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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
FOR QUARTER ENDED March 29, 1998
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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 incorporation (I.R.S. Employer Identification No.)
or organization)
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 May 3, 1998 (exclusive of treasury shares):
Class A Common Stock................................................................................ 95,403,489 shares
Class B Common Stock................................................................................ 424,801 shares
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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)
FOR THE QUARTER ENDED
----------------------
MARCH 29, MARCH 30,
1998 1997
---------- ----------
(13 WEEKS)
Revenues
Advertising............................................................................. $ 507,478 $ 477,378
Circulation............................................................................. 169,522 168,554
Other................................................................................... 45,563 46,529
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Total............................................................................... 722,563 692,461
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Production Costs
Raw Materials........................................................................... 87,778 74,975
Wages and Benefits...................................................................... 153,722 158,364
Other................................................................................... 121,804 113,147
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Total............................................................................... 363,304 346,486
Selling, General and Administrative Expenses.............................................. 242,889 244,720
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Total............................................................................... 606,193 591,206
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Operating Profit.......................................................................... 116,370 101,255
Income from Joint Ventures................................................................ 4,371 1,315
Interest Expense--net..................................................................... 10,143 8,318
Gain on Disposition of Assets............................................................. 4,619 --
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Income Before Income Taxes................................................................ 115,217 94,252
Income Taxes.............................................................................. 50,580 42,413
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Net Income................................................................................ $ 64,637 $ 51,839
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Average Number of Common Shares Outstanding
Basic................................................................................... 96,296 97,822
Diluted................................................................................. 98,577 99,604
Per Share of Common Stock
Basic Earnings.......................................................................... $ .67 $ .53
Diluted Earnings........................................................................ $ .66 $ .52
Dividends............................................................................... $ .17 $ .15
See notes to condensed consolidated financial statements.
2
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
MARCH 29, DECEMBER 28,
1998 1997
------------ ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and short-term investments.................................................... $ 65,749 $ 106,820
Accounts receivable-net............................................................ 341,601 331,287
Inventories
Newsprint and magazine paper..................................................... 33,418 27,694
Work-in-process, etc............................................................. 4,728 4,440
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Total inventories.............................................................. 38,146 32,134
Deferred Income Taxes.............................................................. 60,039 60,039
Other current assets............................................................... 90,001 85,555
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Total current assets........................................................... 595,536 615,835
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Other Assets
Investment in joint ventures....................................................... 135,744 133,054
Property, plant and equipment (less accumulated depreciation of $890,520 in 1998
and $868,274 in 1997)............................................................ 1,344,408 1,366,931
Intangible assets acquired
Cost in excess of net assets acquired (less accumulated amortization of $218,925
in 1998 and $210,815 in 1997).................................................. 985,095 993,206
Other intangible assets acquired (less accumulated amortization of $49,205 in
1998 and $43,975 in 1997)...................................................... 379,269 384,499
Miscellaneous assets............................................................... 155,174 145,493
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TOTAL ASSETS......................................................................... $ 3,595,226 $3,639,018
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See notes to condensed consolidated financial statements.
3
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
MARCH 29, DECEMBER 28,
1998 1997
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(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable................................................................... $ 168,081 $ 189,580
Accrued payroll and other related liabilities...................................... 69,069 103,511
Accrued expenses................................................................... 249,858 217,742
Unexpired subscriptions............................................................ 87,093 82,621
Current portion of long-term debt and capital lease obligations.................... 179,680 104,033
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Total current liabilities........................................................ 753,781 697,487
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Other Liabilities
Long-term debt..................................................................... 414,759 490,237
Capital lease obligations.......................................................... 44,034 45,191
Deferred income taxes.............................................................. 187,396 186,705
Other.............................................................................. 497,709 491,336
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Total other liabilities.......................................................... 1,143,898 1,213,469
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Total Liabilities................................................................ 1,897,679 1,910,956
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Stockholders' Equity
Capital stock...................................................................... 11,467 11,385
Additional paid-in capital......................................................... 793,935 773,367
Earnings reinvested in the business................................................ 1,537,179 1,488,910
Common stock held in treasury, at cost............................................. (645,034) (545,600)
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Total stockholders' equity....................................................... 1,697,547 1,728,062
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................... $ 3,595,226 $3,639,018
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See notes to condensed consolidated financial statements.
