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 30, 1995
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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
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(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 July 31, 1995 (exclusive of treasury shares):
Class A Common Stock 95,912,773 shares
Class B Common Stock 428,976 shares
-2-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
INDEX
PART I. FINANCIAL INFORMATION (Unaudited) Page
----
Item 1. Financial Statements:
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income for
the Three and Six Months Ended June 30, 1995
and 1994.......................................... 3
Condensed Consolidated Balance Sheets as of
June 30, 1995 and December 31, 1994............... 4
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30, 1995
and 1994.......................................... 6
Notes to Condensed Consolidated Financial
Statements........................................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations:
Segment Information.................................. 11
Results of Operations - Second Quarter
of 1995 Compared with Second Quarter of 1994...... 13
Results of Operations - Six Months of 1995
Compared with Six Months of 1994.................. 15
Liquidity and Capital Resources...................... 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................... 20
SIGNATURES............................................................ 21
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30
1995 1994 1995 1994
------ ------ ------ ------
(Dollars and shares in thousands
except per share data)
Revenues
Advertising ...................................... $ 427,672 $ 444,849 $ 828,823 $ 856,472
Circulation ...................................... 138,603 151,848 268,344 296,144
Other ............................................ 44,114 38,832 84,387 72,425
--------- ---------- ---------- ----------
Total ......................................... 610,389 635,529 1,181,554 1,225,041
--------- ---------- ---------- ----------
Production Costs
Raw Materials .................................... 85,675 80,451 165,666 158,870
Wages and Benefits ............................... 133,588 133,665 264,967 265,697
Other ............................................ 97,592 117,582 193,780 230,512
--------- ---------- ---------- ----------
Total ......................................... 316,855 331,698 624,413 655,079
Selling, General and Administrative Expenses ........ 211,939 230,421 418,029 453,400
--------- ---------- ---------- ----------
Total ......................................... 528,794 562,119 1,042,442 1,108,479
--------- ---------- ---------- ----------
Operating Profit ..................................... 81,595 73,410 139,112 116,562
Interest Expense, Net of Interest Income ............. 6,732 8,027 14,076 16,693
--------- ---------- ---------- ----------
Income Before Income Taxes and Equity in
Operations of Forest Products Group ................ 74,863 65,383 125,036 99,869
Income Taxes ......................................... 34,181 31,416 58,665 48,137
--------- ---------- ---------- ----------
Income Before Equity in Operations of Forest
Products Group ..................................... 40,682 33,967 66,371 51,732
Equity in Operations of Forest Products Group ........ 2,574 330 4,244 300
--------- ---------- ---------- ----------
Net Income ........................................... $ 43,256 $ 34,297 $ 70,615 $ 52,032
========= ========== ========== ==========
Average Number of Common Shares Outstanding .......... 96,781 106,345 97,304 106,600
Per Share of Common Stock
Net Income ......................................... $ .45 $ .32 $ .73 $ .49
Cash Dividends ..................................... .14 .14 .28 .28
See notes to condensed consolidated financial statements.
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
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(Dollars in thousands)
ASSETS
Current Assets
Cash and short-term investments ............... $ 124,184 $ 41,419
------------ -----------
Marketable securities ......................... 19,677 --
------------ -----------
Accounts receivable-net ....................... 246,260 247,750
------------ -----------
Inventories
Newsprint and magazine paper ............... 28,773 24,783
Work-in-process, etc ....................... 6,062 5,762
------------ -----------
Total inventories ...................... 34,835 30,545
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Other current assets .......................... 67,222 92,060
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Total current assets ................... 492,178 411,774
Other Assets
Investment in forest products group ........... 91,863 85,433
Property, plant and equipment (less accumulated
depreciation of $695,128,000 in 1995 and
$660,017,000 in 1994) ...................... 1,211,727 1,158,751
Intangible assets acquired
Cost in excess of net assets acquired (less
accumulated amortization of $177,920,000
in 1995 and $166,045,000 in 1994) .......... 1,200,962 1,225,205
Other intangible assets acquired (less
accumulated amortization of $9,089,000
in 1995 and $6,486,000 in 1994) ............ 208,625 154,261
Miscellaneous assets .......................... 103,928 102,207
------------ -----------
TOTAL ASSETS ........................... $3,309,283 $3,137,631
=========== ===========
See notes to condensed consolidated financial statements.
