10-K 1 a2012form10-k.htm FORM 10-K 2012 Form 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 30, 2012
 
Commission file number 1-5837
THE NEW YORK TIMES COMPANY
(Exact name of registrant as specified in its charter)
New York
  
13-1102020
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
620 Eighth Avenue, New York, N.Y.
  
10018
(Address of principal executive offices)
  
(Zip code)
Registrant’s telephone number, including area code: (212) 556-1234
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
  
Name of each exchange on which registered
Class A Common Stock of $.10 par value
  
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Not Applicable
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer          
þ  
Accelerated filer
¨
 
Non-accelerated filer        
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨     No þ
The aggregate worldwide market value of Class A Common Stock held by non-affiliates, based on the closing price on June 22, 2012, the last business day of the registrant’s most recently completed second quarter, as reported on the New York Stock Exchange, was approximately $961 million. As of such date, non-affiliates held 72,477 shares of Class B Common Stock. There is no active market for such stock.
The number of outstanding shares of each class of the registrant’s common stock as of February 22, 2013 (exclusive of treasury shares), was as follows: 147,946,704 shares of Class A Common Stock and 818,385 shares of Class B Common Stock.
Documents incorporated by reference
Portions of the Proxy Statement relating to the registrant’s 2013 Annual Meeting of Stockholders, to be held on May 1, 2013, are incorporated by reference into Part III of this report.



INDEX TO THE NEW YORK TIMES COMPANY 2012 ANNUAL REPORT ON FORM 10-K
 
 
ITEM NO.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






      PART I        
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the sections titled “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that relate to future events or our future financial performance. We may also make written and oral forward-looking statements in our Securities and Exchange Commission (“SEC”) filings and otherwise. We have tried, where possible, to identify such statements by using words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “project,” “plan” and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statements are and will be based upon our then-current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in any such statements. You should bear this in mind as you consider forward-looking statements. Factors that we think could, individually or in the aggregate, cause our actual results to differ materially from expected and historical results include those described in “Item 1A — Risk Factors” below, as well as other risks and factors identified from time to time in our SEC filings.
ITEM 1. BUSINESS
INTRODUCTION
The New York Times Company (the “Company”) was incorporated on August 26, 1896, under the laws of the State of New York. The Company is a leading global, multimedia news and information company that currently includes newspapers, digital businesses, investments in paper mills and other investments. The Company and its consolidated subsidiaries are referred to collectively in this Annual Report on Form 10-K as “we,” “our” and “us.”
We had previously classified our businesses into two reportable segments, the News Media Group and the About Group. As a result of the sale of the About Group, described below, and effective for the quarter ended September 23, 2012, we have one reportable segment.
We currently have two divisions:
The New York Times Media Group, which includes The New York Times (“The Times”), the International Herald Tribune (the “IHT”), NYTimes.com and related businesses; and
the New England Media Group, which includes The Boston Globe (the “Globe”), BostonGlobe.com, Boston.com, the Worcester Telegram & Gazette (the “T&G”), Telegram.com and related businesses.
In February 2013, we announced that we have retained a strategic adviser in connection with a sale of the New England Media Group and our 49% equity interest in Metro Boston (“Metro Boston”), which publishes a free daily newspaper in the greater Boston area.
On September 24, 2012, we completed the sale of the About Group, consisting of About.com, ConsumerSearch.com, CalorieCount.com and related businesses, to IAC/InterActiveCorp for $300.0 million in cash, plus a net working capital adjustment of approximately $17 million.
On January 6, 2012, we completed the sale of the Regional Media Group, consisting of 16 regional newspapers, other print publications and related businesses in Alabama, California, Florida, Louisiana, North Carolina and South Carolina, to Halifax Media Holdings LLC for approximately $140 million in cash.
Results of operations for each of the About Group and the Regional Media Group, which previously was a division of the News Media Group, have been treated as discontinued operations in all periods presented in this report. For information regarding discontinued operations, see Note 15 of the Notes to the Consolidated Financial Statements.
Additionally, we own equity interests primarily in a Canadian newsprint company and a supercalendered paper manufacturing partnership in Maine.