4
THE NEW YORK TIMES COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE QUARTER ENDED
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MARCH 29, MARCH 30,
1998 1997
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(13 WEEKS)
OPERATING ACTIVITIES:
Net cash provided by operating activities................................................. $ 74,622 $ 104,607
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INVESTING ACTIVITIES:
Additions to property, plant and equipment................................................ (25,185) (44,746)
Net proceeds from disposition............................................................. 9,934 --
Other-net................................................................................. (994) 66
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Net cash used in investing activities..................................................... (16,245) (44,680)
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FINANCING ACTIVITIES:
Commercial paper borrowings............................................................... -- (30,600)
Long-term debt reduction.................................................................. (1,002) (973)
Capital Shares
Issuance................................................................................ 2,302 4,002
Repurchase.............................................................................. (84,380) (10,970)
Dividends paid to stockholders............................................................ (16,368) (14,717)
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Net cash used in financing activities..................................................... (99,448) (53,258)
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(Decrease)/increase in Cash and short-term investments.................................... (41,071) 6,669
Cash and short-term investments at the beginning of the year.............................. 106,820 39,103
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Cash and short-term investments at the end of the quarter................................. $ 65,749 $ 45,772
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NONCASH FINANCING TRANSACTIONS:
Repurchases of common stock in connection with certain exercises under the
Company's stock option plans increased treasury stock by $17,347 and $23,312 in
1998 and 1997, respectively. Additional paid-in capital increased by a
corresponding amount.
SUPPLEMENTAL INFORMATION:
Amounts in these statements of cash flows are presented on a cash basis and
may differ from those shown in other sections of the financial statements.
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 28, 1997 for The New
York Times Company (the "Company") filed with the Securities and Exchange
Commission. In the opinion of management, all adjustments necessary for a fair
presentation of the financial position and results of operations, as of and for
the interim period ended, have been included. Due to the seasonal nature of the
Company's business, results for the interim periods are not necessarily
indicative of a full year's operations.
Certain reclassifications have been made to the 1997 Condensed Consolidated
Financial Statements to conform with classifications used at March 29, 1998.
2. INCOME TAXES
The reasons for the variances between the effective tax rate on income
before income taxes and the federal statutory rate are as follows:
MARCH 29, MARCH 30,
FOR THE THIRTEEN WEEKS ENDED 1998 1997
- ------------------------------------------------------------ ---------------------- ----------------------
% OF % OF
AMOUNT PRETAX AMOUNT PRETAX
--------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
Tax at federal statutory rate............................... $ 40,326 35.0% $ 32,988 35.0%
State and local taxes-net of federal benefit................ 7,764 6.8% 7,055 7.5%
Amortization of nondeductible intangible
assets acquired............................................. 2,219 1.9% 2,202 2.3%
Other-net................................................... 271 0.2% 168 0.2%
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Income Tax Expense.......................................... $ 50,580 43.9% $ 42,413 45.0%
--------- --- --------- ---
3. DEBT OBLIGATIONS
The Company currently maintains $300,000,000 in revolving credit agreements
which require, among other matters, specified levels of stockholders' equity. At
March 29, 1998, approximately $905,300,000 of stockholders' equity was
unrestricted under these agreements.
On April 2, 1998, the Company's tender offer for any and all of its
$150,000,000 of outstanding publicly-held 8-1/4 percent debentures due March 15,
2025, expired. The debenture holders tendered $78,100,000 of the outstanding
debentures. The amount tendered was reclassified from long-term to current debt
in the Company's Condensed Consolidated Balance Sheet at March 29, 1998. In the
second quarter of 1998, the Company will record a pretax extraordinary charge of
approximately $14,000,000 (approximately $7,900,000 after-tax) relating to the
debentures tendered.
4. STOCK REPURCHASE PROGRAM
During the first three months of 1998, the Company repurchased approximately
1,100,000 shares of Class A Common Stock at a cost of approximately $70,600,000.
The average price of these repurchases was approximately $65 per share. To date,
approximately $134,400,000 remain from the December 1997
6
THE NEW YORK TIMES COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. STOCK REPURCHASE PROGRAM (CONTINUED)
authorization of $215,000,000. Stock repurchases under this program exclude
shares reacquired in connection with certain exercises under the Company's stock
option plans at a cost of approximately $11,400,000 in the first quarter of
1998.