(Continued) - 1
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS - (Continued)
(Unaudited)
June 30, December 31,
1995 1994
-------- -------
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and notes payable ....... $ 115,211 $ 121,504
Payrolls ................................. 74,129 67,012
Accrued expenses ......................... 193,744 182,338
Unexpired subscriptions .................. 79,038 77,697
Current portion of long-term debt ........ 52,764 2,681
---------- ---------
Total current liabilities ............. 514,886 451,232
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Other Liabilities
Long-term debt ........................... 588,957 473,530
Capital lease obligations ................ 48,611 49,666
Deferred income taxes .................... 168,625 176,588
Other .................................... 444,389 441,323
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Total other liabilities ............... 1,250,582 1,141,107
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Stockholders' Equity
Capital shares ........................... 12,626 12,615
Additional capital ....................... 598,740 597,860
Earnings reinvested in the business ...... 1,223,608 1,179,715
Common stock held in treasury, at cost ... (291,159) (244,898)
---------- ---------
Total stockholders' equity ............ 1,543,815 1,545,292
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ... $ 3,309,283 $ 3,137,631
========== =========
See notes to condensed consolidated financial statements.
(Concluded) - 2
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
CASH PROVIDED (USED): 1995 1994
---- ----
OPERATING ACTIVITIES
Net income ..................................................... $ 70,615 $ 52,032
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization ............................. 72,324 77,679
Deferred income taxes ..................................... (12,949) (5,540)
Equity in operations of forest products group-net ......... (5,706) (2)
Other-net ................................................. 47,845 27,139
--------- --------
Net cash provided by operating activities ...................... 172,129 151,308
--------- --------
INVESTING ACTIVITIES
Business acquired .............................................. (71,913) --
Net proceeds on sale of BPI Communications, L.P ................ -- 52,992
Purchases of marketable securities ............................. (39,370) --
Proceeds from sales of marketable securities ................... 19,693 --
Additions to property, plant and equipment ..................... (90,715) (63,057)
Other-net ...................................................... 796 (219)
--------- --------
Net cash used in investing activities .......................... (181,509) (10,284)
--------- --------
FINANCING ACTIVITIES
Short-term borrowings - net .................................... (60,405) (62,340)
Long-term obligations and notes payable
Increase .................................................. 388,842 --
Reduction ................................................. (164,882) (2,649)
Capital Shares
Issuance .................................................. 723 1,193
Repurchase ................................................ (44,960) (25,390)
Dividends paid to stockholders ................................. (27,268) (29,907)
Other-net ...................................................... 95 898
--------- --------
Net cash provided by (used in) financing activities ............ 92,145 (118,195)
--------- --------
Increase in Cash and short-term investments .................... 82,765 22,829
Cash and short-term investments at the beginning of the year ... 41,419 42,058
--------- --------
Cash and short-term investments at the end of the quarter ...... $ 124,184 $ 64,887
========= ========
See notes to condensed consolidated inancial statements.
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. General
a. Results for the interim periods should not be considered
as indicative of results for a full year.
b. The information furnished, in the opinion of management,
reflects all adjustments (which consist of normal
recurring accruals) necessary for a fair presentation of
results for the interim periods presented.
c. The 1995 amounts are subject to year-end audit.
2. Income Taxes
For the three and six months ended June 30, 1995, income tax expense
includes the reversal of deferred income taxes of $7,508,000 and $13,232,000,
respectively. For the comparable 1994 periods, income taxes include deferred
income tax expense of $4,906,000 and $10,127,000, respectively. The principal
reasons for the variance between the effective tax rate on income before income
taxes and equity in operations of Forest Products Group and the federal
statutory rate (exclusive of the effects of the Company's interest in Madison
Paper Industries ("Madison"), a partnership) are state and local taxes and the
amortization of certain intangible assets acquired.
Equity in operations of Forest Products Group includes the income tax
effects of the Company's interest in Madison and its equity in the operations of
a Canadian forest products company. For the three and six months ended June 30,
1995, income tax expense included in equity in operations was $870,000 and
$1,322,000, respectively. For the comparable 1994 periods, income tax expense
included in equity in operations was $44,000 and $8,000, respectively. The
Company's consolidated federal income tax return includes the Company's interest
in Madison.
