FORM 10-Q
UNITED STATES
SECURITIES 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 24, 2000
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Commission file number 1-5837
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THE NEW YORK TIMES COMPANY
--------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-1102020
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
229 WEST 43RD STREET, NEW YORK, NEW YORK
----------------------------------------
(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 November 3, 2000 (exclusive of treasury shares):
Class A Common Stock 161,800,924 shares
Class B Common Stock 847,158 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 24, September 26, September 24, September 26,
2000 1999 2000 1999
------------- ------------- ------------- -------------
(13 Weeks) (39 Weeks)
Revenues
Advertising ........................... $ 560,149 $ 513,072 $1,835,223 $1,598,128
Circulation ........................... 177,840 168,886 538,449 513,742
Other ................................. 49,300 47,700 142,138 136,231
---------- ---------- ---------- ----------
Total ............................. 787,289 729,658 2,515,810 2,248,101
---------- ---------- ---------- ----------
Production costs
Raw materials ......................... 84,080 67,452 257,582 237,211
Wages and benefits .................... 155,806 150,901 485,213 461,295
Other ................................. 113,367 106,966 336,189 316,483
---------- ---------- ---------- ----------
Total ............................. 353,253 325,319 1,078,984 1,014,989
Selling, general and administrative expenses 317,850 291,569 979,828 850,240
---------- ---------- ---------- ----------
Total ............................. 671,103 616,888 2,058,812 1,865,229
---------- ---------- ---------- ----------
Operating profit ........................... 116,186 112,770 456,998 382,872
Income from joint ventures ................. 3,929 4,888 11,178 12,356
Interest expense - net ..................... 17,516 12,936 48,048 37,673
Gain on disposition of assets and other-net 22,172 -- 22,172 --
---------- ---------- ---------- ----------
Income before income taxes ................. 124,771 104,722 442,300 357,555
Income taxes ............................... 49,806 44,716 182,533 152,676
---------- ---------- ---------- ----------
Net income ................................. $ 74,965 $ 60,006 $ 259,767 $ 204,879
========== ========== ========== ==========
Average number of common shares outstanding
Basic ................................. 166,564 173,829 169,670 176,560
Diluted ............................... 169,903 177,720 173,367 180,068
Per share of common stock
Basic earnings ........................ $ 0.45 $ 0.35 $ 1.53 $ 1.16
========== ========== ========== ==========
Diluted earnings ...................... $ 0.44 $ 0.34 $ 1.50 $ 1.14
========== ========== ========== ==========
Dividends ............................. $ 0.115 $ 0.105 $ 0.335 $ 0.305
========== ========== ========== ==========
See Notes to Condensed Consolidated Financial Statements.
2
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 24, December 26,
2000 1999
------------- ------------
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents ...................... $ 42,864 $ 63,861
Accounts receivable-net ........................ 347,691 366,754
Inventories
Newsprint and magazine paper .............. 36,918 23,666
Work-in-process and other ................. 4,337 4,984
---------- ----------
Total inventories .................... 41,255 28,650
Deferred income taxes .......................... 53,611 53,611
Assets held for sale ........................... 31,944 37,796
Other current assets ........................... 83,609 64,236
---------- ----------
Total current assets ................. 600,974 614,908
---------- ----------
Other Assets
Investments in joint ventures .................. 118,442 121,940
Property, plant and equipment (less accumulated
depreciation of $1,069,708 in 2000
and $976,767 in 1999) ..................... 1,199,470 1,218,396
Intangible assets acquired
Cost in excess of net assets acquired (less
accumulated amortization of $300,767
in 2000 and $270,235 in 1999) ............. 1,083,248 953,709
Other intangible assets acquired (less
accumulated amortization of $104,273
in 2000 and $85,365 in 1999) .............. 432,901 351,309
Miscellaneous assets ........................... 221,955 235,540
---------- ----------
TOTAL ASSETS ........................................ $3,656,990 $3,495,802
========== ==========
See Notes to Condensed Consolidated Financial Statements.
3
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 24, December 26,
2000 1999
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
Current Liabilities
Commercial paper outstanding ................................ $ 403,490 $ --
Accounts payable ............................................ 193,031 191,706
Accrued payroll and other related liabilities ............... 105,369 105,257
Accrued expenses ............................................ 190,026 193,553
Unexpired subscriptions ..................................... 87,265 80,161
Current portion of long-term debt and
capital lease obligations .............................. 2,500 102,837
----------- -----------
Total current liabilities .............................. 981,681 673,514
----------- -----------
Other Liabilities
Long-term debt .............................................. 553,205 512,627
Capital lease obligations ................................... 84,198 85,700
Deferred income taxes ....................................... 104,618 141,033
Other ....................................................... 674,783 634,270
----------- -----------
Total other liabilities ................................ 1,416,804 1,373,630
----------- -----------
Total liabilities ...................................... 2,398,485 2,047,144
----------- -----------
Stockholders' Equity
Capital stock of $.10 par value
Class A - authorized 300,000,000 shares; issued: 2000 -
179,334,284; 1999 - 177,971,194 (including
treasury shares: 2000 - 15,300,743; 1999 - 5,000,000) 17,933 17,797
Class B - convertible - authorized 847,158 shares; issued:
2000 - 847,158; 1999 - 847,240 ...................... 85 85
Additional paid-in capital .................................. 36,665 --
Accumulated other comprehensive (loss) income ............... (7,063) 3,170
Retained earnings ........................................... 1,808,633 1,600,743
Common stock held in treasury, at cost ...................... (597,748) (173,137)
----------- -----------
Total stockholders' equity ............................. 1,258,505 1,448,658
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 3,656,990 $ 3,495,802
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
4
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
----------------------------
September 24, September 26,
2000 1999
----------------------------
(39 Weeks)
OPERATING ACTIVITIES
Net cash provided by operating activities ............ $ 381,007 $ 381,934
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment ........... (43,461) (47,140)
Business acquired .................................... (296,278) --
Net proceeds from dispositions ....................... 55,980 11,434
Other-net ............................................ (6,713) (18,181)
--------- ---------
Net cash used in investing activities ................ (290,472) (53,887)
--------- ---------
FINANCING ACTIVITIES
Commercial paper borrowings .......................... 403,490 95,400
Long-term debt
Proceeds ....................................... 40,000 --
Payments ....................................... (101,839) (1,151)
Capital shares
Issuances ...................................... 29,499 13,941
Repurchases .................................... (425,932) (374,849)
Dividends paid to stockholders ....................... (56,750) (53,801)
--------- ---------
Net cash provided by/(used in) financing activities .. (111,532) (320,460)
--------- ---------
Decrease in cash and cash equivalents ................ (20,997) 7,587
Cash and cash equivalents at the beginning of the year 63,861 35,991
--------- ---------
Cash and cash equivalents at the end of the quarter .. $ 42,864 $ 43,578
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
NONCASH FINANCING AND INVESTING TRANSACTIONS
In 1999 the Company purchased a minority interest in TheStreet.com for
$15.6 million, of which $3.6 million was in cash and $12.0 million
represents an irrevocable credit for services to be used by TheStreet.com
through February 2003. Investment and deferred revenue accounts were
increased by $12.0 million accordingly. As of September 24, 2000,
approximately $3.5 million of advertising credits have been utilized.
BUSINESS ACQUIRED
In January of 2000 the Company acquired certain assets ($313.8 million)
and assumed certain liabilities ($17.5 million) of a newspaper, the
Worcester Telegram & Gazette, for $296.3 million in cash (see Note 4).
OTHER
Amounts in these statements of cash flows are presented on a cash basis
and may differ from those shown in other sections of the financial
statements.
See Notes to Condensed Consolidated Financial Statements.
5
THE NEW YORK TIMES COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying Notes to Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial Statements
included in the annual report on Form 10-K for the year ended December 26, 1999,
for The New York Times Company (the "Company") filed with the Securities and
Exchange Commission (the "SEC"). In the opinion of management, all adjustments
necessary for a fair presentation of the financial position and results of
operations, as of and for the interim periods ended, have been included. Due to
the seasonal nature of the Company's business, results for the interim periods
are not necessarily indicative of a full year's operations. The fiscal periods
included herein comprise 13 weeks for the three-month periods and 39 weeks for
the nine-month periods.