5. VOLUNTARY STAFF REDUCTIONS
In the first quarter of 1997, the Company recorded approximately $2,500,000,
or $.01 basic and diluted earnings per share, at corporate headquarters and The
New York Times, for pretax charges relating to staff reductions. At March 29,
1998, and December 28, 1997, approximately $15,900,000 and $25,000,000,
respectively, of these charges were unpaid. This balance will be principally
paid within two years.
6. COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement of Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS 130"). Comprehensive Income for the
Company includes foreign currency translation adjustments in addition to net
income as reported in the Company's Condensed Consolidated Financial Statements.
Comprehensive income was the same as net income for the quarters ended March 29,
1998 and March 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Advertising and circulation revenues accounted for approximately 70% and
23%, respectively, of the Company's revenues in the first quarter of 1998.
Advertising revenues influence the pattern of the Company's consolidated
revenues because they are seasonal in nature. Traditionally, second-quarter and
fourth-quarter advertising volume is higher than that which occurs in the first
and third quarters since economic activity tends to be lower in the post-holiday
season and the summer period. Quarterly trends are also affected by the overall
economy and economic conditions that may exist in specific markets served by
each of the Company's business segments.
Newsprint is the major component of the Company's cost of raw materials. The
Company's cost of newsprint was higher in the first quarter of 1998 than in the
comparable 1997 quarter. A price increase may occur later in the year which
could further increase the Company's cost of newsprint in 1998.
The special items that affected the 1998 and 1997 first-quarter results were
as follows:
1998
- $4.6 million ($.03 basic and diluted earnings per share) pretax gain from
the sale of equipment.
1997
- $2.5 million ($.01 basic and diluted earnings per share) pretax charge
for severance and related costs resulting from work force reductions
("buyouts").
7
RESULTS OF OPERATIONS--FIRST QUARTER OF 1998
COMPARED WITH FIRST QUARTER OF 1997
The 1998 first-quarter net income was $64.6 million or $.67 basic ($.66
diluted) earnings per share compared with net income of $51.8 million or $.53
basic ($.52 diluted) earnings per share in the first quarter of 1997. The higher
1998 net income was principally due to higher advertising revenues, partially
offset by higher newsprint costs and depreciation expense related to new
production facilities.
Revenues for the first quarter of 1998 were $722.6 million, an approximately
4% increase over 1997 first-quarter revenues of $692.5 million. On a comparable
basis, adjusted for the 1997 disposition of certain properties, 1998
first-quarter revenues increased by approximately 7% over the 1997 first
quarter.
Production costs for the first quarter of 1998 were $363.3 million, an
approximately 5% increase over the 1997 first-quarter production costs of $346.5
million. The increase was primarily due to higher newsprint costs and
depreciation expense associated with the new production facilities; in addition,
1997 costs were higher due to one-time pressmen bonuses.
Selling, general and administrative expenses ("SGA expenses") in the first
quarter of 1998 were $242.9 million, an approximately 1% decrease over the 1997
first-quarter SGA expenses of $244.7 million. SGA expenses, exclusive of
buyouts, were flat in the first quarter of 1998 as compared with the first
quarter of 1997.
Operating profit in the first quarter of 1998 was $116.4 million compared
with $101.3 million in the 1997 first quarter. Operating profit increased to
$116.4 million in the first quarter of 1998 from $103.8 million in 1997,
excluding buyouts. The improvement in operating profit was principally due to
higher advertising revenues at the Newspaper Group and the Broadcast Group.
The 1998 first-quarter earnings before interest, income taxes, depreciation
and amortization ("EBITDA") rose to $166.6 million from $143.0 million in the
comparable 1997 period. EBITDA is presented because 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 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.
Income from Joint Ventures increased to $4.4 million in the 1998 first
quarter from $1.3 million in 1997. The increase was primarily due to higher
income from equity investments in paper mills.
Interest expense-net increased to $10.1 million in the 1998 first quarter
from $8.3 million in 1997. The increase was due to lower capitalization of
interest expense associated with construction, partially offset by higher
interest income. Interest income and capitalized interest included in the
amounts presented was $1.6 million and $4.1 million in 1998 and 1997,
respectively.