3. Earnings Per Share
The computation of earnings per share data is not separately disclosed
as such computation can be clearly determined from the Condensed Consolidated
Statements of Income.
4. Cash and Short-Term Investments
For purposes of the Condensed 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 caused by outstanding checks. These overdrafts,
including $874,000 as of June 30, 1995 related to repurchases of the Company's
stock (see Note 10), have been reclassified to accounts payable.
For the six-month periods ended June 30, 1995 and 1994, the Company made
cash payments for interest (net of amounts capitalized) totaling $12,461,000 and
$20,278,000, respectively. Cash payments for income taxes for the six-month
periods ended June 30, 1995 and 1994 totaled $31,379,000 and $39,355,000,
respectively.
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
5. Marketable Securities
The Company determines the appropriate classification of its
investments in debt and equity securities at the time of purchase and
reevaluates such determination at each balance sheet date. The Company has
classified the marketable debt securities as held-to-maturity, since the Company
has the intent and ability to hold them to maturity. Held-to-maturity
investments are carried at amortized cost.
6. Capital Investment Projects
In December 1993, the Company and the City of New York executed a
25-year lease and related agreements, under which the Company is leasing 31
acres of City-owned land in College Point, New York, on which The New York Times
("The Times") is building a state-of-the-art production and distribution
facility. Conditions stipulated under the lease were met in June 1994 and,
accordingly, a capital lease of $5,000,000 was recorded at such time.
In July 1994, the Company's Board of Directors approved the construction
of the new facility, which will allow for later news deadlines and provide color
and inserting capability for the daily editions of The Times. The cost of the
new facility, excluding capitalized interest currently projected to be
$45,000,000, is estimated to be $315,000,000.
Construction of the facility began in August 1994 with completion
anticipated in the second half of 1997. While the new facility will replace The
Times's Manhattan production and distribution facility, business and news
operations will remain at the Manhattan building. No write-down is anticipated
as a result of the discontinuance of production at the Manhattan facility.
7. Staff Reductions and Union Negotiations
In 1994, the Company completed its negotiations of long-term labor
agreements with all of its unions at The Times and they extend to the year 2000.
These agreements encompass wages, payments to the unions' benefits and pension
funds, job security and financial incentives. These agreements apply to all of
The Times's current and new production and distribution facilities.
In connection with these union agreements and additional white-collar
staff reductions for non-union employees, the Company recorded pre-tax charges
($35,400,000, or $.23 per share, in 1993; $28,000,000, or $.20 per share, in
1992; $20,000,000, or $.15 per share, in 1991; and $30,000,000, or $.22 per
share, in 1989) for severance and related costs for staff reductions at The
Times.
-9-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
At June 30, 1995 and December 31, 1994, approximately $14,700,000 and
$23,700,000, respectively, were included in Accrued Expenses on the accompanying
Condensed Consolidated Balance Sheets, which represent the unpaid, but
committed, balance of these pre-tax charges. The remaining cash outflows of the
unpaid balance are expected to occur over the next two years due to the timing
of certain union pension and welfare fund contributions.
8. Acquisition/Dispositions
In June 1995 the Company acquired WTKR-TV in Norfolk, Virginia. The
acquisition was accounted for as a purchase. The aggregate cost of the
acquisition was $72,556,000, of which $71,913,000 was paid in cash with the
remainder representing operating liabilities assumed. The purchase resulted in
increases of other intangible assets of approximately $56,791,000 (which consist
of network affiliation agreement, FCC licenses and other intangible assets);
property, plant and equipment of $14,285,000, and other assets of $1,480,000.
Net liabilities assumed as a result of the transaction totaled approximately
$643,000.
In May 1995, the Company sold the York County Coast Star (Kennebunk, ME)
and in July and August 1995 the Company completed the sales of six additional
small regional newspapers. The net gain from the dispositions will not have a
material effect on the Company's consolidated financial statements. The net
assets of $13,203,000 of the six properties are included in other current
assets on the accompanying June 30, 1995 Condensed Consolidated Balance Sheet.
These dispositions and acquisition will not have a material impact on the
future operations of the Company.
In the third quarter of 1994, the Company completed the sales of its
Women's Magazines Division and U.K. golf publications. 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 that commenced July 26, 1994.