Certain reclassifications have been made to the 1999 Condensed
Consolidated Financial Statements to conform with classifications used as of and
for the periods ended September 24, 2000.
2. Recent Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"), which is effective for all quarters of fiscal years beginning after June
15, 1999. SFAS No. 133 requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair value. Unless
the entity can treat the derivative as a hedge according to certain criteria,
the entity may be required to reflect any changes in the derivative's fair value
in its operating income. In June 1999 the FASB issued SFAS No. 137, Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of Statement of Financial Accounting Standard Statement No. 133 ("SFAS No.
137"). SFAS No. 137 amended the effective date for SFAS No. 133 from June 15,
1999 to June 15, 2000. In June 2000 the FASB issued SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities-an Amendment of
FASB Statement No. 133 ("SFAS No. 138"), which is effective for all quarters of
all fiscal years beginning after June 15, 2000. SFAS No. 138 expands the scope
of derivatives in order for an instrument to qualify as a SFAS No. 133 hedge.
The adoption of these statements will not have a material effect on the
Company's results of operations or financial position.
In December 1999 the SEC released Staff Accounting Bulletin No.
101-Revenue Recognition ("SAB No. 101"). SAB No. 101 provides SEC views in
applying generally accepted accounting principles to selected revenue
recognition issues. In March 2000 the SEC released Staff Accounting Bulletin No.
101A-Amendment ("SAB No. 101A"). SAB No. 101A amended the implementation date of
SAB No. 101 for registrants with fiscal years that begin between December 16,
1999 and March 15, 2000. In June 2000 the SEC released Staff Accounting
Bulletin No. 101B-Second Amendment ("SAB No. 101B") further delaying the
implementation date of SAB 101 to no later than the fourth fiscal quarter of
registrants with fiscal years beginning after December 15, 1999. The adoption of
this statement will not have a material effect on the Company's results of
operations or financial position.
6
3. Proposed Tracking Stock
On January 20, 2000, the Board of Directors of the Company authorized,
subject to shareholder approval, the issuance of a new class of stock ("Class C
Stock") and on January 28, 2000, the Company filed a registration statement on
Form S-3 (the "Form S-3") related to a proposed initial public offering of
Class C Stock. This proposed tracking stock was intended to track the
performance of the Company's Internet business division, New York Times Digital
("NYTD group"). At the Annual Meeting of Stockholders held on May 23, 2000,
stockholders authorized the filing of an amendment to the Company's certificate
of incorporation to create this new class of stock, which the Company has yet to
do.
On October 12, 2000, the Company withdrew the Form S-3 due to unfavorable
conditions in the public equities markets. This decision to withdraw the Form
S-3 will not have a material impact on the NYTD group's day-to-day operations or
its expansion plans.
4. Acquisitions/Dispositions
On January 7, 2000, the Company acquired certain assets and assumed
certain liabilities of a newspaper, the Worcester Telegram & Gazette ("T&G"), in
Worcester, Mass., for $296.3 million in cash. The cost of this acquisition was
principally funded through the Company's commercial paper program. This
transaction was accounted for as a purchase and, accordingly, the T&G has been
included in the Company's Condensed Consolidated Financial Statements, (as of
January 7, 2000). Based on a preliminary valuation, a portion of the purchase
price was allocated to goodwill ($163.2 million), a portion to other intangibles
($100.5 million principally advertising and subscriber relationships) and the
remainder to other assets acquired net of liabilities assumed. The final asset
and liability fair values may differ from those set forth on the Company's
Condensed Consolidated Balance Sheet at September 24, 2000; however, the changes
are not expected to have a material effect on the consolidated financial
position of the Company. The amount allocated to goodwill will be amortized over
a 40-year period and the amount allocated to other intangibles will be amortized
over an average of 19 years. If this acquisition had occurred in the beginning
of 1999, it would not have had a material impact on the results of operations
for periods presented herein.
On February 17, 2000, the Company decided to offer for sale the Santa
Barbara News-Press in Santa Barbara, Calif., Daily World in Opelousas, La.,
Daily News in Palatka, Fla., Lake City Reporter in Lake City, Fla., The News-Sun
in Sebring/Avon Park, Fla., The News-Leader in Fernandina Beach, Fla., Marco
Island Eagle in Marco Island, Fla., and the operations of all nine of its
telephone directories, all of which were part of the Regional Newspaper Group.
During the third quarter of 2000, four newspapers: Daily World, Daily
News, Lake City Reporter and The News-Leader, and nine telephone directories
("divested Regionals") were sold. The net assets of the remaining three
newspapers have been included in the caption "Assets held for sale" in the
Company's Condensed Consolidated Balance Sheets at their carrying value of $31.9
million at September 24, 2000, and all properties held for sale had a carrying
value of $37.8 million at December 26, 1999. In October 2000 the Company sold
the remaining three newspapers (in excess of their carrying value); Marco Island
Eagle, The News-Sun and Santa Barbara News-Press.
The Company recorded a pre-tax gain of $22.2 million in the third quarter
of 2000 from the sale of the four newspapers and nine telephone directories,
partially offset by the loss on the disposition of the Company's interest in an
online venture. The operations of all of these newspapers and telephone
directories as well as the interest in an online venture does not have a
material effect on the consolidated operations of the Company.
7
5. Income Taxes
Reconciliations between the effective rate on income before income taxes
and the federal statutory rate are as follows:
Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
% of % of % of % of
(Dollars in thousands) Amount Pre-tax Amount Pre-tax Amount Pre-tax Amount Pre-tax
- ------------------------------------------------------------------------------------------------------------------------------------
Tax at the federal statutory rate ................. $ 35,910 35.0% $ 36,653 35.0% $ 147,045 35.0% $ 125,144 35.0%
State and local income taxes-net of federal benefit 4,720 4.6% 5,851 5.6% 21,006 5.0% 19,979 5.6%
Amortization of nondeductible intangible
assets acquired ................................... 1,436 1.4% 1,909 1.8% 7,142 1.7% 6,517 1.8%
Other-net ......................................... (220) (0.2%) 303 0.3% (620) (0.1%) 1,036 0.3%
-----------------------------------------------------------------------------
Subtotal .......................................... 41,846 40.8% 44,716 42.7% 174,573 41.6% 152,676 42.7%
-----------------------------------------------------------------------------
Gain on disposition of assets and other-net ....... 7,960 -- -- -- 7,960 -- -- --
-----------------------------------------------------------------------------
Income tax expense ................................ $ 49,806 -- $ 44,716 -- $ 182,533 -- $ 152,676 --
=============================================================================
6. Debt Obligations
In June 2000 total available funds under revolving credit agreements were
increased to $600.0 million from $400.0 million. The Company's one-year
agreement was renewed and increased to $300.0 million from $200.0 million and
will now mature in June 2001. The Company's multi-year agreement was renewed and
increased to $300.0 million from $200.0 million and will now mature in June
2005.
The revolving credit agreements require, among other provisions, specified
levels of stockholders' equity. Approximately $319.0 million of stockholders'
equity was unrestricted under these agreements as of September 24, 2000, and
$509.2 million was unrestricted at December 26, 1999. The decline in the level
of unrestricted stockholders' equity was primarily due to stock repurchases.
As of September 24, 2000, the amount outstanding under the Company's
commercial paper program, which is supported by these revolving credit
agreements, was $403.5 million. The amount available under these facilities was
$196.5 million as of September 24, 2000. No amounts were outstanding under the
Company's revolving credit agreements as of September 24, 2000.
8
In March 2000 the Company issued $40.0 million of 7% subordinated
convertible notes due March 21, 2003, to three venture capital firms. Upon an
initial public offering of Class C stock, this debt is convertible, at the
election of the venture capital firms, into shares of Class C stock intended to
represent approximately 6.7% of the pre-offering equity of the NYTD group. This
debt is not currently convertible (the Company has recently withdrawn its Form
S-3 for the initial public offering of Class C Stock, see Note 3). Beginning
January 1, 2002, if no initial public offering of the Class C Stock has
occurred, the venture capital firms have the right to require the Company to
repurchase the notes at their $40.0 million face value.