The effective income tax rate for the first quarter of 1998 was 43.9%
compared with an effective income tax rate of 45.0% in the comparable 1997
period. The decrease in the effective income tax rate was primarily related to
lower state and local income taxes.
8
SEGMENT INFORMATION
FOR THE QUARTER ENDED
----------------------
MARCH 29, MARCH 30,
1998 1997
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(13 WEEKS)
(DOLLARS IN THOUSANDS)
REVENUES
Newspapers................................................................................ $ 657,330 $ 620,960
Broadcast................................................................................. 33,298 31,354
Magazines................................................................................. 31,935 40,147
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Total................................................................................. $ 722,563 $ 692,461
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OPERATING PROFIT (LOSS)
Newspapers................................................................................ $ 107,589 $ 98,463
Broadcast................................................................................. 7,284 5,684
Magazines................................................................................. 8,318 5,711
Unallocated Corporate Expenses............................................................ (6,821) (8,603)
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Total................................................................................. $ 116,370 $ 101,255
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DEPRECIATION AND AMORTIZATION
Newspapers................................................................................ $ 42,015 $ 36,899
Broadcast................................................................................. 4,456 4,718
Magazines................................................................................. (2,131) (1,737)
Corporate................................................................................. 1,409 423
Joint Ventures............................................................................ 88 89
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Total................................................................................. $ 45,837 $ 40,392
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A discussion of the operating results of the Company's segments follows:
NEWSPAPER GROUP: The Newspaper Group consists of The New York Times ("The
Times"), The Boston Globe ("The Globe"), 21 regional newspapers, newspaper
distributors, a news service, a features
9
syndicate, TimesFax, licensing operations of the New York Times databases and
microfilm and New Ventures. New Ventures include, among other things, projects
developed in electronic media.
FOR THE QUARTER ENDED
----------------------
MARCH 29, MARCH 30,
1998 1997
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(13 WEEKS)
(DOLLARS IN THOUSANDS)
REVENUES
Newspapers............................................................ $ 651,992 $ 618,690
New Ventures.......................................................... 5,338 2,270
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Total Revenues........................................................ $ 657,330 $ 620,960
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EBITDA
Newspapers............................................................ $ 150,929 $ 136,657
New Ventures.......................................................... (1,325) (1,295)
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Total EBITDA.......................................................... $ 149,604 $ 135,362
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OPERATING PROFIT (LOSS)
Newspapers............................................................ $ 109,252 $ 99,970
New Ventures.......................................................... (1,663) (1,507)
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Total Operating Profit................................................ $ 107,589 $ 98,463
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The Newspaper Group's operating profit rose to $107.6 million in the first
quarter of 1998 compared with $100.0 million in the 1997 first quarter,
excluding buyouts. Revenues were $657.3 million in the first quarter of 1998
compared with $621.0 million in 1997. The 6% increase in the Group's revenues
for the quarter was primarily due to higher advertising revenues as a result of
higher rates and volume. Continued strength in classified and national
advertising was a significant factor. Additionally, first-quarter volume
benefited from the timing of Easter, which occurred in April rather than in
March as it did in the prior year. Typically, advertising volume declines on
Easter Sunday when readership is lower due to observance of the holiday. The
improvement in operating profit in the first quarter of 1998 was primarily
attributable to the increase in advertising revenues of approximately 8%, offset
by higher depreciation expense related to new production facilities and an
unfavorable 24% increase in the Company's cost of newsprint compared to the
comparable 1997 period. The increase in the cost of newsprint was partially
attributable to an increase in newsprint consumption related to higher
advertising volume.
Advertising volume on a comparable basis for the quarter was as follows:
FOR THE QUARTER ENDED
MARCH 29, 1998
------------------------
% CHANGE
VOLUME VS. 1997
--------- -------------
(INCHES IN THOUSANDS)
ADVERTISING VOLUME (EXCLUDING PREPRINTS)
The New York Times.......................................................................... 939.5 1.2%
The Boston Globe............................................................................ 712.2 0.6%
Regional Newspapers......................................................................... 3,847.2 2.8%
Advertising volume at The Times for the first quarter of 1998 increased 1.2%
over the 1997 first quarter. The national and classified categories showed
increases of 5.3% and 5.8%, respectively, while the retail and zoned categories
were down 5.8% and 5.2%, respectively. Preprint distribution was up 17.4%.