Pro forma operating results for the six months ended June 30, 1994, had
the sales of the U.K. golf publications and Women's Magazines Division occurred
at the beginning of that period, are as follows: revenues of $1,104,687; net
income of $59,242,000; and net income per share of $.56.
The above pro forma results are not necessarily indicative of the
results of operations that might have occurred had the sales taken place at the
beginning of the period, nor necessarily indicative of the results that may be
obtained in the future. The gain on the sales is not included in the above pro
forma operating results.
-10-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Concluded)
9. Debt
On March 29, 1995, the Company completed a public offering of
$400,000,000 in unsecured notes and debentures. Ten-year notes maturing March
15, 2005, totaling $250,000,000 were issued at a rate of 7.625 percent; the
remaining $150,000,000 were issued as 30-year debentures maturing March 15,
2025, at a rate of 8.25 percent and are callable after 10 years. For both
issuances interest is payable semi-annually on March 15 and September 15.
The net proceeds from the offering were used to repay notes of
$162,300,000 due March 31, 1995, with an effective interest rate of 11.85
percent related to the 1985 acquisition of three newspapers; $50,000,000
was used to repay 9.34 percent notes due July 15, 1995 assumed in connection
with the October 1993 acquisition of The Boston Globe; and to repay
indebtedness from the Company's commercial paper program. The remaining net
proceeds will be used for general corporate purposes.
10. Stock Repurchase Program
During the first quarter of 1995, the remainder of an October 1994
$100,000,000 authorization was expended to repurchase approximately 600,000
shares of Class A Common Stock at an average price of $22.08. In February 1995
the Company's Board of Directors authorized additional repurchases of up to
$50,000,000. To date, the Company has repurchased approximately 1,400,000 shares
of its Class A Common Stock at an average price of $22.80 per share under this
program. Under the program, purchases may be made from time to time either in
the open market or through private transactions. The number of shares that may
be purchased in market transactions may be limited as a result of The Globe
transaction. Purchases may be suspended from time to time or discontinued.
11. Equity Put Options
In addition to the Company's stock repurchase program (see Note 10), the
Company sold put options in a series of private placements that entitle the
holder, upon exercise, to sell one share of Class A Common Stock to the Company
at a specified price. At June 30, 1995, and December 31, 1994, approximately
$3,060,000 and $2,660,000, respectively, were 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.
-11-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
-----------------------------------------------
Segment Information
-------------------
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- ------- ------- ---------
(Dollars in thousands)
REVENUES
Newspapers ........................... $ 546,672 $ 508,102 $ 1,059,766 $ 986,620
Magazines ............................ 42,929 108,885 83,831 205,351
Broadcasting ......................... 20,788 18,542 37,957 33,070
------------ ------------ ------------ ------------
Total ................................ $ 610,389 $ 635,529 $ 1,181,554 $ 1,225,041
============ ============ ============ ============
OPERATING PROFIT (LOSS)
Newspapers ........................... $ 70,531 $ 65,773 $ 121,341 $ 113,852
Magazines ............................ 10,924 10,014 21,123 10,180
Broadcasting ......................... 6,228 4,727 8,972 5,791
Unallocated Corporate Expenses ....... (6,088) (7,104) (12,324) (13,261)
------------ ------------ ------------ ------------
Total ................................ 81,595 73,410 139,112 116,562
INTEREST EXPENSE, NET
OF INTEREST INCOME ................ 6,732 8,027 14,076 16,693
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND
EQUITY IN OPERATIONS OF
FOREST PRODUCTS GROUP ............. 74,863 65,383 125,036 99,869
INCOME TAXES ......................... 34,181 31,416 58,665 48,137
------------ ------------ ------------ ------------
INCOME BEFORE EQUITY IN OPERATIONS
OF FOREST PRODUCTS GROUP .......... 40,682 33,967 66,371 51,732
EQUITY IN OPERATIONS OF
FOREST PRODUCTS GROUP ............. 2,574 330 4,244 300
------------ ------------ ------------ ------------
NET INCOME............................ $ 43,256 $ 34,297 $ 70,615 $ 52,032
============ ============ ============ ============
-12-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)
-------------------------------------------------
Segment Information
--------------------
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------- ------- -------- -------
(Dollars in thousands)
DEPRECIATION AND AMORTIZATION
Newspapers .............................. $32,945 $32,974 $66,392 $65,986
Magazines ............................... 555 3,191 1,140 6,456
Broadcasting ............................ 2,183 2,416 4,356 4,880
Corporate ............................... 239 202 436 357
-------- ------- ------- -------
Total ................................... $35,922 $38,783 $72,324 $77,679
======== ======= ======= =======
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THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
-----------------------------------------------
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 quarter. Advertising volume
tends to be lower in the third quarter primarily because of the summer slow-down
in many areas of economic activity. In addition, quarterly trends are affected
by the overall economy and economic conditions that may exist in specific
markets served by each of the Company's business segments.
