FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended September 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 .
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Number of shares of each class of the registrant's common stock outstanding as
of October 31, 1995 (exclusive of treasury shares):
Class A Common Stock 96,008,364 shares
Class B Common Stock 428,976 shares
-2-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 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 Nine Months Ended September 30, 1995 and 1994 . . . . . 3
Condensed Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 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 - Third Quarter of 1995
Compared with Third Quarter of 1994 . . . . . . . . . . . . 13
Results of Operations - Nine Months of 1995
Compared with Nine 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
September 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------- ------- -------- -------
(Dollars and shares in thousands
except per share data)
Revenues
Advertising . . . . . . . . . . . $385,065 $364,266 $1,213,888 $1,220,738
Circulation . . . . . . . . . . . 139,315 123,383 407,659 419,527
Other . . . . . . . . . . . . . . 48,331 39,501 132,718 111,926
-------- -------- ---------- ----------
Total . . . . . . . . . . . . . 572,711 527,150 1,754,265 1,752,191
-------- -------- ---------- ----------
Production Costs
Raw Materials . . . . . . . . . . 90,499 65,973 256,165 224,843
Wages and Benefits . . . . . . . 135,053 129,876 400,020 395,573
Other . . . . . . . . . . . . . . 97,224 96,165 291,004 326,677
-------- -------- ---------- ----------
Total . . . . . . . . . . . . . 322,776 292,014 947,189 947,093
Selling, General and Administrative
Expenses . . . . . . . . . . . . 209,690 201,861 627,719 655,261
-------- -------- ---------- ----------
Total . . . . . . . . . . . . . 532,466 493,875 1,574,908 1,602,354
-------- -------- ---------- ----------
Operating Profit . . . . . . . . . 40,245 33,275 179,357 149,837
Interest Expense, Net of Interest
Income . . . . . . . . . . . . . 5,577 6,193 19,653 22,886
Gain on Dispositions . . . . . . . 11,291 203,979 11,291 203,979
-------- -------- ---------- ----------
Income Before Income Taxes and
Equity in Operations of Forest
Products Group . . . . . . . . . 45,959 231,061 170,995 330,930
Income Taxes . . . . . . . . . . . 18,032 111,913 76,697 160,050
-------- -------- ---------- ----------
Income Before Equity in Operations
of Forest Products Group . . . . 27,927 119,148 94,298 170,880
Equity in Operations of Forest
Products Group . . . . . . . . . 4,279 1,486 8,523 1,786
-------- -------- ---------- ----------
Net Income . . . . . . . . . . . . $ 32,206 $120,634 $ 102,821 $ 172,666
======== ======== ========== ==========
Average Number of Common Shares
Outstanding . . . . . . . . . . . 96,343 104,254 96,983 105,818
Per Share of Common Stock
Net Income . . . . . . . . . . . $.33 $1.16 $1.06 $1.63
Cash Dividends . . . . . . . . . .14 .14 .42 .42
See notes to condensed consolidated financial statements.
-4-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1995 1994
-------- ------
(Dollars in thousands)
ASSETS
Current Assets
Cash and short-term investments . . $ 77,426 $ 41,419
Accounts receivable-net . . . . . . 264,083 247,750
Inventories
Newsprint and magazine paper . . 34,086 24,783
Work-in-process, etc. . . . . . . 6,260 5,762
--------- ---------
Total inventories . . . . . . 40,346 30,545
--------- ---------
Other current assets . . . . . . . 78,811 92,060
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Total current assets . . . . . 460,666 411,774
Other Assets
Investment in forest products group 95,224 85,433
Property, plant and equipment (less
accumulated depreciation of
$718,318,000 in 1995 and
$660,017,000 in 1994) . . . . . . 1,248,584 1,158,751
Intangible assets acquired
Cost in excess of net assets
acquired (less accumulated
amortization of $186,446,000
in 1995 and $166,045,000 in 1994) 1,192,435 1,225,205
Other intangible assets acquired
(less accumulated amortization of
$10,746,000 in 1995 and $6,486,000
in 1994) . . . . . . . . . . . . 207,882 154,261
Miscellaneous assets . . . . . . . 116,030 102,207
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TOTAL ASSETS . . . . . . . . . $3,320,821 $3,137,631
========== ==========
See notes to condensed consolidated financial statements.