At The Globe, advertising volume for the first quarter of 1998 increased
0.6% over the 1997 first quarter. Advertising volume was higher in the national
and classified categories by 13.3% and 1.5%,
10
respectively, while the retail and zoned categories were down 10.2% and 6.7%,
respectively. Preprint distribution was up 1.1%.
At the Regional Newspapers, advertising volume for the first quarter of 1998
increased 2.8% over the 1997 first quarter. National, classified and legal
advertising categories improved by 6.4%, 5.9% and 4.4%, respectively, with the
retail category remaining flat. Preprint distribution increased 6.1%.
Certain of the advertising volume variances noted above were exacerbated by
the timing of Easter Sunday.
Average circulation of daily newspapers for the quarter ended March 29,
1998, on a comparable basis, was as follows:
FOR THE QUARTER ENDED MARCH 29, 1998
----------------------------------------------------
% CHANGE % CHANGE
WEEKDAY VS. 1997 SUNDAY VS. 1997
----------- ------------- --------- -------------
(COPIES IN THOUSANDS)
AVERAGE NET PAID CIRCULATION
The New York Times.................................................... 1,104.2 1.2% 1,656.2 0.8%
The Boston Globe...................................................... 461.9 0.1% 746.1 (0.7)%
Regional Newspapers................................................... 777.5 0.9% 833.7 0.2%
BROADCAST GROUP: The Broadcast Group is comprised of eight
network-affiliated television stations and two radio stations.
FOR THE QUARTER ENDED
------------------------
MARCH 29, MARCH 30,
1998 1997
----------- -----------
(13 WEEKS)
(DOLLARS IN THOUSANDS)
Revenues............................................................... $ 33,298 $ 31,354
----------- -----------
EBITDA................................................................. $ 11,740 $ 10,402
----------- -----------
Operating Profit....................................................... $ 7,284 $ 5,684
----------- -----------
The Broadcast Group's operating profit rose to $7.3 million in the first
quarter of 1998 from $5.7 million in 1997, on revenues of $33.3 million and
$31.4 million, respectively. The increase in operating profit was primarily
attributable to stronger advertising revenues, particularly at the four CBS
affiliates due to Winter Olympics advertising.
MAGAZINE GROUP: The Magazine Group is comprised of three golf-related
publications and related activities in the golf field, and New Ventures, such as
on-line magazine services. The revenue for the Group includes the amortization
of a $40.0 million non-compete agreement ("Non-Compete"), associated with
11
the divestiture of the Women's Magazine Division, which is being recognized on a
straight-line basis over four years ending in July 1998.
FOR THE QUARTER ENDED
------------------------
MARCH 29, MARCH 30,
1998 1997
----------- -----------
(13 WEEKS)
(DOLLARS IN THOUSANDS)
REVENUES
Magazines.............................................................. $ 29,186 $ 37,377
Non-Compete............................................................ 2,500 2,500
New Ventures........................................................... 249 270
----------- -----------
Total Revenues......................................................... $ 31,935 $ 40,147
----------- -----------
EBITDA
Magazines.............................................................. $ 6,306 $ 6,158
New Ventures........................................................... (119) (2,184)
----------- -----------
Total EBITDA........................................................... $ 6,187 $ 3,974
----------- -----------
OPERATING PROFIT (LOSS)
Magazines.............................................................. $ 5,937 $ 5,600
Non-Compete............................................................ 2,500 2,500
New Ventures........................................................... (119) (2,389)
----------- -----------
Total Operating Profit................................................. $ 8,318 $ 5,711
----------- -----------
The Magazine Group's first-quarter operating profit was $8.3 million in 1998
compared with $5.7 million in 1997 on revenues of $31.9 million and $40.1
million, respectively. The improvement in operating profit was principally
attributable to the Company's exit from the tee time reservation business in the
fourth quarter of 1997. The Group's revenues decreased as a result of the sale
of the Company's tennis, sailing and ski magazine businesses in the fourth
quarter of 1997. The results of the sold magazines were included in the Group's
results for the first eleven months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $74.6 million in the 1998
first quarter compared with $104.6 million in 1997. The decrease of $30.0
million in 1998 was primarily due to an increase in working capital partially
offset by an improvement in earnings. Net cash used in investing activities was
$16.2 million in the first quarter of 1998 compared with $44.7 million in 1997.