THE NEW YORK TIMES COMPANY – P. 1


In February 2012, we sold 100 of our units in Fenway Sports Group for an aggregate price of $30.0 million and in May 2012, we sold our remaining 210 units for an aggregate price of $63.0 million. Fenway Sports Group owns the Boston Red Sox baseball club; Liverpool Football Club (a soccer team in the English Premier League); approximately 80% of New England Sports Network (a regional cable sports network); and 50% of Roush Fenway Racing (a NASCAR team).
In early October 2012, Indeed.com, a search engine for jobs in which we had an ownership interest, was sold. The proceeds from the sale of our interest were approximately $167 million.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, and the Proxy Statement for our Annual Meeting of Stockholders are made available, free of charge, on our Web site http://www.nytco.com, as soon as reasonably practicable after such reports have been filed with or furnished to the SEC.
OUR COMPANY
Our Company generates revenues principally from advertising and circulation.
Advertising is sold in our newspapers and other publications, on our Web sites and across other digital platforms. We divide advertising into three main categories: national, retail and classified. Advertising revenue also includes preprints, which are advertising supplements. Our digital advertising offerings include mainly display advertising (such as banners, large-format units, half-page units and interactive multimedia) and classified advertising. Our businesses are affected in part by seasonal patterns in advertising, with generally higher advertising volume in the fourth quarter due to holiday advertising.
Circulation revenue is from amounts charged to readers or distributors for products in print, online or through other digital platforms. Charges vary by property and by city and depend on the type of sale (i.e., subscription or single copy) and distribution arrangements.
Advertising and circulation revenue information for our divisions appears under “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Revenues, operating profit and identifiable assets of foreign operations are not significant.
The New York Times Media Group
The New York Times Media Group comprises The Times, the IHT, NYTimes.com and related businesses. The Times, a daily (Mon. - Sat.) and Sunday newspaper, commenced publication in 1851. The IHT, a daily newspaper, commenced publishing in Paris in 1887. We recently announced that the IHT, which has served as the global edition of The Times, will be rebranded the International New York Times later in 2013. NYTimes.com was launched in 1996.
Since March 2011, The Times has charged consumers for content provided on NYTimes.com and other digital platforms, in addition to its other paid subscription offerings on several e-reader devices. The Times’s metered model offers users free access to a set number of articles per month and then charges users who are not print home-delivery subscribers once they exceed that number. All print home-delivery subscribers receive free digital access.
Since October 2011, the IHT has charged consumers for digital subscription packages for full access to its news applications on the iPhone and iPad and on NYTimes.com. These digital packages are free to IHT home-delivery subscribers who subscribe for a minimum of five days per week.
Audience
The Times and the IHT reach a broad audience in print, online at NYTimes.com and global.nytimes.com and on other digital platforms. The Times and the IHT have also expanded their reach and deepened engagement with readers and users by delivering content online and across other digital platforms, including mobile and e-reader applications and social networking sites.
According to reports filed with the Alliance for Audited Media (“AAM”), formerly known as the Audit Bureau of Circulations, an independent agency that audits the circulation of most U.S. newspapers and magazines, for the six-month period ended September 30, 2012, The Times had the largest daily and Sunday circulation of all seven-day newspapers in the United States. For the year ended December 30, 2012, The Times’s average circulation, which includes paid and verified circulation of the newspaper in print, online and on other digital platforms, was 1,670,500 for weekday (Mon. - Fri.) and 2,138,500 for Sunday. Under AAM’s reporting guidance, verified circulation represents


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copies available for individual consumers that are either non-paid or paid by someone other than the individual, such as copies served to schools and colleges and copies purchased by businesses for free distribution. For the first time, The Times’s average circulation for 2012 captures a full year of paid subscribers to its digital subscription packages since The Times began offering them in March 2011. In 2012, approximately 87% of the weekday and 88% of the Sunday circulation was through print or digital subscriptions; the remainder was single-copy print sales primarily on newsstands.
Approximately 43% of the weekday average print circulation for the year ended December 30, 2012, was sold in the 31 counties that make up the greater New York City area, which includes New York City, Westchester County, Long Island, and parts of upstate New York, Connecticut, New Jersey and Pennsylvania; approximately 57% was sold elsewhere. On Sundays, approximately 38% of the average print circulation was sold in the greater New York City area and 62% was sold elsewhere.
The IHT’s average circulation, which includes paid circulation of the newspaper in print and electronic replica editions, for the years ended December 30, 2012, and December 25, 2011, was 224,771 (estimated) and 226,267, respectively. These figures follow the guidance of Office de Justification de la Diffusion, an agency based in Paris and a member of the International Federation of Audit Bureaux of Circulations that audits the circulation of most of France’s newspapers and magazines. The final 2012 figure will not be available until April 2013.
According to comScore Media Metrix, an online audience measurement service, in 2012, NYTimes.com had a monthly average of approximately 29 million unique visitors in the United States and approximately 43 million unique visitors worldwide. Paid subscribers to digital subscription packages, e-readers and replica editions of The Times and the IHT totaled approximately 640,000 as of our fiscal year ended December 30, 2012.
Advertising
According to data compiled by MagazineRadar, an independent agency that measures advertising sales volume and estimates advertising revenue, The Times had the largest market share in 2012 in print advertising revenues among a national newspaper set that consists of USA Today, The Wall Street Journal and The Times. Approximately three-quarters of The New York Times Media Group’s print and digital advertising revenues in 2012 came from national advertisers.
Based on recent data provided by MagazineRadar, we believe The Times ranks first by a substantial margin in print advertising revenues in the general weekday and Sunday newspaper field in the New York metropolitan area.
Production and Distribution
The Times is currently printed at our production and distribution facility in College Point, N.Y., as well as under contract at 27 remote print sites across the United States. The Times is delivered to newsstands and retail outlets in the New York metropolitan area through a combination of third-party wholesalers and our own drivers. In other markets in the United States and Canada, The Times is delivered through agreements with other newspapers and third-party delivery agents.
The IHT is printed under contract at 38 sites throughout the world and is sold in more than 135 countries and territories.
Other Businesses
The New York Times Media Group’s other businesses primarily include:
The New York Times Index, which produces and licenses The New York Times Index, a print publication;
Digital Archive Distribution, which licenses electronic archive databases to resellers of that information in the business, professional and library markets; and
The New York Times News Services Division, which is made up of Syndication Sales and Business Development. Syndication Sales transmits articles, graphics and photographs from The Times, the Globe and other publications to over 1,300 newspapers, magazines and Web sites in nearly 100 countries and territories worldwide. Business Development principally comprises photo archives, The New York Times store, book development and rights and permissions.


