectively, offset by decreased
advertising in the retail and zoned categories. Preprint distribution was up
5.6% for the quarter and 7.4% for the six months over 1996.
For the regional newspaper group, advertising volume for the second
quarter decreased 0.1% from the 1996 second quarter. The decrease was a
result of lower volume in the legal category, offset by increases in all
other advertising categories. For the first six months of 1997, advertising
volume increased 0.5%. Advertising volume was higher in all categories
except legal. Preprint distribution increased 8.1% and 10.4% for the second-
quarter and six-month periods, respectively, over 1996.
Magazine Group: The Magazine Group is comprised of a number of sports-related
publications, 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 the amortization of a $40.0
million non-compete agreement ("Non-Compete"), associated with the divestiture
of the Women's Magazine Division, which is being recognized on a straight-line
basis over four years ending in July 1998.
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 29, June 30, June 29, June 30,
(Dollars in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(13 Weeks) (26 Weeks)
Revenues
Sports/Leisure Magazines $42,961 $38,940 $80,338 $76,980
Non-Compete 2,500 2,500 5,000 5,000
New Ventures 586 259 856 429
- ---------------------------------------------------------------------------------------------------------------------
Total Revenues $46,047 $41,699 $86,194 $82,409
- ---------------------------------------------------------------------------------------------------------------------
EBITDA
Sports/Leisure Magazines $ 9,246 $ 6,088 $15,404 $12,456
New Ventures (1,735) (1,342) (3,919) (2,511)
- ---------------------------------------------------------------------------------------------------------------------
Total EBITDA $ 7,511 $ 4,746 $11,485 $ 9,945
- ---------------------------------------------------------------------------------------------------------------------
Operating Profit (Loss)
Sports/Leisure Magazines $ 8,694 $ 5,508 $14,294 $11,396
Non-Compete 2,500 2,500 5,000 5,000
New Ventures (1,947) (1,544) (4,336) (2,862)
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Profit $ 9,247 $ 6,464 $14,958 $13,534
- ---------------------------------------------------------------------------------------------------------------------
The Magazine Group's operating profit was $9.2 million in the second
quarter of 1997 compared with $6.5 million in 1996, on revenues of $46.0
million and $41.7 million, respectively. Operating profit for the first six
months was $15.0 million in 1997 compared with $13.5 million in 1996, on
revenues of $86.2 million and $82.4 million, respectively. The
second-quarter and six-month operating profit increases were primarily
related to higher advertising revenues as a result of higher ad volume at the
Company's golf-related magazines, partially offset by increased losses
associated with New Ventures. In March 1997, the Company announced its plans
to sell its tennis, sailing and ski magazines. The results of these
magazines will be included in the Group's results until the divestitures are
completed. The operating profit (loss) of these magazines was not material
to the Group in the second quarter or the first six months of 1997 and their
sale will not have a material impact on the future results or financial
position of the Company.
13
Broadcasting Group: The Broadcasting Group consists of eight network-
affiliated television stations and two radio stations.
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
-----------------------------------------------------------
June 29, June 30, June 29, June 30,
(Dollars in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(13 Weeks) (26 Weeks)
Revenues $38,801 $26,339 $70,155 $47,794
- ---------------------------------------------------------------------------------------------------------------------
EBITDA $16,608 $10,559 $27,010 $16,487
- ---------------------------------------------------------------------------------------------------------------------
Operating Profit $11,905 $ 7,988 $17,589 $11,372
- ---------------------------------------------------------------------------------------------------------------------
The Broadcasting Group's operating profit rose to $11.9 million in the
second quarter of 1997 from $8.2 million in 1996, excluding buyouts, on
revenues of $38.8 million and $26.3 million, respectively. Operating profit
was $17.6 million for the first six months of 1997 compared with $11.6
million in 1996, excluding buyouts, on revenues of $70.2 million and $47.8
million, respectively. The revenue and operating profit increases were
principally attributable to the acquisition of KFOR-TV, Oklahoma City,
Oklahoma, and WHO-TV, Des Moines, Iowa, two NBC affiliates which were
acquired in July 1996, as well as stronger advertising revenues at WTKR-TV,
Norfolk, Virginia. The two new stations contributed $3.6 million and $5.2
million of operating profit in the second quarter and first six months of
1997, respectively.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $191.0 million in the
first six months of 1997 compared with $154.3 million in 1996. The increase
in operating cash flows was primarily used for 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 should be adequate to
cover working capital needs, planned capital expenditures, dividend payments
to stockholders, stock repurchases and other cash requirements. The ratio of
current assets to current liabilities was .71 and .73 at June 29, 1997, and
December 29, 1996, respectively. The ratio of long-term debt and capital
lease obligations as a percentage of total capitalization was 28% at June 29,
1997, and December 29, 1996.
Financing: The Company currently maintains $300.0 million in revolving credit
agreements, $100.0 million of which was renewed in July 1997 and has been
extended through July 1998, and $200.0 million of which had an original
maturity of July 2001 and has been extended through July 2002. The extended
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. In addition, these agreements include provisions
which require, among other matters, specified levels of stockholders' equity.
At June 29, 1997, approximately $896.5 million of stockholders' equity was
unrestricted under these agreements. At June 29, 1997, and December 29,
1996, the Company had commercial paper outstanding of $74.2 million and $45.5
million, respectively, which is supported by the revolving credit agreements.
The Company's long-term debt, including capital leases, was $636.1 million at
June 29, 1997, of which $100.0 million is due in October 1998.