(Continued) - 1
-5-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS - (Continued)
(Unaudited)
September 30, December 31,
1995 1994
-------- --------
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts and notes payable . . . . $ 144,921 $ 121,504
Payrolls . . . . . . . . . . . . . 75,112 67,012
Accrued expenses . . . . . . . . . 183,283 182,338
Unexpired subscriptions . . . . . . 84,641 77,697
Current portion of long-term debt . 2,982 2,681
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Total current liabilities . . . . 490,939 451,232
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Other Liabilities
Long-term debt . . . . . . . . . . 589,074 473,530
Capital lease obligations . . . . . 48,845 49,666
Deferred income taxes . . . . . . . 170,589 176,588
Other . . . . . . . . . . . . . . . 459,160 441,323
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Total other liabilities . . . . . 1,267,668 1,141,107
---------- ----------
Stockholders' Equity
Capital shares . . . . . . . . . . 12,663 12,615
Additional capital . . . . . . . . 605,299 597,860
Earnings reinvested in the business 1,242,911 1,179,715
Common stock held in treasury, at
cost . . . . . . . . . . . . . . (298,659) (244,898)
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Total stockholders' equity . . . 1,562,214 1,545,292
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.......... $3,320,821 $3,137,631
========== ==========
See notes to condensed consolidated financial statements.
(Concluded) - 2
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THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine Months Ended
September 30,
CASH PROVIDED (USED): 1995 1994
------ ------
(Dollars in thousands)
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . $102,821 $172,666
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization . . . . . . 109,363 113,817
Deferred income taxes . . . . . . . . . . (13,296) (17,228)
Equity in operations of forest products
group-net . . . . . . . . . . . . . . . . (11,727) (2,198)
Gain on sales . . . . . . . . . . . . . . . (11,291) (203,979)
Other-net . . . . . . . . . . . . . . . . 34,852 124,532
-------- --------
Net cash provided by operating activities . . 210,722 187,610
-------- --------
INVESTING ACTIVITIES
Purchase of WTKR-TV. . . . . . . . . . . . . (71,214) -
Net proceeds from sales . . . . . . . . . . . 27,536 279,078
Purchases of marketable securities . . . . . (39,370) (88,538)
Proceeds from sales of marketable securities 39,370 -
Additions to property, plant and equipment . (152,504) (107,459)
Other-net . . . . . . . . . . . . . . . . . . (5,122) (7,446)
-------- --------
Net cash (used in) provided by investing
activities . . . . . . . . . . . . . . . . (201,304) 75,635
-------- --------
FINANCING ACTIVITIES
Short-term borrowings - net . . . . . . . . . (60,405) (62,340)
Long-term obligations and notes payable
Increase . . . . . . . . . . . . . . . . . 388,842 -
Reduction . . . . . . . . . . . . . . . . (216,113) (3,898)
Capital Shares
Issuance . . . . . . . . . . . . . . . . . 1,302 2,129
Repurchase . . . . . . . . . . . . . . . . (46,536) (98,115)
Dividends paid to stockholders . . . . . . . (40,760) (44,501)
Other-net . . . . . . . . . . . . . . . . . . 259 1,096
-------- --------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . 26,589 (205,629)
-------- --------
Increase in Cash and short-term investments . 36,007 57,616
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 . . . . . . . . . . . . . . . . $ 77,426 $ 99,674
======== ========
See notes to condensed consolidated financial statements.
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THE NEW YORK TIMES COMPANY
Form 10-Q
September 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 nine months ended September 30, 1995, income tax
expense includes the reversal of deferred income taxes of $603,000 and
$13,835,000, respectively. For the comparable 1994 periods, income taxes
include deferred income tax expense of $16,188,000 and $26,316,000,
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 nine
months ended September 30, 1995, income tax expense included in equity in
operations was $1,559,000 and $2,881,000, respectively. For the comparable
1994 periods, income tax expense included in equity in operations was
$739,000 and $747,000, 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 have been reclassified to accounts payable.
For the nine month periods ended September 30, 1995 and 1994, the
Company made cash payments for interest (net of amounts capitalized)
totaling $26,522,000 and $31,363,000, respectively. Cash payments for
income taxes for the nine month periods ended September 30, 1995 and 1994
totaled $76,780,000 and $122,755,000, respectively.
-8-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
5. 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 by mid-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.
6. 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.