THE NEW YORK TIMES COMPANY – P. 3


New England Media Group
The New England Media Group comprises the Globe, BostonGlobe.com, Boston.com, the T&G, Telegram.com and related businesses. The Globe is a daily and Sunday newspaper that commenced publication in 1872. The T&G is a daily and Sunday newspaper that began publishing in 1866.
In fall 2011, the Globe launched BostonGlobe.com, a paid subscription Web site with access to the full range of The Globe’s content. All print home-delivery subscribers to the Globe receive free digital access to BostonGlobe.com.
Boston.com, a free Web site developed by the Globe, serves as a community portal for the greater Boston area and offers general community-focused information to consumers.
Audience
The Globe reaches a broad audience in print, online and other digital platforms. The Globe is distributed in print throughout New England, although its circulation is concentrated in the Boston metropolitan area. The Globe has expanded its reach and deepened engagement with readers and users by delivering content online and across other digital platforms, including mobile and e-reader applications and social networking sites.
According to reports filed with AAM, for the six-month period ended September 30, 2012, the Globe ranked first in New England for both daily and Sunday circulation. For the year ended December 30, 2012, the Globe’s average circulation, which includes paid and verified circulation of the newspaper in print, online and other digital platforms, was 233,000 for weekday (Mon. - Fri.) and 373,000 for Sunday. For the first time, the Globe’s average circulation for 2012 captures a full year of paid subscribers to BostonGlobe.com since its launch in the fall of 2011. Approximately 83% of the Globe’s weekday and 79% of its Sunday circulation was sold through print and digital subscriptions in 2012; the remainder was sold primarily on newsstands.
Boston.com, New England’s largest regional news and information Web site, in 2012 had a monthly average of over 6 million unique visitors in the United States, according to comScore Media Metrix. In 2012, BostonGlobe.com had a monthly average of over 1 million unique visitors in the United States, according to comScore Media Metrix. Paid digital subscribers to BostonGlobe.com, e-readers and replica editions totaled approximately 28,000 as of our fiscal year ended December 30, 2012.
The T&G and several Company-owned non-daily newspapers — some published under the name of Coulter Press — circulate throughout Worcester County, Mass., and northeastern Connecticut. According to reports filed with AAM, for the six-month period ended September 30, 2012, the T&G ranked fifth in daily circulation and sixth in Sunday circulation volume in New England. Since 2010, Telegram.com has offered paid digital subscriptions to access articles produced by its staff. For the year ended December 30, 2012, the T&G’s average circulation, which includes paid and verified circulation of the newspaper in print and online, was 69,400 for weekday (Mon. - Fri.) and 78,400 for Sunday.
Advertising
The sales forces of the New England Media Group sell advertising across multiple channels, including print, digital, direct marketing, niche magazines, Internet radio and events, capitalizing on opportunities to deliver to national and local advertisers the Globe’s broad readership in the New England region. Nearly one-third of the New England Media Group’s advertising revenues in 2012 came from national advertisers.
Production and Distribution
The Globe and most of the T&G are currently printed at the Globe’s facility in Boston, Mass. Nearly all of the Globe’s and T&G’s print subscription circulation was delivered by a third-party service in 2012.
FOREST PRODUCTS INVESTMENTS AND OTHER JOINT VENTURES
We have ownership interests primarily in one newsprint company and one mill producing supercalendered paper, a polished paper used in some magazines, catalogs and preprinted inserts, which is a higher-value grade than newsprint (the “Forest Products Investments”), as well as in Metro Boston. These investments were accounted for under the equity method and reported in “Investments in joint ventures” in our Consolidated Balance Sheets as of December 30, 2012. For additional information on our investments, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 7 of the Notes to the Consolidated Financial Statements.