As of September 24, 2000, and December 26, 1999, the Company had
outstanding $1.043 billion and $701.2 million in total debt including commercial
paper and capital leases. The increase is primarily attributable to higher
levels of commercial paper outstanding principally resulting from the
acquisition of the T&G and the Company's share repurchase program. On April 28,
2000, the Company repaid $100.0 million due on its six and one-half year senior
notes. The remainder of the Company's debt and capital leases generally mature
between March 2003 and March 2025.
7. Stock Repurchase Program
During the first nine months of 2000, the Company repurchased 10.3 million
shares of Class A Common Stock at a cost of $425.9 million. The average price of
these repurchases was $41 per share. On September 21, 2000, the Board of
Directors authorized additional repurchase expenditures under the Company's
stock repurchase program for up to $600.0 million. As of November 3, 2000, the
remaining amount of repurchase authorization from the Company's Board of
Directors was $530.2 million.
8. Voluntary Staff Reductions
Work force reduction charges of $3.8 million (across most groups) were
recorded in the third quarter of 2000 and $6.1 million (principally at The
Boston Globe) were recorded in the third quarter of 1999. Work force reduction
accruals are included in "Accrued expenses" on the Company's Condensed
Consolidated Balance Sheets and amounted to $13.6 million at September 24, 2000,
and $20.0 million at December 26, 1999. Most of the accruals outstanding at
September 24, 2000, will be paid within one year.
9. Comprehensive Income
Comprehensive income for the Company principally includes unrealized
(losses)/gains on available-for-sale securities, as defined under SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," foreign
currency translation adjustments, as well as net income reported in the
Company's Condensed Consolidated Statements of Income.
Comprehensive income for the third quarter and first nine months of 2000
and 1999 were as follows:
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) September 24, September 26, September 24, September 26,
2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
Net Income ................................................. $ 74,965 $ 60,006 $ 259,767 $ 204,879
Foreign currency translation (losses)/gains ................ (1,428) (152) (540) 1,291
Change in unrealized (losses)/gains on marketable securities (2,523) (8,539) (18,291) 16,429
Income tax benefit/(charge) ................................ 1,330 3,907 8,598 (7,945)
- ---------------------------------------------------------------------------------------------------------------------------
Comprehensive income ....................................... $ 72,344 $ 55,222 $ 249,534 $ 214,654
- ---------------------------------------------------------------------------------------------------------------------------
9
The Accumulated other comprehensive (loss) income on the Company's
Condensed Consolidated Balance Sheets was net of a deferred income tax asset of
$6.1 million as of September 24, 2000, and net of a deferred income tax
liability of $2.6 million as of December 26, 1999.
10. Dividend Rate Increase
On April 27, 2000, the Board of Directors authorized a $.01 per share
increase in the quarterly dividend on its Class A and Class B Common Stock from
$.105 per share to $.115 per share, effective with the June 2000 dividend.
11. Segment Statements of Income
Beginning in 2000, the Company's management determined that its reportable
segments consist of Newspapers, Broadcast, Magazine and the NYTD group. The NYTD
group includes NYTimes.com, newyorktoday.com, Boston.com, GolfDigest.com and
Abuzz. These segments will be evaluated regularly by key management in assessing
performance and allocating resources.
- --------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- --------------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------
REVENUES
Newspapers ...................... $ 715,866 $ 662,714 $ 2,284,674 $ 2,039,776
Broadcast ....................... 37,486 35,210 113,159 109,107
Magazines ....................... 26,545 26,749 91,036 87,049
New York Times Digital .......... 12,118 6,127 37,152 14,958
Intersegment eliminations (A) ... (4,726) (1,142) (10,211) (2,789)
-----------------------------------------------------------------
Total ........................... $ 787,289 $ 729,658 $ 2,515,810 $ 2,248,101
=================================================================
OPERATING PROFIT (LOSS)
Newspapers ...................... $ 129,933 $ 116,858 $ 480,675 $ 382,825
Broadcast ....................... 10,231 9,957 31,242 31,648
Magazines ....................... 3,526 4,211 17,623 16,933
New York Times Digital .......... (20,713) (8,081) (46,234) (17,800)
Unallocated corporate expenses .. (6,791) (10,175) (26,308) (30,734)
-----------------------------------------------------------------
Total ........................... 116,186 112,770 456,998 382,872
Income from joint ventures ...... 3,929 4,888 11,178 12,356
Interest expense, net ........... 17,516 12,936 48,048 37,673
Gain on disposition of assets and
other-net ...................... 22,172 -- 22,172 --
-----------------------------------------------------------------
Income before income taxes ...... 124,771 104,722 442,300 357,555
Income taxes .................... 49,806 44,716 182,533 152,676
-----------------------------------------------------------------
NET INCOME ...................... $ 74,965 $ 60,006 $ 259,767 $ 204,879
=================================================================
See Management's Discussion and Analysis of Financial Condition and
Results of Operations in this Form 10-Q for more information on the Company's
reportable operating segments.
(A) Intersegment eliminations primarily include revenues between New York
Times Digital and other segments.
10
12. Supplemental Information
Below is the consolidating financial information of the NYT group and the
NYTD group. The financial information reflects the businesses of the NYT group
and the NYTD group, including the allocation of revenues and expenses between
the NYT group and the NYTD group in accordance with the Company's allocation
policies.
The allocations are as follows: a) Inter-group advertising revenues
between the NYT and NYTD groups, b) a portion of classified advertising revenues
from the NYT group to the NYTD group, c) license fees charged by the NYT group
to the NYTD group for the electronic use of the trademarks and copyrights owned
by the NYT group, d) a portion of NYT group expenses for general and
administrative services and shared processing services from the NYT group to the
NYTD group. Additionally, the income tax benefit relating to the operations of
the NYTD group, which could be utilized on a consolidated basis, were allocated
to the NYTD group. The Company believes that the aforementioned allocations were
made on a reasonable basis.