Results of Operations - Second Quarter of 1995
----------------------------------------------
Compared with Second Quarter of 1994
-----------------------------------
The 1995 second-quarter net income was $43.3 million, or $.45 per share,
compared with net income of $34.3 million, or $.32 per share, in 1994. The
higher 1995 net income was mainly due to improvements in the Newspaper,
Broadcasting and the Forest Products Groups.
Revenues for the 1995 second quarter were $610.4 million compared with
$635.5 million in the 1994 quarter. The Company's costs and expenses for the
1995 second quarter decreased to $528.8 million from $562.1 million in 1994. The
declines were due to the absence of the revenues and expenses attributable to
the Women's Magazines and U.K. golf publications, which were sold in the 1994
third quarter. On a comparable basis, excluding the revenues and costs and
expenses attributable to the magazines sold, 1995 second-quarter revenues and
costs and expenses both increased by approximately 7 percent over the comparable
1994 period. The improvement in revenues was a result of increased revenues at
the Newspaper and Broadcasting Groups. The increase in costs and expenses was
primarily due to higher newsprint costs.
For the second quarter of 1995, earnings before depreciation,
amortization, interest and income taxes rose to $117.5 million from $112.2
million in the 1994 quarter. The Company currently anticipates that depreciation
and amortization will approximate $150 million for the year 1995 as compared
with $154 million in 1994.
The quarterly per-share amounts were affected by the repurchase of the
Company's Class A Common Stock throughout 1994 as well as in the first half of
1995. During 1994, approximately $235.2 million was expended to repurchase
approximately 10.0 million shares. In the first six months of 1995, the Company
continued its repurchase program and expended $45.7 million to repurchase
approximately 2.0 million shares.
Interest expense, net of interest income, declined to $6.7 million in
the second quarter of 1995 from $8.0 million last year. The decline was due
principally to a higher level of capitalized interest in connection with
facilities under construction.
-14-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
------------------------------------------------
The 1995 and 1994 second-quarter effective tax rates, were 45.7 and 48.0
percent, respectively. This is principally attributable to a reduction in the
proportion of nondeductible amortization to income before income taxes in 1995
as compared with 1994.
A discussion of the operating results of the Company's segments and
equity interests follows:
The Newspaper Group, as of June 30, 1995, consisted of The New York
Times ("The Times"), The Boston Globe ("The Globe"), 27 Regional Newspapers,
newspaper wholesalers, Information Services and a 50 percent interest in the
International Herald Tribune. In May 1995 the Company sold the York County Coast
Star (Kennebunk, ME). The impact of the sale was immaterial.
Second-quarter 1995 operating profit for the Group rose to $70.5 million
from $65.8 million in the 1994 second quarter. Revenues were $546.7 million in
the 1995 second quarter, compared with $508.1 million in 1994. The increase in
revenues was principally due to a combination of higher advertising rates and
volume, enhanced database licensing royalties, and higher circulation revenues
which resulted from higher prices, offset by the softness in circulation copies.
The Times experienced almost a 15 percent gain in circulation revenues for the
second quarter, with The Globe and the Regional Newspapers recording gains of
almost 7 percent for the same period.
The operating performance improved despite higher newsprint prices,
which were 36 percent greater in the 1995 second quarter compared with the 1994
second quarter. In order to offset such price increases, newsprint conservation
and cost control programs were implemented. These cost management programs,
combined with aggressive pricing, contributed to the improved results for the
quarter. Higher newsprint prices are expected for the remainder of the year, but
these cost management programs are expected to offset a portion of these price
increases.