At September 30, 1995 and December 31, 1994, approximately $10,943,000
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 charges. The remaining cash
outflows of the unpaid balance are expected to occur over the next two
years due to the timing of the payments to certain union pension and
welfare funds.
7. Acquisition/Dispositions
In May 1995, the Company sold The York County Coast Star (Kennebunk,
ME). The sale did not have a material effect on the Company's consolidated
financial statements. In the third quarter of 1995, the Company completed
the sales of seven small regional newspapers: The Daily Commercial
(Leesburg, FL) in July 1995; and The
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THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Daily Corinthian (Corinth, MS), The Messenger (Madisonville, KY), The
Lenoir News-Topic (Lenoir, NC), The State Gazette (Dyersburg, TN) and The
Banner-Independent (Booneville, MS) in August 1995. The sales resulted in
a net pre-tax gain of approximately $11,300,000. These dispositions will
not have a material impact on the future operations of either the Newspaper
Segment or the Company.
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 $72,159,000, of which $71,214,000 was paid in cash with the
remainder representing liabilities assumed. The purchase resulted in
increases in other intangible assets of approximately $57,705,000 (which
consist of network affiliation agreement, FCC licenses and other intangible
assets); property, plant and equipment of $13,841,000, and other assets of
$1,064,000. Net liabilities assumed as a result of the transaction totaled
approximately $945,000. This 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 sales
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 amounts for the nine months ended September 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
$1,626,570,000; net income of $74,835,000; and net income per share of
$.71.
The above pro forma amounts are not necessarily indicative of the
operations that might have occurred had the sales taken place at the
beginning of the period, nor necessarily indicative of the operations that
may be obtained in the future. The gain on the sales is not included in
the above pro forma amounts.
8. 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; and
$50,000,000 was used to repay 9.34 percent notes due July 15, 1995 assumed
in connection with the October 1993 acquisition
-10-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Concluded)
of The Boston Globe; and to repay indebtedness from the Company's
commercial paper program. The remaining net proceeds were used for general
corporate purposes.
9. 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
1,415,000 shares of its Class A Common Stock at an average price of $22.84
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.
10. Equity Put Options
In addition to the Company's stock repurchase program (see Note 9),
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 September 30, 1995, and December 31,
1994, approximately $4,015,000 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
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
- ------------------------------------------------
Segment Information
- -------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------ ------ ------ ------
(Dollars in thousands)
REVENUES
Newspapers . . . . . . . . . . . $507,067 $470,782 $1,566,833 $1,457,402
Magazines . . . . . . . . . . . . 43,430 39,380 127,261 244,731
Broadcasting . . . . . . . . . . 22,214 16,988 60,171 50,058
-------- -------- ---------- ----------
Total . . . . . . . . . . . . . . $572,711 $527,150 $1,754,265 $1,752,191
======== ======== ========== ==========
OPERATING PROFIT (LOSS)
Newspapers . . . . . . . . . . . $33,723 $31,069 $ 155,064 $ 144,921
Magazines . . . . . . . . . . . . 7,466 5,527 28,589 15,707
Broadcasting . . . . . . . . . . 4,397 2,897 13,369 8,688
Unallocated Corporate Expenses . (5,341) (6,218) (17,665) (19,479)
-------- -------- ---------- ----------
Total . . . . . . . . . . . . . . 40,245 33,275 179,357 149,837
INTEREST EXPENSE, NET
OF INTEREST INCOME . . . . . . 5,577 6,193 19,653 22,886
GAIN ON DISPOSITIONS . . . . . . 11,291 203,979 11,291 203,979
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EQUITY IN OPERATIONS OF
FOREST PRODUCTS GROUP . . . . . 45,959 231,061 170,995 330,930
INCOME TAXES . . . . . . . . . . 18,032 111,913 76,697 160,050
-------- -------- ---------- ----------
INCOME BEFORE EQUITY IN OPERATIONS
OF FOREST PRODUCTS GROUP . . . 27,927 119,148 94,298 170,880
EQUITY IN OPERATIONS OF
FOREST PRODUCTS GROUP . . . . . 4,279 1,486 8,523 1,786
-------- -------- ---------- ----------
NET INCOME . . . . . . . . . . . $32,206 $120,634 $102,821 $172,666
======== ======== ========== ==========
-12-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)
- --------------------------------------------------
Segment Information
- -------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------ ------ ------ ------
(Dollars in thousands)
DEPRECIATION AND AMORTIZATION
Newspapers . . . . . . . . . . . $32,728 $32,956 $99,120 $98,942
Magazines . . . . . . . . . . . 387 579 1,527 7,035
Broadcasting . . . . . . . . . . 3,503 2,393 7,859 7,273
Corporate . . . . . . . . . . . 421 210 857 567
-------- -------- ---------- ----------
Total $37,039 $36,138 $109,363 $113,817
======== ======== ========== ==========
-13-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 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 and fourth quarter advertising
volume is higher than that which occurs in the first quarter. In the
fourth quarter, advertising volume is affected by specific categories of
advertising, especially retail. Advertising volume tends to be lower in
the third quarter primarily because of the summer slow-down in many areas
of economic activity.