11
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended September 24, 2000
- -------------------------------------------------------------------------------------------------------
The New
The NYT The NYTD Elimina- York Times
(In thousands) Group Group tions Company
- -------------------------------------------------------------------------------------------------------
REVENUES
External non-internet revenues $ 775,254 $ -- $ -- $ 775,254
External internet revenues 870 11,165 -- 12,035
Inter-group revenue 3,775 953 (4,728) --
- -------------------------------------------------------------------------------------------------------
Total 779,899 12,118 (4,728) 787,289
- -------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs:
External expenses 344,023 9,230 -- 353,253
Inter-group expense 215 1,077 (1,292) --
Selling, general and administrative expenses:
External expenses 298,429 19,421 -- 317,850
Inter-group allocated expenses 333 3,103 (3,436) --
- -------------------------------------------------------------------------------------------------------
Total 643,000 32,831 (4,728) 671,103
- -------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 136,899 (20,713) -- 116,186
Income from joint ventures 3,929 -- -- 3,929
Interest expense, net 17,419 97 -- 17,516
Gain on disposition of assets and
other-net 22,172 -- -- 22,172
- -------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 145,581 (20,810) -- 124,771
- -------------------------------------------------------------------------------------------------------
Income tax expense (benefit) 57,431 (7,625) -- 49,806
- -------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) $ 88,150 $ (13,185) $ -- $ 74,965
- -------------------------------------------------------------------------------------------------------
Three Months Ended September 26, 1999
- ---------------------------------------------------------------------------------------------------------
The New
The NYT The NYTD Elimina- York Times
(In thousands) Group Group tions Company
- ---------------------------------------------------------------------------------------------------------
REVENUES
External non-internet revenues $ 723,531 $ -- $ -- $ 723,531
External internet revenues -- 6,127 -- 6,127
Inter-group revenue 1,144 -- (1,144) --
- ---------------------------------------------------------------------------------------------------------
Total 724,675 6,127 (1,144) 729,658
- ---------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs:
External expenses 320,474 4,845 -- 325,319
Inter-group expense -- 1,144 (1,144) --
Selling, general and administrative expenses:
External expenses 283,931 7,638 -- 291,569
Inter-group allocated expenses (581) 581 -- --
- ---------------------------------------------------------------------------------------------------------
Total 603,824 14,208 (1,144) 616,888
- ---------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 120,851 (8,081) -- 112,770
Income from joint ventures 4,888 -- -- 4,888
Interest expense, net 12,938 (2) -- 12,936
Gain on disposition of assets and
other-net -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 112,801 (8,079) -- 104,722
- ---------------------------------------------------------------------------------------------------------
Income tax expense (benefit) 48,166 (3,450) -- 44,716
- ---------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) $ 64,635 $ (4,629) $ -- $ 60,006
- ---------------------------------------------------------------------------------------------------------
Nine Months Ended September 24, 2000
- -------------------------------------------------------------------------------------------------------
The New
The NYT The NYTD Elimina- York Times
(In thousands) Group Group tions Company
- -------------------------------------------------------------------------------------------------------
REVENUES
External non-internet revenues $ 2,478,765 $ -- $ -- $ 2,478,765
External internet revenues 2,374 34,671 -- 37,045
Inter-group revenue 7,732 2,481 (10,213) --
- -------------------------------------------------------------------------------------------------------
Total 2,488,871 37,152 (10,213) 2,515,810
- -------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs:
External expenses 1,056,629 22,355 -- 1,078,984
Inter-group expense 648 3,417 (4,065) --
Selling, general and administrative expenses:
External expenses 927,754 52,074 -- 979,828
Inter-group allocated expenses 608 5,540 (6,148) --
- -------------------------------------------------------------------------------------------------------
Total 1,985,639 83,386 (10,213) 2,058,812
- -------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 503,232 (46,234) -- 456,998
Income from joint ventures 11,178 -- -- 11,178
Interest expense, net 47,809 239 -- 48,048
Gain on disposition of assets and
other-net 22,172 -- -- 22,172
- -------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 488,773 (46,473) -- 442,300
- -------------------------------------------------------------------------------------------------------
Income tax expense (benefit) 200,936 (18,403) -- 182,533
- -------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) $ 287,837 $ (28,070) $ -- $ 259,767
- -------------------------------------------------------------------------------------------------------
Nine Months Ended September 26, 1999
- --------------------------------------------------------------------------------------------------------
The New
The NYT The NYTD Elimina- York Times
(In thousands) Group Group tions Company
- --------------------------------------------------------------------------------------------------------
REVENUES
External non-internet revenues $ 2,233,143 $ -- $ -- $ 2,233,143
External internet revenues -- 14,958 -- 14,958
Inter-group revenue 2,789 -- (2,789) --
- --------------------------------------------------------------------------------------------------------
Total 2,235,932 14,958 (2,789) 2,248,101
- --------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Production costs:
External expenses 1,003,123 11,866 -- 1,014,989
Inter-group expense -- 2,789 (2,789) --
Selling, general and administrative expenses:
External expenses 833,875 16,365 -- 850,240
Inter-group allocated expenses (1,738) 1,738 -- --
- --------------------------------------------------------------------------------------------------------
Total 1,835,260 32,758 (2,789) 1,865,229
- --------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 400,672 (17,800) -- 382,872
Income from joint ventures 12,356 -- -- 12,356
Interest expense, net 37,675 (2) -- 37,673
Gain on disposition of assets and
other-net -- -- -- --
- --------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 375,353 (17,798) -- 357,555
- --------------------------------------------------------------------------------------------------------
Income tax expense (benefit) 160,276 (7,600) -- 152,676
- --------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) $ 215,077 $ (10,198) $ -- $ 204,879
- --------------------------------------------------------------------------------------------------------
12
CONDENSED CONSOLIDATING BALANCE SHEETS
September 24, 2000
-----------------------------------------------------------
Reclassifi- The New
The NYT The NYTD cations/ York Times
(In thousands) Group Group Eliminations Company
- -----------------------------------------------------------------------------------------
ASSETS
Current assets $ 592,296 $ 8,678 $ -- $ 600,974
Investments in joint
ventures 118,442 -- -- 118,442
Funds allocated to the
NYTD group, net 52,233 -- (52,233) --
Property plant
& equipment, net 1,185,675 13,795 -- 1,199,470
Intangible assets
acquired, net 1,492,051 24,098 -- 1,516,149
Miscellaneous assets 220,624 1,331 -- 221,955
- -----------------------------------------------------------------------------------------
Total $ 3,661,321 $ 47,902 $ (52,233) $ 3,656,990
- -----------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 954,001 $ 27,680 $ -- $ 981,681
Other liabilities 1,374,737 42,067 -- 1,416,804
Funds allocated from the
NYT group, net -- 52,233 (52,233) --
Common stock 18,018 -- -- 18,018
Additional paid-in capital 36,665 -- -- 36,665
Retained earnings
(accumulated losses) 1,882,711 (74,078) -- 1,808,633
Common stock held
in treasury, at cost,
and other (604,811) -- -- (604,811)
- -----------------------------------------------------------------------------------------
Total $ 3,661,321 $ 47,902 $ (52,233) $ 3,656,990
- -----------------------------------------------------------------------------------------
December 26, 1999
--------------------------------------------------------
Reclassifi- The New
The NYT The NYTD cations/ York Times
(In thousands) Group Group Eliminations Company
- ------------------------------------------------------------------------------------
ASSETS
Current assets $ 605,350 $ 9,558 $ -- $ 614,908
Investments in joint
ventures 121,940 -- -- 121,940
Funds allocated to the
NYTD group, net 80,440 -- (80,440) --
Property plant
& equipment, net 1,208,601 9,795 -- 1,218,396
Intangible assets
acquired, net 1,276,134 28,884 -- 1,305,018
Miscellaneous assets 235,052 488 -- 235,540
- ------------------------------------------------------------------------------------
Total $ 3,527,517 $ 48,725 $ (80,440) $ 3,495,802
- ------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 660,978 $ 12,536 $ -- $ 673,514
Other liabilities 1,371,873 1,757 -- 1,373,630
Funds allocated from the
NYT group, net -- 80,440 (80,440) --
Common stock 17,882 -- -- 17,882
Additional paid-in capital -- -- -- --
Retained earnings
(accumulated losses) 1,646,751 (46,008) -- 1,600,743
Common stock held
in treasury, at cost,
and other (169,967) -- -- (169,967)
- ------------------------------------------------------------------------------------
Total $ 3,527,517 $ 48,725 $ (80,440) $ 3,495,802
- ------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION TO THE CONDENSED CONSOLIDATING BALANCE SHEETS
FUNDS ALLOCATED TO/FROM THE NYTD GROUP
Debt Funds
Funds proceeds allocated
allocated advanced to to/from the
from the NYT the NYT NYT group,
(In thousands) group group net
-------- -------- --------
Balance at December 26, 1999 .................. $ 80,440 $ -- $ 80,440
Funds allocated from the NYT group ......... 3,237 8,556 11,793
Debt proceeds advanced to the NYT group (A) -- (40,000) (40,000)
-------- -------- --------
Balance at September 24, 2000 ................. $ 83,677 $(31,444) $ 52,233
======== ======== ========
(A) The Company will make the proceeds of this debt (see Note 6) available to
the NYTD group as they are needed and as such the NYTD group will accrue
interest income on the amount of proceeds still available to the NYTD group at
the Company's short-term interest rate.
Advertising Credits
On March 3, 2000, the NYT group committed to provide $30.0 million in
advertising credits to the NYTD group to be utilized in any of the NYT group's
print publications. It is the NYTD group's current intention to use these
credits as consideration to effect strategic alliances, investments and
acquisitions.
The advertising credits will be recorded on the NYTD group's financial
statements as they are committed to independent third parties. The fair market
value of what is received or the value of the advertising given up, whichever is
more readily determinable, will be recorded as an asset with a corresponding
amount recorded as funds allocated from the NYT group to the NYTD group, in the
NYTD group's financial statements. As of September 24, 2000, none of the
advertising credits have been utilized.