At The Times, advertising volume for the second quarter of 1995 was
971,700 inches, up 0.9 percent from the 1994 second quarter. The zoned, national
and retail advertising categories showed gains, while the classified advertising
category was down. Average circulation for the three months ended June 30, 1995
was 1,101,300 copies weekdays, down 36,200 copies from 1994, and 1,687,900
copies Sundays, down 41,600 copies.
At The Globe, advertising volume for the second quarter of 1995 was
756,100 inches, up 3.3 percent from the 1994 second quarter. Advertising was up
in all categories except classified. Preprint distribution was up 8.5 percent.
Average circulation for the three months ended June 30, 1995 was 499,000 copies
weekdays, down 10,200 copies from 1994, and 788,200 copies Sundays, down 20,400
copies.
For the 27 Regional Newspapers that were in the Group for the same
period, advertising volume for the second quarter increased to 4.3 million
inches, up 0.4 percent. Strong advertising in the classified and retail
categories accounted for the improved results. Preprint distribution was up 0.9
percent. For the three months
-15-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
-----------------------------------------------
ended June 30, 1995, average circulation was 813,700 copies on weekdays, down
15,500 copies from 1994 and 821,600 copies on Sunday, down 13,200 copies.
Circulation was 40,900 copies for the nondailies, up 100 copies.
The Magazine Group's second-quarter operating profit was $10.9 million
in 1995 compared with $10.0 million in 1994 on revenues of $42.9 million and
$108.9 million, respectively. The changes in revenues and operating profit for
the quarter were due to the absence of the operations of the Women's Magazines
and U.K. golf publications which were sold in the 1994 third quarter.
Excluding the 1994 second-quarter operations of the magazines sold and
the 1995 second-quarter non-compete income of $2.5 million arising from the
Women's Magazines sale (see Note 8), 1995 second-quarter operating profit for
the Sports/Leisure Magazines was $8.4 million compared with $9.6 million in the
1994 quarter. Revenues for the Sports/Leisure Magazines for the second quarter
of 1995 were $40.4 million compared with $40.8 million in the comparable 1994
period. The decrease in the results of operations was primarily due to lower
second-quarter advertising revenues at Golf Digest and Tennis magazines, offset
by lower subscription promotion costs.
The Broadcasting Group's second-quarter operating profit rose to $6.2
million in the 1995 second quarter from $4.7 million in the comparable 1994
quarter. Second-quarter revenues were $20.8 million compared with $18.5 million
in the 1994 quarter. Higher local advertising revenue at the television and
radio stations, as well as higher network compensation, accounted for the
improved results.
The Forest Products Group's equity in operations (an after-tax amount)
was $2.6 million for the second quarter of 1995, compared with $0.3 million in
1994. The 1995 improvement resulted from higher sales prices. This trend is
expected to continue for the remainder of 1995.
Results of Operations - Six Months of 1995
------------------------------------------
Compared with Six Months of 1994
--------------------------------
Net income rose to $70.6 million, or $.73 per share, up from $52.0
million, or $.49 per share, in 1994. The higher 1995 net income was principally
due to improvements in the Newspaper, Broadcast and Forest Products Groups.
Consolidated revenues for the 1995 six-month period decreased to $1.18
billion, compared with $1.23 billion for the first six months of 1994. The
decline was due to the absence of the revenues attributable to the Women's
Magazines and U.K. Golf publications which were sold in the third quarter of
1994. Exclusive of the revenues attributable to the magazines which were sold,
revenues for the six months increased by approximately 7 percent over the
comparable 1994 period.
-16-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
-----------------------------------------------
The Company's costs and expenses decreased to $1.04 billion from $1.11
billion. Excluding the costs and expenses attributable to the sold magazines,
costs and expenses increased 7 percent primarily due to higher newsprint costs.
For the first six months of 1995, the Company's operating profit before
depreciation and amortization rose to $211.4 million from $194.2 million in the
comparable 1994 period.
Interest expense, net of interest income, declined to $14.1 million for
the 1995 six-month period from $16.7 million last year due to higher level of
capitalized interest in connection with facilities under construction.