The cost of raw materials for the Company and the entire publishing
industry have been adversely affected by the significant increases in
newsprint and magazine paper prices throughout 1995 and this trend is
expected to continue into 1996.
In addition, quarterly trends are affected by the overall economy and
specific economic conditions that exist in the markets served by each of
the Company's business segments.
Results of Operations - Third Quarter of 1995
- ----------------------------------------------
Compared with Third Quarter of 1994
- -----------------------------------
The 1995 third quarter net income was $32.2 million, or $.33 per
share, compared with net income of $120.6 million, or $1.16 per share, in
1994. The 1995 results include a pre-tax gain of $11.3 million ($.05 per
share) from the third quarter sales of six small newspapers, while 1994
includes a pre-tax gain of $204.0 million ($1.01 per share for the third
quarter and $.99 for the nine months) from the sales of the Women's
Magazines Division and U.K. golf publications. Excluding these gains, 1995
third quarter earnings per share would have been $.28 per share, compared
with $.15 per share in 1994. The Company experienced improved results
throughout all of its operating groups as well as higher earnings from the
Forest Products Group. The third quarter was also favorably affected by a
lower effective tax rate.
Revenues increased to $572.7 million in the 1995 quarter from $527.2
million in the 1994 quarter. The improvement in revenues was primarily due
to a combination of higher advertising and circulation revenues. The
Company's costs and expenses for the 1995 third quarter increased to $532.5
million from $493.9 million in 1994. The increase in costs and expenses was
primarily due to significantly higher newsprint prices.
For the third quarter of 1995, earnings before depreciation,
amortization, interest and income taxes, excluding the gains from the
newspaper and magazine sales, rose to $77.3 million from $69.4 million in
the 1994 quarter. The Company anticipates that depreciation and
amortization will approximate $148 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 1995. During
1994, approximately $235.2 million was expended to repurchase approximately
10.0 million shares. In the first nine months of 1995, the Company
continued its repurchase program and expended $46.4 million to repurchase
approximately 2.1 million shares.
-14-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- ------------------------------------------------
Interest expense, net of interest income, declined to $5.6 million in
the third quarter of 1995 from $6.2 million last year. The decline was due
principally to a higher level of capitalized interest in connection with
facilities under construction and a lower rate of interest on the Company's
debt.
The 1995 and 1994 third quarter effective tax rates, exclusive of the
gains, were 33.7 and 48.2 percent respectively. The decrease in 1995 is
primarily attributable to a favorable state tax ruling.
A discussion of the operating results of the Company's segments and
equity interests follows:
The Newspaper Group consists of The New York Times ("The Times"), The
Boston Globe ("The Globe"), 21 Regional Newspapers, newspaper wholesalers,
Information Services and a 50 percent interest in the International Herald
Tribune.
Third quarter 1995 operating profit for the Group rose to $33.7
million from $31.1 million in the 1994 third quarter. Revenues were $507.1
million in the 1995 third quarter, compared with $470.8 million in 1994.
The increase in revenues for the third quarter was the result of a
combination of higher circulation and advertising rates and enhanced
database licensing royalties. Circulation revenues continue to grow
throughout the Group despite a decline in circulation volume. The Times
experienced an 18 percent gain in circulation revenues for the third
quarter, with The Globe and the 21 Regional Newspapers each recording gains
of 8 percent for the same period.