13
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended September 24, 2000 Nine Months Ended September 26, 1999
------------------------------------------ -----------------------------------------
The New The New
The NYT The NYTD Elimina- York Times The NYT The NYTD Elimina- York Times
(In thousands) Group Group tions Company Group Group tions Company
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net cash provided by/(used in)
operating activities $ 386,075 $ (5,068) $ -- $ 381,007 $ 387,107 $ (5,173) $ -- $ 381,934
- ---------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property, plant
and equipment (38,064) (5,397) -- (43,461) (42,739) (4,401) -- (47,140)
Business acquired (296,278) -- -- (296,278) -- -- -- --
Net proceeds from dispositions 55,980 -- -- 55,980 11,434 -- -- 11,434
Other-net (6,713) -- -- (6,713) (18,181) -- -- (18,181)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (285,075) (5,397) -- (290,472) (49,486) (4,401) -- (53,887)
- ---------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Commercial paper borrowings 403,490 -- -- 403,490 95,400 -- -- 95,400
Long-term debt
Proceeds -- 40,000 -- 40,000 -- -- -- --
Payments (101,150) (689) -- (101,839) (1,151) -- -- (1,151)
Capital shares
Issuances 29,499 -- -- 29,499 13,941 -- -- 13,941
Repurchases (425,932) -- -- (425,932) (374,849) -- -- (374,849)
Dividends paid to stockholders (56,750) -- -- (56,750) (53,801) -- -- (53,801)
Funds allocated between the NYT
group and the NYTD group, net 29,000 (29,000) -- -- (9,426) 9,426 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by/(used in)
financing activities (121,843) 10,311 -- (111,532) (329,886) 9,426 -- (320,460)
- ---------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash
and short-term investments (20,843) (154) -- (20,997) 7,735 (148) -- 7,587
Cash and cash equivalents
at the beginning of the year 63,677 184 -- 63,861 35,950 41 -- 35,991
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
at the end of the quarter $ 42,834 $ 30 $ -- $ 42,864 $ 43,685 $ (107) $ -- $ 43,578
- ---------------------------------------------------------------------------------------------------------------------------
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Advertising revenues accounted for approximately 73% and circulation
revenues accounted for 21% of the Company's revenues in the third quarter and
for the first nine months of 2000. Advertising revenues influence the pattern of
the Company's consolidated revenues because they are seasonal in nature.
Traditionally, second-quarter and fourth-quarter advertising volume is higher
than that which occurs in the first and third quarters when economic activity
tends to be lower after the holiday season and in the summer period. Quarterly
trends are also affected by the overall economy and economic conditions that may
exist in specific markets served by each of the Company's business segments.
Newsprint is the major component of the Company's cost of raw materials.
Newsprint market prices began increasing in the second quarter of 2000 over 1999
levels and are expected to continue to rise over 1999 levels for the remainder
of the year.
The Company's consolidated financial results for the quarter and nine
months ended September 24, 2000, compared with the quarter and nine months ended
September 26, 1999, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands, except per share data) 2000 1999 % Change 2000 1999 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues $ 787,289 $ 729,658 7.9% $ 2,515,810 $ 2,248,101 11.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 116,186 $ 112,770 3.0% $ 456,998 $ 382,872 19.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income before special items $ 62,987 $ 63,526 -0.8% $ 247,789 $ 210,691 17.6%
Special items 11,978 (3,520) N/A 11,978 (5,812) N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 74,965 $ 60,006 24.9% $ 259,767 $ 204,879 26.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share: $ 0.37 $ 0.36 2.8% $ 1.43 $ 1.17 22.2%
Net Income before special items
Special items 0.07 (0.02) N/A 0.07 (0.03) N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 0.44 $ 0.34 29.4% $ 1.50 $ 1.14 31.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues for the third quarter of 2000 increased 7.9% over 1999
third-quarter revenues. Revenues for the first nine months of 2000 increased
11.9% over the same period in 1999.
Excluding revenues from the four newspapers and nine telephone directories
in the Regional Newspaper Group divested in the 2000 third quarter ("divested
Regionals") and the Worcester Telegram & Gazette ("T&G"), which was acquired on
January 7, 2000, total revenues for the Company grew 5.4% in the third quarter
of 2000 and advertising revenues in the Newspaper Group grew 6.0% over the third
quarter of 1999. On the same basis, in the first nine months of 2000 total
revenues for the Company grew 9.4% and advertising revenues in the Newspaper
Group grew 11.9% compared with the same period a year ago.
Operating profit in the third quarter of 2000 was $120.0 million, nearly
matching the performance in the third quarter of 1999, excluding work force
reduction expenses. On the same basis, operating profit for the first nine
months of 2000 rose 17.3% to $460.8 million from $393.0 million in the
corresponding period of 1999. The operating profit increases were principally
from strong revenue growth.
Operating profit increased 3.0% in the third quarter of 2000 compared with
the third quarter of 1999, including special items. On the same basis, for the
first nine months of 2000 operating profit increased 19.4% from the
corresponding period of 1999.
15
The 2000 third-quarter net income of $63.0 million nearly matched the
$63.5 million earned in the third quarter of 1999, and for the first nine months
of 2000, net income increased 17.6% compared with the first nine months of 1999,
excluding special items. Including special items, the third-quarter 2000 net
income increased 24.9% compared with the third quarter of 1999, and for the
first nine months of 2000 net income increased 26.8% compared with the first
nine months of 1999.
The Company expects that for 2000 diluted earnings per share will be in a
range of $2.05 to $2.10 compared with $1.78 in 1999, excluding special items.
Special items in the third quarter and first nine months of 2000 included
a $22.2 million pre-tax gain ($0.08 per share) principally resulting from the
sale of the divested Regionals, partially offset by the loss on the disposition
of the Company's interest in an online venture (see Note 4 in Notes to Condensed
Consolidated Financial Statements). In the same periods there was a $3.8 million
pre-tax charge ($.01 per share) for work force reduction expenses across most
groups.
Special items in the third quarter of last year included a $6.1 million
pre-tax charge ($.02 per share) for work force reduction expenses principally at
The Boston Globe, and for the first nine months of 1999, there were work force
reduction expenses (principally at The Boston Globe) totaling $10.1 million
before taxes ($.03 per share).
Excluding special items, EBITDA (earnings before interest, taxes,
depreciation and amortization) in the third quarter of 2000 rose to $175.3
million from $172.8 million in the 1999 third quarter. On the same basis, EBITDA
for the first nine months of 2000 was $627.4 million compared with $551.4
million in the same period of 1999. EBITDA in the 2000 third quarter rose to
$171.4 million from $166.6 million in the third quarter of 1999, including
special items. On the same basis, EBITDA for the first nine months of 2000 was
$623.6 million compared with $541.3 million in the same period of 1999.
EBITDA is presented since it is a widely accepted indicator of funds
available to service debt, although it is not a measure of liquidity or of
financial performance under generally accepted accounting principles ("GAAP").
The EBITDA presented may not be comparable to similarly titled measures reported
by other companies. The Company believes that EBITDA, while providing useful
information, should not be considered in isolation or as an alternative to net
income or cash flows as determined under GAAP.
Consolidated operating expenses for the third quarter and first nine
months of 2000 and 1999 were as follows:
- ----------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- ----------------------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- ----------------------------------------------------------------------------------------------------------------
Production costs
Raw materials $ 84,080 $ 67,452 24.7% $ 257,582 $ 237,211 8.6%
Wages and benefits 155,806 150,901 3.3% 485,213 461,295 5.2%
Other 113,367 106,966 6.0% 336,189 316,483 6.2%
- ----------------------------------------------------------------------------------------------------------------
Total production costs 353,253 325,319 8.6% 1,078,984 1,014,989 6.3%
Selling, general and
administrative expenses 317,850 291,569 9.0% 979,828 850,240 15.2%
- ----------------------------------------------------------------------------------------------------------------
Total expenses $ 671,103 $ 616,888 8.8% $2,058,812 $1,865,229 10.4%
- ----------------------------------------------------------------------------------------------------------------
Production costs for the third quarter of 2000 increased 8.6% from the
third quarter of 1999 and for the first nine months of 2000 production costs
increased 6.3% from the comparable period in 1999. Excluding the divested
Regionals, the T&G and New York Times Digital (NYTD), production costs for the
third quarter and for the first nine months of 2000
16
increased 4.9% and 3.0%. On same basis, excluding newsprint expense, costs
increased 0.4% and 2.0% in the third quarter and for the first nine months of
2000.