The Company's effective tax rate for the first six months of 1995 was
46.9 percent compared with 48.2 percent in the comparable 1994 period. The
Company currently estimates that its 1995 annual effective income tax rate will
approximate the six-month rate for 1995. The 1994 annual effective income tax
rate was 41.7 percent as a result of the utilization of capital loss
carryforwards.
A discussion of the operating results of the Company's segments and equity
interests follows:
For the six months operating profit of the Newspaper Group increased to
$121.3 million from $113.9 million in the six months of 1994. Revenues of $1.06
billion in 1995 increased from $986.6 million in 1994 due to a combination of
higher advertising rates and volume, enhanced database licensing royalties, and
higher circulation revenues, which resulted from higher prices, offset by
softness in circulation copies. The Group's operating performance increased
despite rising newsprint prices. The Company implemented newsprint conservation
and cost control programs to offset the effect of such price increases. These
cost programs, combined with aggressive pricing, contributed to improved
results. Higher newsprint prices are expected for the remainder of the year and
into 1996 as a result of increased demand for newsprint in the market. These
cost management programs are expected to offset these price increases.
Advertising volume at The Times for the first six months of 1995 was
1,889,900 inches, up 3.8 percent over the comparable 1994 period. The zoned and
national categories showed strong gains, while retail and classified declined
slightly. Average circulation for the six months ended June 30, 1995 was
1,129,600 copies weekdays, down 21,400 copies from 1994, and 1,713,300 copies
Sundays, down 12,400 copies from the comparable 1994 period.
At The Globe, advertising volume for the first six months of 1995 was
1,440,700 inches, up 3.7 percent over the comparable 1994 period. Advertising
was up in all categories except retail. Preprint distribution was up 8.6
percent. Average circulation for the six months ended June 30, 1995 was 498,400
copies weekdays, down 7,100 copies from 1994, and 786,800 copies Sunday, down
23,700 copies.
-17-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
-----------------------------------------------
For the 27 Regional Newspapers that were in the Group for the same
period, advertising volume for the first six months of 1995 increased 2.1
percent from the 1994 six-month period to 8.4 million inches. Strong advertising
in the classified and retail categories accounted for the increase. Preprint
distribution was down 1.8 percent. For the six months ended June 30, 1995,
circulation for the dailies was 852,500 copies weekdays, down 8,600 copies from
1994, and 861,400 copies Sundays, down 6,300 copies. Circulation of 44,200
copies for the non-dailies was up 300 copies.
The Magazine Group's six-month operating profit was $21.1 million in
1995 compared with $10.2 million in 1994 on revenues of $83.8 million and $205.4
million respectively. The changes in revenues and operating profit were due to
the absence of the Women's Magazines and U.K. Golf publications which were sold
in the 1994 third quarter.
Excluding the 1994 operations of the Women's Magazines Division and the
U.K. golf publications and the 1995 non-compete income, the 1995 six-month
operating profit rose to $16.1 million from $14.5 million. Revenues were $78.8
million for the first six months, compared with $75.4 million in the comparable
1994 period. Higher six-month advertising revenues at Golf Digest and lower
subscription promotion costs accounted for the improved results.
The Broadcasting Group's operating profit rose to $9.0 million for the
first six months of 1995 compared with $5.8 million in the 1994 six-month period
on revenues of $38.0 million and $33.1 million respectively. Higher local
advertising revenues at the television and radio stations, as well as higher
network compensation accounted for the improved results.
Equity in operations (an after-tax amount) of the Forest Products Group
was $4.2 million compared with $0.3 million in the first six months of 1994. The
improvement resulted primarily from higher sales prices. This favorable trend
should continue for the remainder of the year.
Liquidity and Capital Resources
-------------------------------
Net cash provided by operating activities was $172.1 million in the 1995
second quarter compared with $151.3 million in 1994. Such cash was used
primarily to modernize facilities and equipment, for acquisitions, to pay
dividends to stockholders and to repurchase shares of the Company's Class A
Common Stock. The ratio of current assets to current liabilities was .96 at June
30, 1995, and .91 at December 31, 1994; and long-term debt and capital lease
obligations as a percentage of total capitalization was 29 percent at June 30,
1995, compared with 25 percent at December 31, 1994.