The Group's operating performance improved despite a 45 percent
increase in newsprint prices in the third quarter of 1995 compared with the
third quarter of 1994. In order to offset this significant price increase,
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 third quarter of 1995 was
844,600 inches, up 0.1 percent from the 1994 third quarter. The zoned
category was up, while the retail, classified and national advertising
categories were down. Average circulation for the three months ended
September 30, 1995 was 1,061,700 copies weekdays, down 30,600 copies from
1994, and 1,647,700 copies Sundays, down 72,500 copies.
At The Globe, advertising volume for the third quarter of 1995 was
686,800 inches, down 0.9 percent from the 1994 third quarter. Advertising
was up in all categories except retail. Preprint distribution was down 2.1
percent. Average circulation for the three months ended September 30, 1995
was 498,700 copies weekdays, down 5,100 copies from 1994, and 799,200
copies Sundays, down 14,400 copies.
-15-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- ------------------------------------------------
For the 21 Regional Newspapers that were in the Group for the same
period, advertising volume for the third quarter increased to 3.8 million
inches, up 1.3 percent. Strong advertising in the classified and national
categories accounted for the improved results. For the three months ended
September 30, 1995, average circulation was 717,400 copies on weekdays,
down 19,900 copies from 1994 and 767,200 copies on Sunday, down 14,800
copies. Circulation was 32,200 copies for the nondailies, down 1,000
copies.
The Magazine Group's third quarter operating profit was $7.5 million
in 1995 compared with $5.5 million in 1994 on revenues of $43.4 million and
$39.4 million respectively. Excluding the 1994 third quarter operations
of the magazines sold and the non-compete income arising from the Women's
Magazines sale (see Note 7), 1995 third quarter operating profit for the
Sports/Leisure Magazines was $5.0 million compared with $3.9 million in the
1994 quarter. Revenues for the Sports/Leisure Magazines for the third
quarter of 1995 were $40.9 million compared with $36.5 million in the
comparable 1994 period. The increase in the results of operations was
primarily due to higher third quarter advertising revenues at Golf Digest.
The Broadcasting Group's third quarter operating profit rose to $4.4
million in 1995 from $2.9 million in the comparable 1994 quarter. Third
quarter revenues were $22.2 million in 1995 compared with $17.0 million in
the 1994 quarter. Increased results were due to higher local advertising
revenues at the television and radio stations, higher network compensation,
as well as the inclusion of the operations of WTKR-TV, Norfolk, VA
(acquired June 1995).
The Forest Products Group's equity in operations (an after-tax amount)
was $4.3 million for the third quarter of 1995, compared with $1.5 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 - Nine Months of 1995
- -------------------------------------------
Compared with Nine Months of 1994
- ---------------------------------
For the nine months, net income was $102.8 million, or $1.06 per share,
as compared with $172.7 million, or $1.63 per share, in 1994. Exclusive of
the 1995 small newspaper sales and the 1994 magazine sales, 1995 nine-month
earnings would have been $1.01 per share, compared with $.64 per share in
1994. The higher 1995 net income was principally due to improved results
throughout all the operating groups and higher earnings from its Forest
Products Group. A lower effective tax rate also had a favorable impact on
results.
Revenues for the 1995 nine months were $1.75 billion, approximating
1994 nine month revenues. However, excluding the revenues attributable to
the magazines which were sold in 1994, revenues for the nine months
increased approximately 8 percent.
-16-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- ------------------------------------------------
The Company's costs and expenses decreased to $1.57 billion from $1.60
billion. Excluding the costs and expenses attributable to the magazines
sold, costs and expenses increased 7 percent primarily due to significantly
higher newsprint prices, offset by savings from newsprint conservation
programs.
For the first nine months of 1995, the Company's operating profit
before depreciation and amortization, interest and income taxes, excluding
the gains from the newspaper and magazine sales, rose to $288.7 million
from $263.7 million in the comparable 1994 period. Interest expense, net
of interest income, declined to $19.7 million for the 1995 nine-month
period from $22.9 million last year due to higher levels of capitalized
interest in connection with facilities under construction and a lower rate
of interest on the Company's outstanding debt.
The Company's effective tax rate, exclusive of the gains, for the
first nine months of 1995 was 45.1 percent compared with 48.2 percent in
the comparable 1994 period. The 1995 nine-month effective tax rate is
somewhat lower than the first half of 1995 as a result of a favorable state
tax ruling. The Company currently estimates that its 1995 annual effective
income tax rate will approximate the nine-month rate for 1995. The 1994
annual effective income tax rate was 41.7 percent as a result of the
utilization in the fourth quarter of capital loss carryforwards.