In the third quarter of 2000, the Company's newsprint expense rose 19.0%
compared with the 1999 third quarter, excluding the T&G. Of this increase, 17.1%
resulted from an increase in the average cost of newsprint and 1.9% resulted
from an increase in consumption. For the first nine months of 2000 compared with
the first nine months of 1999, excluding the T&G, the Company's newsprint
expense increased by 4.9%. Of this increase, 0.9% resulted from an increase in
the average cost of newsprint and 4.0% resulted from an increase in consumption.
Selling, general and administrative expenses ("SGA expenses") in the third
quarter of 2000 increased 9.0% compared with the same period in 1999. For the
first nine months of 2000, SGA expenses increased 15.2%, compared with the
corresponding period in 1999. Excluding divested Regionals, the T&G, and NYTD,
SGA expenses increased 1.5% in the third quarter of 2000 and 7.8% for the first
nine months of 2000. The higher level of SGA expenses is partly attributable to
the continuing national expansion of The New York Times newspaper. SGA expenses
for the third quarter and the first nine months of 2000 include a $3.8 million
work force reduction charge across most groups. SGA expenses include a $6.1
million and $10.1 million work force reduction charge (principally at The Boston
Globe) in the third quarter and first nine months of 1999.
The Company currently expects growth in its total expenses, excluding the
effects of newsprint, the T&G and NYTD to be in the range of four to six percent
for 2000.
Other Items
Interest expense-net increased to $17.5 million in the 2000 third quarter
and $48.0 million in the first nine months of 2000 compared with $12.9 million
and $37.7 million in the comparable 1999 periods, principally due to additional
borrowings to fund the purchase of the T&G and the Company's share repurchase
program.
The effective income tax rate for the third quarter of 2000 was 40.8%
compared with 42.7% in the 1999 third quarter, excluding special items. For the
first nine months of 2000 the effective income tax rate was 41.6% compared with
42.7% in the first nine months of 1999, excluding special items. The decreases
for both the quarter and for the first nine months of 2000 were primarily due to
lower state and local income taxes.
17
Consolidated revenues, EBITDA, depreciation and amortization and operating
profit by business segment were as follows:
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- ------------------------------------------------------------------------------------------------------------------------------
REVENUES
Newspapers ................... $ 715,866 $ 662,714 8.0% $ 2,284,674 $ 2,039,776 12.0%
Broadcast .................... 37,486 35,210 6.5% 113,159 109,107 3.7%
Magazines .................... 26,545 26,749 -0.8% 91,036 87,049 4.6%
New York Times Digital ....... 12,118 6,127 97.8% 37,152 14,958 148.4%
Intersegment eliminations (a) (4,726) (1,142) -313.8% (10,211) (2,789) -266.1%
------------------------------------------------------------------------------------------
Total ..................... $ 787,289 $ 729,658 7.9% $ 2,515,810 $ 2,248,101 11.9%
==========================================================================================
EBITDA
Newspapers ................... $ 171,202 $ 157,403 8.8% $ 605,894 $ 504,988 20.0%
Broadcast .................... 14,251 14,329 -0.5% 43,863 44,751 -2.0%
Magazines .................... 3,836 4,549 -15.7% 18,581 17,983 3.3%
New York Times Digital ....... (18,077) (6,788) -166.3% (38,302) (15,905) -140.8%
Unallocated corporate expenses (3,793) (7,843) 51.6% (17,881) (23,156) 22.8%
Joint ventures ............... 4,017 4,976 -19.3% 11,441 12,620 -9.3%
------------------------------------------------------------------------------------------
Total ..................... $ 171,436 $ 166,626 2.9% $ 623,596 $ 541,281 15.2%
==========================================================================================
DEPRECIATION AND AMORTIZATION
Newspapers ................... $ 41,268 $ 40,546 1.8% $ 125,219 $ 122,161 2.5%
Broadcast .................... 4,020 4,371 -8.0% 12,622 13,103 -3.7%
Magazines .................... 310 338 -8.3% 958 1,050 -8.8%
New York Times Digital ....... 2,637 1,293 103.9% 7,931 1,896 318.3%
Corporate .................... 2,997 2,332 28.5% 8,425 7,579 11.2%
Joint ventures ............... 88 88 -- 263 264 -0.4%
------------------------------------------------------------------------------------------
Total ..................... $ 51,320 $ 48,968 4.8% $ 155,418 $ 146,053 6.4%
==========================================================================================
OPERATING PROFIT (LOSS)
Newspapers ................... $ 129,933 $ 116,858 11.2% $ 480,675 $ 382,825 25.6%
Broadcast .................... 10,231 9,957 2.8% 31,242 31,648 -1.3%
Magazines .................... 3,526 4,211 -16.3% 17,623 16,933 4.1%
New York Times Digital ....... (20,713) (8,081) -156.3% (46,234) (17,800) -159.7%
Unallocated corporate expenses (6,791) (10,175) 33.3% (26,308) (30,734) 14.4%
------------------------------------------------------------------------------------------
Total ..................... $ 116,186 $ 112,770 3.0% $ 456,998 $ 382,872 19.4%
==========================================================================================
(A) Intersegment eliminations primarily include revenues between New York Times
Digital and other segments.
Newspaper Group: The Newspaper Group consists of The New York Times ("The
Times"), The Boston Globe ("The Globe"), 15 other newspapers, newspaper
distributors, a news service, a features syndicate, TimesFax, licensing
operations of the New York Times databases and microfilm.
- ----------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-----------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- ----------------------------------------------------------------------------------------------------------
Revenues $ 715,866 $ 662,714 8.0% $2,284,674 $2,039,776 12.0%
- ----------------------------------------------------------------------------------------------------------
EBITDA $ 171,202 $ 157,403 8.8% $ 605,894 $ 504,988 20.0%
- ----------------------------------------------------------------------------------------------------------
Operating profit $ 129,933 $ 116,858 11.2% $ 480,675 $ 382,825 25.6%
- ----------------------------------------------------------------------------------------------------------
18
Total Newspaper Group revenues in the third quarter and the first nine
months of 2000 increased 8.0% and 12.0%, over the comparable periods in 1999.
Excluding the T&G and divested Regionals, total Newspaper Group revenues
increased 5.3% and 9.3% for the quarter and the first nine months of 2000.
Performance was strongest at The Times and The Globe where advertising revenues
increased 7.4% and 5.3% for the third quarter of 2000 and 14.8% and 11.1% in the
first nine months of 2000. Both newspapers benefited from higher advertising
rates.
Third-quarter operating profit for the Newspaper Group increased 7.1%
compared with the 1999 third quarter, excluding special items. For the first
nine months of the year, operating profit increased 22.8% from the comparable
1999 period, excluding special items. Excluding the T&G and divested Regionals,
total Newspaper Group operating profit increased 8.9% and 23.3% for the third
quarter and the first nine months of 2000.
The Company currently expects advertising revenue growth in the Newspaper
Group, excluding the T&G, to be in the range of eight to nine percent for 2000.