-18-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
-----------------------------------------------
In March 1995 the Company completed a public offering of $400.0 million
in unsecured notes and debentures (see Note 9). Ten-year notes totaling $250.0
million maturing March 15, 2005 were issued at a rate of 7.625 percent; and the
remaining $150.0 million were issued as 30-year debentures maturing March 15,
2025 at a rate of 8.25 percent.
The net proceeds from the offering were used to repay $162.3 million of
notes due March 1995, $50.0 million of notes due July 1995 and indebtedness
from the Company's commercial paper program. The remaining proceeds will be
used for general corporate purposes.
During the first quarter of 1995, the remainder of an October 1994
$100.0 million authorization was expended to repurchase approximately 0.6
million shares of Class A Common Stock at an average price of $22.08. In
February 1995, the Company's Board of Directors authorized additional
expenditures of up to $50.0 million. To date, the Company has repurchased
approximately 1.4 million shares of its Class A Common Stock at an average price
of $22.80 per share under this program. Under the program, purchases may be made
from time to time either in the open market or through private transactions. The
number of shares that may be purchased in market transactions may be limited as
a result of The Globe transaction. Purchases may be suspended from time to time
or discontinued.
The Company currently anticipates that depreciation and amortization
will approximate $150.0 million for the year in 1995 as compared with $154.0
million in 1994.
In July 1994, the Company's Board of Directors approved the construction
of a new production and distribution facility in College Point, New York, for
production of The Times (see Note 6). The cost of the new facility is estimated
to be $315.0 million, exclusive of capitalized interest currently projected to
be $45.0 million. Construction began in August 1994 with completion expected in
the second half of 1997. While the new facility will replace The Times's
Manhattan production and distribution facility, business and news operations
will remain at the Manhattan building. No write-down is anticipated as a result
of the discontinuance of production at the Manhattan facility.
The Company currently anticipates that, inclusive of the College Point
facility, capital expenditures for 1995 are expected to be in the range of
$250.0 million to $300.0 million.
In connection with a commitment related to the 1991 divestiture of a
jointly-owned newsprint affiliate, Spruce Falls Power and Paper Company,
Limited, the Company has fulfilled its commitment to lend $26.5 million (C$30.0
million) to the new owners of the mill. To date, the mill has been operating
profitably and all interest payments related to the loan have been received by
the Company. Under the terms of the loan, the five-year
-19-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Concluded)
-----------------------------------------------
repayment period is not scheduled to commence until December 1997. The Company
expects the former affiliate to fulfill its contractual obligation as stipulated
in the loan agreement.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 - Accounting for Impairment of
Long-Lived Assets ("SFAS 121"). SFAS 121 will require a review for impairment of
long-lived assets and certain identifiable intangible assets to be held and
used, whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The statement shall be effective for
financial statements for fiscal years beginning after December 15, 1995. The
Company does not believe operating results will be materially affected by the
adoption of SFAS 121.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company is not
currently engaged in interest rate swaps or hedging activity of a material
nature. The Company had one interest rate swap agreement with a major financial
institution to manage interest costs on $50.0 million of notes which were paid
in July 1995 (see Note 9). The swap agreement converted a 9.34 percent fixed
interest rate to an effective interest rate of 10.3 percent for the 1995 second
quarter.
In connection with the 1993 charges totaling $35.4 million for staff
reductions (see Note 7), approximately $24.5 million has been disbursed. The
Company has committed the remaining funds. As a result of the timing of certain
union pension and welfare fund contributions, the remaining cash outflow
associated with these charges are expected to occur over the next two years. The
Company does not anticipate that its ongoing business operations will be
affected by this reduction of staff and expects to fund the amounts through
internally-generated funds.
In addition to cash provided from operating activities, the Company has several
established sources for future liquidity purposes, including several revolving
credit and term loan agreements. Currently, $170.0 million is available for
borrowing by the Company under these agreements. The Company anticipates that
during 1995, cash for operating, investing and financing activities will
continue to come from a combination of internally-generated funds and external
financing.
-20-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
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.
-21-
THE NEW YORK TIMES COMPANY
Form 10-Q
June 30, 1995
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 the
undersigned thereunto duly authorized.
THE NEW YORK TIMES COMPANY
--------------------------
(Registrant)
Date: August 10, 1995 /s/ D.L. Gorham
--------------- -----------------------------------
(Signature)
David L. Gorham
Senior Vice President and
Chief Financial Officer