A discussion of the operating results of the Company's segments and equity
interests follows:
For the nine months, operating profit of the Newspaper Group increased
to $155.1 million from $144.9 million in the nine months of 1994. Revenues
of $1.57 billion in 1995 increased from $1.46 billion in 1994 due to a
combination of higher circulation revenues, higher advertising rates and
volume and enhanced database licensing royalties. Circulation revenues
continue to grow throughout the Group despite a decline in circulation
volume. The Times experienced a 15 percent gain in circulation revenues
for the nine months. The Globe and the 21 Regional Newspapers each
recorded circulation revenue gains of 6 percent for the nine months. The
Group's operating performance increased despite significantly higher
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 a portion of
these price increases.
Advertising volume at The Times for the first nine months of 1995 was
2,734,600 inches, up 2.7 percent over the comparable 1994 period. The
zoned and national categories showed gains, while retail and classified
declined slightly. Average circulation for the nine months ended September
30, 1995 was 1,107,500 copies weekdays, down 24,200 copies from 1994, and
1,704,700 copies Sundays, down 31,500 copies from the comparable 1994
period.
-17-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
- ------------------------------------------------
At The Globe, advertising volume for the first nine months of 1995 was
2,127,400 inches, up 2.2 percent over the comparable 1994 period.
Advertising was up in all categories except retail. Preprint distribution
was up 5.3 percent. Average circulation for the nine months ended
September 30, 1995 was 498,500 copies weekdays, down 6,400 copies from
1994, and 791,000 copies Sunday, down 20,500 copies.
For the 21 Regional Newspapers that were in the Group for the same
period, advertising volume for the first nine months of 1995 increased 2.2
percent from the 1994 nine-month period to 11.4 million inches. Strong
advertising in the classified category accounted for the increase.
Preprint distribution was down 1.3 percent. For the nine months ended
September 30, 1995, circulation for the dailies was 757,000 copies
weekdays, down 13,500 copies from 1994, and 805,400 copies Sundays, down
9,600 copies. Circulation of 36,600 copies for the non-dailies was down
100 copies.
The Magazine Group's nine-month operating profit was $28.6 million in
1995 compared with $15.7 million in 1994 on revenues of $127.3 million and
$244.7 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 magazines sold and the non-
compete income arising from the sale of the Women's Magazines, the 1995
nine-month operating profit rose to $21.1 million from $18.4 million.
Revenues were $119.8 million for the first nine months, compared with
$111.9 million in the comparable 1994 period. Higher nine-month
advertising revenues at Golf Digest accounted for the improved results.
The Broadcasting Group's operating profit rose to $13.4 million for
the first nine months of 1995 compared with $8.7 million in the 1994 nine-
month period on revenues of $60.2 million and $50.1 million respectively.
Higher local advertising revenues at the television and radio stations, as
well as higher network compensation and the inclusion of the operations of
WTKR-TV, Norfolk, VA (acquired June 1995), accounted for the improved
results.
Equity in operations (an after-tax amount) of the Forest Products
Group was $8.5 million compared with $1.8 million in the first nine months
of 1994. The improvement resulted primarily from higher sales prices.
This favorable trend should continue for the remainder of the year and into
1996.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $210.7 million in the
1995 third quarter compared with $187.6 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 .94 at September 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 September 30, 1995, compared with 25 percent at December
31, 1994.
-18-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 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 8). 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 were 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 $22.84 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 $148.0 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 5). 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 mid-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 will be in the range of $225.0
million to $250.0 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
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.
-19-
THE NEW YORK TIMES COMPANY
Form 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (Concluded)
- ------------------------------------------------
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.
In connection with the 1993 charges totaling $35.4 million for staff
reductions (see Note 6), approximately $27.9 million has been disbursed.
The Company has committed the remaining funds. As a result of the timing
of the payment to certain union pension and welfare funds, 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
these payments 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
September 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
September 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 undersigned thereunto duly authorized.
THE NEW YORK TIMES COMPANY
--------------------------
(Registrant)
Date: November 13, 1995 /S/ D.P. Baker
----------------- -----------------------------------
(Signature)
Diane P. Baker
Senior Vice President and
Chief Financial Officer