19
Advertising, circulation and other revenue, by major product of the
Newspaper Group, were as follows:
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
----------------------------------------- -----------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- ----------------------------------------------------------------------------- -----------------------------------------
The New York Times
Advertising $ 275,836 $ 256,808 7.4% $ 941,414 $ 820,119 14.8%
Circulation 114,924 110,397 4.1% 349,175 337,991 3.3%
Other 41,358 38,053 8.7% 114,422 106,468 7.5%
- ----------------------------------------------------------------------------- -----------------------------------------
Total $ 432,118 $ 405,258 6.6% $1,405,011 $1,264,578 11.1%
- ----------------------------------------------------------------------------- -----------------------------------------
New England Newspaper Group
The Boston Globe
Advertising $ 118,361 $ 112,375 5.3% $ 371,890 $ 334,642 11.1%
Circulation 33,244 34,414 -3.4% 99,029 100,317 -1.3%
Other 3,101 2,571 20.6% 8,679 7,334 18.3%
- ----------------------------------------------------------------------------- -----------------------------------------
Subtotal $ 154,706 $ 149,360 3.6% $ 479,598 $ 442,293 8.4%
- ----------------------------------------------------------------------------- -----------------------------------------
Worcester Telegram & Gazette
Advertising $ 13,935 N/A N/A $ 42,292 N/A N/A
Circulation 5,009 N/A N/A 14,348 N/A N/A
Other 98 N/A N/A 566 N/A N/A
- ----------------------------------------------------------------------------- -----------------------------------------
Subtotal $ 19,042 N/A N/A $ 57,206 N/A N/A
- ----------------------------------------------------------------------------- -----------------------------------------
Total New England Newspaper
Group
Advertising $ 132,296 $ 112,375 17.7% $ 414,182 $ 334,642 23.8%
Circulation 38,253 34,414 11.2% 113,377 100,317 13.0%
Other 3,199 2,571 24.4% 9,245 7,334 26.1%
- ----------------------------------------------------------------------------- -----------------------------------------
Total $ 173,748 $ 149,360 16.3% $ 536,804 $ 442,293 21.4%
- ----------------------------------------------------------------------------- -----------------------------------------
Regional Newspapers
Advertising $ 87,636 $ 85,965 1.9% $ 273,083 $ 263,623 3.6%
Circulation 18,034 18,318 -1.6% 57,233 57,664 -0.7%
Other 4,330 3,813 13.6% 12,543 11,618 8.0%
- ----------------------------------------------------------------------------- -----------------------------------------
Total $ 110,000 $ 108,096 1.8% $ 342,859 $ 332,905 3.0%
- ----------------------------------------------------------------------------- -----------------------------------------
Total Newspaper Group
Advertising $ 495,768 $ 455,148 8.9% $1,628,679 $1,418,384 14.8%
Circulation 171,211 163,129 5.0% 519,785 495,972 4.8%
Other 48,887 44,437 10.0% 136,210 125,420 8.6%
- ----------------------------------------------------------------------------- -----------------------------------------
Total $ 715,866 $ 662,714 8.0% $2,284,674 $2,039,776 12.0%
============================================================================= =========================================
20
Advertising volume was as follows:
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------------------------------------------------------------------
(Inches in thousands, preprints September 24, September 26, September 24, September 26,
in thousands of copies) 2000 1999 % Change 2000 1999 % Change
- -------------------------------------------------------------------------------------------------------------------------
The New York Times
Retail 111.4 112.6 -1.1% 379.5 374.8 1.2%
National 348.6 331.1 5.3% 1,185.9 1,062.6 11.6%
Classified 232.0 235.0 -1.3% 738.9 748.0 -1.2%
Zoned 219.6 216.8 1.3% 742.8 722.8 2.8%
- -------------------------------------------------------------------------------------------------------------------------
Total 911.6 895.5 1.8% 3,047.2 2,908.2 4.8%
- -------------------------------------------------------------------------------------------------------------------------
Preprints 98,940 95,610 3.5% 301,955 288,666 4.6%
- -------------------------------------------------------------------------------------------------------------------------
New England Newspaper Group
The Boston Globe
Retail 132.0 145.8 -9.5% 413.4 441.1 -6.3%
National 180.6 170.2 6.1% 582.2 524.3 11.0%
Classified 342.3 347.2 -1.4% 1,045.9 1,041.8 0.4%
Zoned 54.6 54.9 -0.6% 182.4 185.7 -1.8%
- -------------------------------------------------------------------------------------------------------------------------
Total 709.5 718.1 -1.2% 2,223.9 2,193.0 1.4%
- -------------------------------------------------------------------------------------------------------------------------
Preprints 188,104 181,565 3.6% 573,145 558,763 2.6%
- -------------------------------------------------------------------------------------------------------------------------
Worcester Telegram & Gazette
Retail 72.0 N/A N/A 222.5 N/A N/A
National 22.5 N/A N/A 57.9 N/A N/A
Classified 133.1 N/A N/A 403.7 N/A N/A
Zoned 120.0 N/A N/A 362.9 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Total 347.6 N/A N/A 1,047.0 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Preprints 46,826 N/A N/A 138,710 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Regional Newspapers
Retail 1,657.2 1,732.6 -4.4% 5,311.0 5,438.6 -2.3%
National 70.0 62.4 12.2% 219.0 203.3 7.7%
Classified 2,021.4 2,001.4 1.0% 6,044.6 5,956.2 1.5%
Legal 94.9 89.3 6.3% 429.2 362.7 18.3%
- -------------------------------------------------------------------------------------------------------------------------
Total 3,843.5 3,885.7 -1.1% 12,003.8 11,960.8 0.4%
- -------------------------------------------------------------------------------------------------------------------------
Preprints 258,612 251,086 3.0% 811,589 790,942 2.6%
- -------------------------------------------------------------------------------------------------------------------------
21
Average circulation for The Times, The Globe, the T&G and the Regional
Newspapers for the quarter and nine months ended September 24, 2000, compared
with the third quarter and nine months ended September 26, 1999, was as follows:
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended
September 24, 2000
- ---------------------------------------------------------------------------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
- ---------------------------------------------------------------------------------------------------------------------
Average Net Paid Circulation
The New York Times 1,100.7 2.9% 1,675.0 2.3%
New England Newspaper Group
The Boston Globe 467.6 0.8% 728.5 -1.2%
Worcester Telegram & Gazette 103.5 N/A 127.5 N/A
Regional Newspapers 672.5 -3.7% 727.9 -2.6%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 24, 2000
- ---------------------------------------------------------------------------------------------------------------------
(Copies in thousands) Weekday % Change Sunday % Change
- ---------------------------------------------------------------------------------------------------------------------
Average Net Paid Circulation
The New York Times 1,116.3 1.5% 1,697.0 1.5%
New England Newspaper Group
The Boston Globe 465.2 0.5% 720.8 -1.2%
Worcester Telegram & Gazette 104.6 N/A 134.2 N/A
Regional Newspapers 716.0 -2.3% 765.3 -1.9%
- ---------------------------------------------------------------------------------------------------------------------
For the first nine months of 2000, circulation growth for The Times was
primarily due to additional availability and promotion in major markets across
the nation combined with programs to improve the quality and levels of its home
delivery circulation base. Additionally, The Times, The Globe and the Regional
Newspapers are continuing to make improvements in product delivery and customer
service to attract new readers and retain existing ones.
Excluding divested Regionals, average net paid circulation for the
Regional Newspapers decreased 2.1% for weekday copies and 2.0% for Sunday copies
in third quarter of 2000 compared with the third quarter of 1999. On the same
basis, average net paid circulation for the Regional Newspapers decreased 1.8%
for weekday copies and 1.6% for Sunday copies for the first nine months of 2000
compared with the first nine months of 1999.
Broadcast Group: The Broadcast Group comprises eight network-affiliated
television stations and two radio stations.
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues $37,486 $35,210 6.5% $113,159 $109,107 3.7%
- -----------------------------------------------------------------------------------------------------------------------------------
EBITDA $14,251 $14,329 -0.5% $43,863 $44,751 -2.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Profit $10,231 $9,957 2.8% $31,242 $31,648 -1.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues increased 6.5% in the 2000 third quarter to $37.5 million from
$35.2 million in the 1999 third quarter, while operating profit increased 2.8%
to $10.2 million from $10.0 million in the third quarter of last year. The
improved performance in the third quarter resulted mainly from higher levels of
advertising related to the elections and the Olympics. For the first nine months
of 2000, revenues increased 3.7% and operating profit decreased 1.3% compared
with the same period of 1999. Operating profit decreased mainly due to higher
personnel costs.
22
Magazine Group: The Magazine Group comprises four golf publications and related
activities in the golf field.
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-----------------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues $26,545 $26,749 -0.8% $91,036 $87,049 4.6%
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA $ 3,836 $ 4,549 -15.7% $18,581 $17,983 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Profit $ 3,526 $ 4,211 -16.3% $17,623 $16,933 4.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Third-quarter 2000 revenues decreased 0.8% to $26.5 million from $26.7
million in the 1999 third quarter. Operating profit in the 2000 third quarter
decreased 16.3% to $3.5 million from $4.2 million in the third quarter of 1999.
For the first nine months of 2000, revenues and operating profit were $91.0
million and $17.6 million compared with $87.0 million and $16.9 million in the
first nine months of 1999. Revenues for the first nine months rose primarily due
to the 50th Anniversary issue of Golf Digest magazine.