The decrease of $28.4 million in 1998 was primarily due to lower capital
expenditures. Net cash used in financing activities was $99.4 million in the
first quarter of 1998 compared with $53.3 million in the first quarter of 1997.
The increase of $46.1 million in 1998 was primarily related to higher stock
repurchases.
The Company believes that cash generated from its operations and the
availability of funds from external sources should be adequate to cover working
capital needs, stock repurchases, planned capital expenditures, dividend
payments to stockholders and other cash requirements. The ratio of current
assets to current liabilities was .79 and .73 at March 29, 1998, and March 30,
1997, respectively. The ratio of long-term debt and capital lease obligations as
a percentage of total capitalization was 21% at March 28, 1998 (see Recent
Developments below), compared with 28% at March 30, 1997.
FINANCING: The Company currently maintains $300.0 million in revolving
credit agreements, which require, among other matters, specified levels of
stockholders' equity. Approximately $905.3 million and $930.0 million of
stockholders' equity was unrestricted under these agreements at March 29, 1998,
and March 30, 1997, respectively. The Company plans to renew $100.0 million of
the revolving credit
12
agreements which expire in July 1998. The Company's long-term debt, including
capital leases, was $458.8 million and $636.5 million at March 29, 1998, and
March 30, 1997, respectively.
CAPITAL EXPENDITURES: The Company currently estimates that capital
expenditures for 1998 will range from $90.0 million to $110.0 million. The
Company currently anticipates that depreciation and amortization expense will
approximate $190.0 million to $195.0 million for 1998 compared with $173.9
million in 1997.
OTHER: The Company has evaluated the potential impact of the situation
commonly referred to as the "Year 2000 problem." The Year 2000 problem, which is
common to most corporations, concerns the inability of information systems,
primarily computer software programs, to properly recognize and process date
sensitive information related to the Year 2000. Preliminary assessment indicates
that solutions will involve a mix of purchasing new systems, modifying existing
systems, retiring obsolete systems and confirming vendor compliance. The Company
currently anticipates that incremental capital expenditures associated with the
Year 2000 problem will be modest. In addition, incremental expenses expected to
be incurred in 1998 and 1999 to remediate existing systems are currently
expected to range between $10.0 million and $15.0 million.
RECENT DEVELOPMENTS: The Company's tender offer for any and all of its
$150.0 million of outstanding publicly-held 8-1/4 percent debentures due March
15, 2025, expired on April 2, 1998. The debenture holders tendered $78.1 million
of the outstanding debentures. The amount tendered was reclassified from
long-term debt to current debt in the Company's Condensed Consolidated Balance
Sheet at March 29, 1998. The Company financed the purchase of the debentures
with available cash and through its existing commercial paper facility. By
replacing higher rate long-term borrowings with lower-rate short-term
alternatives, the Company expects to reduce interest expense and generate a
positive return on a net present value basis. In the second quarter of 1998, the
Company will record a pretax extraordinary charge of approximately $14.0 million
(approximately $7.9 million after-tax) relating to the debentures tendered.
In the second quarter of 1998, the Company will record a pretax gain of
approximately $8.0 million due to the satisfaction of a post-closing requirement
related to the sale of the tennis, sailing and ski magazine businesses in the
fourth quarter of 1997.
NEW ACCOUNTING PRONOUNCEMENTS: In February 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 132,
Employer's Disclosures about Pensions and Other Postretirement Benefits ("SFAS
132"), which is effective for fiscal years beginning after December 15, 1997.
SFAS 132 standardizes the disclosure requirements for pension and other
postretirement benefits, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. SFAS 132 does not change
the measurement or recognition of pension or other postretirement benefits. The
adoption of SFAS 132 will not have a material effect on the Company's
Consolidated Financial Statements.