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Forest Products Investments
We have a 49% equity interest in a Canadian newsprint company, Donohue Malbaie Inc. (“Malbaie”). The other 51% is owned by Resolute FP Canada Inc., a subsidiary of Resolute Forest Products Inc. (“Resolute”), a Delaware corporation. Resolute is a large global manufacturer of paper, market pulp and wood products. Malbaie manufactures newsprint on the paper machine it owns within Resolute’s paper mill in Clermont, Quebec. Malbaie is wholly dependent upon Resolute for its pulp, which is purchased by Malbaie from Resolute’s paper mill in Clermont, Quebec. In 2012, Malbaie produced approximately 218,000 metric tons of newsprint, of which approximately 14% was sold to us, with the balance sold to Resolute for resale.
We have a 40% equity interest in Madison Paper Industries (“Madison”), a partnership operating a supercalendered paper mill in Madison, Maine. Madison purchases the majority of its wood from local suppliers, mostly under long-term contracts. In 2012, Madison produced approximately 188,000 metric tons, of which approximately 3% was sold to us.
Malbaie and Madison are subject to comprehensive environmental protection laws, regulations and orders of provincial, federal, state and local authorities of Canada and the United States (the “Environmental Laws”). The Environmental Laws impose effluent and emission limitations and require Malbaie and Madison to obtain, and operate in compliance with the conditions of, permits and other governmental authorizations (“Governmental Authorizations”). Malbaie and Madison follow policies and operate monitoring programs designed to ensure compliance with applicable Environmental Laws and Governmental Authorizations and to minimize exposure to environmental liabilities. Various regulatory authorities periodically review the status of the operations of Malbaie and Madison. Based on the foregoing, we believe that Malbaie and Madison are in substantial compliance with such Environmental Laws and Governmental Authorizations.
Other Joint Ventures
We own a 49% interest in Metro Boston, which publishes a free daily newspaper in the greater Boston area.
quadrantONE, an online advertising network and private exchange in which we own a 25% interest, announced in February 2013 that it will begin winding down its current operations. The Web sites of the New England Media Group had participated in quadrantONE’s network and exchange, which sold bundled premium, targeted display advertising onto local newspaper and other Web sites.
RAW MATERIALS
The primary raw materials we use are newsprint and supercalendered paper. We purchase newsprint from a number of North American producers. In 2012, the paper used by The New York Times and New England Media Groups was purchased from unrelated suppliers and related suppliers in which we hold equity interests (see “— Forest Products Investments”). A significant portion of newsprint is purchased from Resolute.
In 2012 and 2011, we used the following types and quantities of paper:
 
 
Newsprint
 
Coated,
Supercalendered
and Other Paper(1)
(In metric tons)
 
2012

 
2011

 
2012

 
2011

The New York Times Media Group
 
133,000

 
138,000

 
16,200

 
15,300

New England Media Group
 
41,000

 
41,000

 
1,500

 
1,600

Total
 
174,000

 
179,000

 
17,700

 
16,900

(1)
The Times and the Globe use coated, supercalendered or other paper for The New York Times Magazine, T: The New York Times Style Magazine and the Globe’s Sunday Magazine.