New York Times Digital: The NYTD group is the Company's Internet business
division, which consists of NYTimes.com, newyorktoday.com, Boston.com,
GolfDigest.com and Abuzz. Abuzz develops and deploys technology to enable online
communities to share knowledge, interests and experience.
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-----------------------------------------------------------------------------------------------------
September 24, September 26, September 24, September 26,
(Dollars in thousands) 2000 1999 % Change 2000 1999 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues $ 12,118 $ 6,127 97.8% $ 37,152 $ 14,958 148.4%
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA $ (18,077) $(6,788) -166.3% $ (38,302) $ (15,905) -140.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating loss $ (20,713) $(8,081) -156.3% $ (46,234) $ (17,800) -159.7%
- ------------------------------------------------------------------------------------------------------------------------------------
NYTD group revenues for the third quarter of 2000 increased 97.8% compared
with the third quarter of 1999. For the first nine months of 2000, revenues
increased 148.4% compared with the first nine months of 1999. These increases
were primarily due to increased growth in advertising volume. Advertising
revenue accounted for approximately 87.0% of NYTD group total revenues for the
first nine months of 2000.
Operating losses in the third quarter of 2000 increased to $20.7 million
($.08 per share) from $8.1 million ($.03 per share) in the same quarter last
year. For the first nine months of 2000, operating losses rose to $46.2 million
($.16 per share) from $17.8 million ($.06 per share) in the first nine months of
1999. Higher operating losses for both the quarter and first nine months of 2000
were mainly due to increased staffing, promotion and advertising at NYTD.
NYTD expects operating losses to be in the range of $63.0 million to $65.0
million and EBITDA losses to be in the range of $52.0 million to $54.0 million
for 2000. NYTD continues to experience significant growth, and its goal is to
achieve positive EBITDA for the year in 2002.
23
Liquidity and Capital Resources
Net cash provided by operating activities was $381.0 million for the first
nine months of 2000 compared with $381.9 million for the first nine months of
1999. Net cash used in investing activities was $290.5 million for the first
nine months of 2000 compared with $53.9 million for the first nine months of
1999. The increase in cash utilized of $236.6 million was primarily due to the
acquisition of the T&G, partially offset by the proceeds of the sale of the
divested Regionals and the Company's investment in an online venture. Net cash
used in financing activities was $111.5 million for the first nine months of
2000 compared with $320.5 million used in financing activities for the first
nine months of 1999. This change was principally related to increases in
commercial paper borrowings mostly used to fund the T&G acquisition and to
repay $101.8 million in debt in 2000. The Company has continued to repurchase
shares and both periods have been similarly affected.
The Company believes that cash generated from its operations and the
availability of funds from external sources should be adequate to cover all cash
requirements, including working capital needs, stock repurchases, planned
capital expenditures and acquisitions, and dividend payments to stockholders.
The ratio of current assets to current liabilities was 61.2% at September 24,
2000, and 62.2% at September 26, 1999. This decrease is principally due to an
increase in commercial paper outstanding at September 24, 2000, mostly resulting
from the funding of the T&G acquisition. The ratio of long-term debt and capital
lease obligations as a percentage of total capitalization was 33.6% at September
24, 2000, compared with 26.5% at September 26, 1999. This increase is
principally the result of stock repurchases.
Financing: The Company's total debt, including commercial paper and capital
leases, was $1.043 billion at September 24, 2000, and $818.8 million at
September 26, 1999. The increase in total debt was primarily from an increase in
commercial paper outstanding. On April 28, 2000, $100.0 million of the Company's
six and one-half year senior notes was repaid; the remainder of the Company's
debt and capital leases generally mature between March 2003 and March 2025. In
June 2000 total available funds under the revolving credit agreements were
increased to $600.0 million from $400.0 million. The Company's one-year
revolving credit agreement was renewed and increased to $300.0 million from
$200.0 million and will now mature in June 2001. The Company's multi-year
revolving credit agreement was renewed and increased to $300.0 million from
$200.0 million and will now mature in June 2005.
The Company's revolving credit agreements require, among other provisions,
specified levels of stockholders' equity. Approximately $319.0 million of
stockholders' equity was unrestricted under these agreements at September 24,
2000, and $537.6 million was unrestricted at September 26, 1999. The decline in
the level of unrestricted stockholders' equity was primarily due to stock
repurchases.
The Company had $403.5 million in commercial paper outstanding at
September 24, 2000, and $219.5 million at September 26, 1999. These obligations
are supported by the revolving credit agreements, and no amounts are outstanding
under these revolving credit agreements as of September 24, 2000. The amount
available under the commercial paper facility was $196.5 million as of September
24, 2000.
In March 2000 the Company issued $40.0 million of 7% subordinated
convertible notes due March 21, 2003, to three venture capital firms. Upon an
initial public offering of Class C Stock (see Proposed Tracking Stock below),
this debt is convertible, at the election of the venture capital firms, into
shares of Class C Stock intended to represent approximately 6.7% of the
pre-offering equity of the NYTD group. This debt is not currently convertible
(the Company has recently withdrawn its Form S-3 for the initial public offering
of Class C Stock, see Proposed Tracking Stock below). Beginning
24
January 1, 2002, if no initial public offering of the Class C Stock has
occurred, the venture capital firms have the right to require the Company to
repurchase the notes at their $40.0 million face value.
The Company's Condensed Consolidated Balance Sheets as of December 26,
1999, contains a $25.0 million accrued expense related to a contingent payment
to former stockholders of Abuzz Technologies, Inc. The Company's recent
withdrawal of the form S-3 has made it more likely that this payment will become
due and payable after January 1, 2001.
Capital Expenditures: The Company currently estimates that capital
expenditures for 2000 will range from $90.0 million to $100.0 million. The
Company currently anticipates that depreciation and amortization expense for
2000 will be in the range of $210.0 million to $215.0 million compared with
$197.5 million in 1999.
Proposed Tracking Stock
On January 20, 2000, the Board of Directors of the Company authorized,
subject to shareholder approval, the issuance of a new class of stock ("Class C
Stock") and on January 28, 2000, the Company filed a registration statement on
Form S-3 (the "Form S-3") related to the proposed initial public offering of
Class C Stock. This proposed tracking stock was intended to track the
performance of the NYTD group. At the Annual Meeting of Stockholders held on May
23, 2000, stockholders authorized the filing of an amendment to the Company's
certificate of incorporation to create this new class of stock, which the
Company has yet to do.
On October 12, 2000, the Company withdrew the Form S-3 due to unfavorable
conditions in the public equities markets. This decision to withdraw the Form
S-3 will not have a material impact on the NYTD group's day-to-day operations or
its expansion plans.
Factors That Could Affect Operating Results
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those predicted by such forward-looking statements. These risks and
uncertainties include national and local conditions, as well as competition,
that could influence the levels (rate and volume) of retail, national and
classified advertising and circulation generated by the Company's various
markets and material increases in newsprint and magazine paper prices. They also
include other risks detailed from time to time in the Company's publicly-filed
documents, including the Company's Annual Report on Form 10-K for the period
ended December 26, 1999. The Company undertakes no obligation to publicly update
any forward-looking statement, whether as a result of new information, future
events, or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's quantitative and qualitative market risk is principally
associated with market interest rate fluctuations related to its debt
obligations. The Company does not consider such market risk significant.
25
PART II. OTHER INFORMATION
Item 6. (a) Exhibits and Reports on Form 8-K Exhibits
10.2 The Company's Executive Stock Incentive Plan, as amended on
September 21, 2000
10.3 The Company's 1991 Executive Cash Bonus Plan, as amended
through May 23, 2000
10.4 The Company's Non-Employee Directors' Stock Option Plan, as
amended through September 21, 2000
12 Ratio of Earnings to Fixed Charges
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.
26
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 8, 2000 /s/ John M. O'Brien
---------------- --------------------------
John M. O'Brien
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
27
Exhibit Index to Quarterly Report Form 10-Q
Quarter Ended September 24, 2000
Exhibit No.
(a) Exhibit
10.2 The Company's Executive Stock Incentive Plan, as amended
on September 21, 2000
10.3 The Company's 1991 Executive Cash Bonus Plan, as amended
through May 23, 2000
10.4 The Company's Non-Employee Directors' Stock Option Plan,
as amended through September 21, 2000
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
28