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-5, Reporting on the Costs
of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that entities expense
start-up costs and organization costs as they are incurred. The Company's
accounting practices are currently in compliance with SOP 98-5. In March 1998,
the AICPA issued SOP No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance
on expensing versus capitalization of software costs incurred for internal use,
as well as the amortization of capitalized software costs. SOP 98-1 requires
computer software costs that are incurred in the preliminary project stage to be
expensed as incurred. The adoption of SOP 98-1 is not expected to have a
material effect on the Company's Consolidated Financial Statements. SOP 98-5 and
SOP 98-1 are effective for fiscal years beginning after December 15, 1998.
13
FACTORS THAT COULD AFFECT OPERATING RESULTS
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those predicted by such forward-looking statements. Such risks and
uncertainties include national and local conditions that could influence the
levels of retail, national and classified advertising revenue as well as
circulation revenue, the impact of competition that could affect levels (rate
and volume) of advertising and circulation generated by the markets served by
the Company's business segments, material increases in newsprint and magazine
paper prices, and other risks detailed from time to time in the Company's
publicly-filed documents, including its Annual Report on Form 10-K for the
period ended December 28, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Company's annual meeting of stockholders was held on April 16, 1998.
(b) The following matters were voted on at the annual meeting:
1. The stockholders (with Class A and Class B stockholders voting
separately) elected all of management's nominees for election as Class A
Directors and Class B Directors. The results of the vote taken were as follows:
CLASS A DIRECTORS: FOR WITHHELD
- ------------------------------------------------------------------- ------------ ----------
A. Leon Higginbotham............................................... 79,706,535 2,788,359
Robert A. Lawrence................................................. 81,829,784 665,110
Charles H. Price II................................................ 81,828,920 665,974
Donald M. Stewart.................................................. 81,836,389 658,505
William O. Taylor.................................................. 81,837,644 657,250
CLASS B DIRECTORS:
- -------------------------------------------------------------------
John F. Akers...................................................... 416,141 0
Brenda C. Barnes................................................... 416,141 0
Richard L. Gelb.................................................... 416,141 0
Michael Golden..................................................... 416,141 0
Russell T. Lewis................................................... 416,141 0
Ellen R. Marram.................................................... 416,141 0
George L. Shinn.................................................... 416,141 0
Arthur Ochs Sulzberger............................................. 416,141 0
Arthur O. Sulzberger, Jr........................................... 416,141 0
Judith P. Sulzberger............................................... 416,141 0
2. The stockholders (with Class A and B stockholders voting together)
ratified the amendments to the Company's 1991 Executive Cash Bonus Plan and 1991
Executive Stock Incentive Plan. The result of the vote taken was as follows:
For:............................................................ 78,715,486
Against:........................................................ 3,591,442
Abstain:........................................................ 604,107
Broker Non-Vote................................................. 0
Total Against, Abstain and Broker Non-Vote*..................... 4,195,549
3. The stockholders (with Class A and Class B stockholders voting together)
ratified the selection, by the Audit Committee of the Board of Directors, of
Deloitte & Touche LLP, independent certified public
14
accountants, as auditors of the Company for the year ending December 27, 1998.
The result of the vote taken was as follows:
For:............................................................ 82,630,824
Against:........................................................ 151,719
Abstain:........................................................ 128,492
Broker Non-Vote................................................. 0
Total Against, Abstain and Broker Non-Vote*..................... 280,211
- ------------------------
* An abstention had the same effect as a vote against this matter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.2 The Company's 1991 Executive Stock Incentive Plan, as amended through April 16,
1998.
10.3 The Company's 1991 Executive Cash Bonus Plan, as amended through April 16, 1998.
10.4 The Company's Non-Employee Directors' Stock Option Plan, as amended through
February 19, 1998. (This version supersedes the version filed with the Company's
Form 10-K dated March 2, 1998.)
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the period for which this report is filed.
15
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: May 7, 1998 /s/ JOHN M. O'BRIEN
-----------------------------------------
John M. O'Brien
SENIOR VICE-PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
16
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 29, 1998
EXHIBIT NO. EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
10.2 The Company's 1991 Executive Stock Incentive Plan, as amended through April 16, 1998
10.3 The Company's 1991 Executive Cash Bonus Plan, as amended through April 16, 1998.
10.4 The Company's Non-Employee Directors' Stock Option Plan, as amended through February 19, 1998. (This
version supersedes the version filed with the Company's Form 10-K dated March 2, 1998.)
27 Financial Data Schedule
17