14
Capital Expenditures: The Company's new production and distribution
facilities under construction in College Point, New York City and Lakeland,
Florida are substantially complete and estimated to cost approximately $375.1
million, exclusive of capitalized interest currently projected to be $38.8
million. At June 29, 1997, approximately $341.7 million had been incurred
exclusive of capitalized interest for these projects.
The Company currently estimates that, inclusive of these new
facilities, capital expenditures for 1997 will range from $170.0 million to
$190.0 million. The Company currently anticipates that depreciation and
amortization will approximate $170.0 million to $180.0 million for 1997
compared with $147.8 million in 1996.
Stock Repurchase Program: During the first six months of 1997, the Company
paid approximately $100.2 million to repurchase approximately 2.5 million
shares of Class A Common Stock. Approximately 1.9 million of these shares
were purchased under an agreement with an investment firm. The agreement
provides for a Settlement Amount in cash or in shares of Class A Common
Stock, at the Company's discretion, based on the Company's weighted average
stock price as defined in the agreement. The current estimated Settlement
Amount is approximately $15.0 million.
At December 29, 1996, approximately $6.2 million remained under a May
1996 stock repurchase authorization. In February 1997, the Board of
Directors authorized additional expenditures of up to $150.0 million. To
date, including the estimated Settlement Amount, approximately $41.0 million
remain from the February 1997 authorization. Stock repurchases under this
program exclude shares reacquired in connection with certain exercises under
the Company's stock option plans.
Other: At June 29, 1997, approximately $23.0 million of payments remain from
charges associated with staff reductions. This unpaid balance will be
principally paid within one year.
The Company is evaluating the potential impact of the situation
commonly referred to as the "Year 2000 problem". The Year 2000 problem,
which is common to most corporations, concerns the inability of information
systems, primarily computer software programs, to properly recognize and
process date sensitive information related to the Year 2000. Preliminary
assessment indicates that resulting solutions will involve a mix of
purchasing new systems and modifying existing systems. The Company is
currently in the process of determining the costs and expenditures associated
with the Year 2000 problem.
New Accounting Pronouncements: In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS")
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), and SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 131 establishes standards for reporting financial and
descriptive information for reportable segments on the same basis that is
used internally for evaluating segment performance and the allocation of
resources to segments. The Company is evaluating the effect, if any, of SFAS
131, on its operating segment reporting disclosure. SFAS 130 establishes
standards for presenting nonshareholder related items that are excluded from
net income and reported as components of stockholders' equity, such as
foreign currency translation. These statements are effective for fiscal years
beginning after December 15, 1997. The adoption of these statements will not
have a material effect on the Company's results of operations or financial
position.
15
Factors That Could Affect Operating Results
- -------------------------------------------
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those predicted by such forward-looking statements. Such
risks and uncertainties include national and local conditions that could
influence the level of retail, national and classified advertising revenues
as well as circulation revenue, the impact of competition that could affect
levels (rate and volume) of advertising and circulation generated by the
markets served by the Company's business segments, material increases in
newsprint and magazine paper prices, and other risks detailed from time to
time in the Company's publicly-filed documents, including its Annual Report
on Form 10-K for the period ended December 29, 1996.
16
Item 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
(a) The Company's annual meeting of stockholders was held on May 16, 1997.
(b) The following matters were voted on at the annual meeting:
1. The stockholders (with Class A and Class B stockholders voting
separately) elected all of management's nominees for election as Class A
Directors and Class B Directors. The results of the vote taken was as follows:
For Withheld
--- --------
Class A Directors:
A. Leon Higginbotham 85,486,005 615,512
Robert A. Lawrence 85,251,980 849,537
Charles H. Price II 85,488,783 612,734
Donald M. Stewart 85,490,787 610,730
William O. Taylor 85,257,835 843,682
Class B Directors: 407,923 0
John F. Akers 407,923 0
Richard L. Gelb 407,923 0
Ruth S. Holmberg 407,923 0
Russell T. Lewis 407,923 0
George B. Munroe 407,923 0
George L. Shinn 407,923 0
Arthur Ochs Sulzberger 407,923 0
Arthur O. Sulzberger, Jr. 407,923 0
Judith P. Sulzberger 407,923 0
2. The stockholders (with Class A and Class B stockholders voting together)
ratified the selection, by the Audit Committee of the Board of Directors, of
Deloitte & Touche LLP, independent certified public accountants, as auditors
of the Company for the year ending December 28, 1997. The result of the vote
taken was as follows:
For 86,058,601
Against 168,001
Abstain 282,838
Broker Non-Vote 0
Total Against, Abstain and Broker Non-Vote* 450,839
_______________________
* An abstention vote had the same effect as a vote against this matter.
17
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
10.4 The Company's Non-Employee Directors' Stock Option Plan, as
amended through May 16, 1997.
11. Statements re: Computation of earnings per share
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed during the period for which
this report is filed.
18
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEW YORK TIMES COMPANY
-----------------------------
(Registrant)
Date August 11, 1997
------------------ /s/ Diane P. Baker
-----------------------------
Diane P. Baker
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
19
Exhibit Index to Quarterly Report Form 10-Q
-------------------------------------------
Quarter Ended June 29, 1997
---------------------------
Exhibit No. Exhibit
- ----------- -------
10.4 The Company's Non-Employee Directors' Stock
Option Plan, as amended through May 16, 1997.
11 Statements of Computation of Primary and Fully-
Diluted Net Income Per Share
27 Financial Data Schedule
20