THE NEW YORK TIMES COMPANY – P. 5


COMPETITION
Our media properties and investments compete for advertising and consumers with other media in their respective markets, including paid and free newspapers, Web sites, digital platforms and applications, social media, broadcast, satellite and cable television, broadcast and satellite radio, magazines, other forms of media and direct marketing. Competition for advertising is generally based upon audience levels and demographics, price, service, targeting capabilities and advertising results, while competition for circulation and readership is generally based upon platform, format, content, quality, service, timeliness and price.
The Times competes for advertising and circulation primarily with national newspapers such as The Wall Street Journal and USA Today; newspapers of general circulation in New York City and its suburbs; other daily and weekly newspapers and television stations and networks in markets in which The Times circulates; and some national news and lifestyle magazines.
The IHT’s key competitors include all international sources of English-language news, including The Wall Street Journal’s European and Asian Editions, the Financial Times, Time, Bloomberg Business Week and The Economist; and news channels CNN, CNNi, Sky News International, CNBC and BBC.
The Globe competes primarily for advertising and circulation with other newspapers and television stations in Boston, its neighboring suburbs and the greater New England region, including, among others, The Boston Herald (daily and Sunday).
In addition, as a result of the secular shift from print to digital media, our newspapers increasingly face competition for audience and advertising from a wide variety of digital alternatives, including news and other information Web sites and digital applications, news aggregation sites, social media sites, digital advertising networks and exchanges, real-time bidding and other programmatic buying channels, online classified services and other new media formats.
NYTimes.com, Boston.com and BostonGlobe.com most directly compete for advertising and traffic with other advertising-supported or consumer-paid news and information Web sites and mobile applications, such as WSJ.com, Google News, Yahoo! News, MSNBC and CNN.com, digital advertising networks and exchanges and classified advertising portals. Internationally, global.nytimes.com competes against international online sources of English language news, such as bbc.co.uk, guardian.co.uk, ft.com and reuters.com.
EMPLOYEES
We had approximately 5,363 full-time equivalent employees as of December 30, 2012.
  
Employees

The New York Times Media Group
3,102

New England Media Group
1,849

Corporate
412

Total Company
5,363




P. 6 – THE NEW YORK TIMES COMPANY


Labor Relations
As of December 30, 2012, more than half of the full-time equivalent employees of The Times were represented by nine unions. The following is a list of collective bargaining agreements covering various categories of employees and their corresponding expiration dates.
  
  
Employee Category
 
Expiration Date
The Times
  
Paperhandlers
 
March 30, 2014

  
Electricians
 
March 30, 2015
 
  
Machinists
 
March 30, 2015
 
  
Mailers
 
March 30, 2016
 
 
New York Newspaper Guild
 
March 30, 2016
 
  
Typographers
 
March 30, 2016
 
  
Pressmen
 
March 30, 2017
 
  
Stereotypers
 
March 30, 2017
 
  
Drivers
 
March 30, 2020
Approximately half of the full-time equivalent employees of the IHT are located in France, whose terms and conditions of employment are established by a combination of French national labor law, industry-wide collective agreements and Company-specific agreements.
More than two-thirds of the full-time equivalent employees of the Globe and Boston.com were represented by 10 unions with 12 labor agreements. As indicated below, certain collective bargaining agreements have expired and negotiations for new contracts are ongoing. We cannot predict the timing or the outcome of these negotiations.
  
  
Employee Category
 
Expiration Date
The Globe and
 
Drivers
 
December 31, 2012 (expired)
Boston.com
 
Paperhandlers
 
December 31, 2012 (expired)
 
 
Boston Newspaper Guild
 
December 31, 2012 (expired)
 
 
Engravers
 
December 31, 2012 (expired)
 
 
Boston Mailers Union
 
December 31, 2012 (expired)
 
 
Pressmen
 
December 31, 2012 (expired)
 
 
Technical services group
 
December 31, 2012 (expired)
 
 
Electricians
 
December 31, 2012 (expired)
 
 
Typographers
 
December 31, 2013
 
 
Garage mechanics
 
December 31, 2013
 
 
Machinists
 
December 31, 2013
 
 
Warehouse employees
 
December 31, 2015
As part of various cost-cutting measures in 2009 that resulted in amendments to certain collective bargaining agreements, the Globe agreed to a profit-sharing plan based on the performance of the Globe and Boston.com in 2011 and 2012. Profit-sharing payments to eligible full-time union employees are based on a formula tied to the operating profit of the Globe and Boston.com, calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Payments made in 2012 based on the performance of the Globe and Boston.com in 2011 reflected the lowest threshold at which payments were required to be made under the collective bargaining agreements. The Globe does not expect to make payments in 2013 under that provision in the collective bargaining agreements.
Approximately one-third of the full-time equivalent employees of the T&G are represented by four unions. Labor agreements with production unions expired or will expire on August 31, 2011, October 31, 2014 and November 30, 2016. The labor agreements with the Providence Newspaper Guild, representing newsroom and circulation employees, expired on June 14, 2012.


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ITEM 1A. RISK FACTORS
You should carefully consider the risk factors described below, as well as the other information included in this Annual Report on Form 10-K. Our business, financial condition or results of operations could be materially adversely affected by any or all of these risks, or by other risks or uncertainties not presently known or currently deemed immaterial, that may adversely affect us in the future.
Economic weakness and uncertainty globally, in the United States, in the regions in which we operate and in key advertising categories have adversely affected and may continue to adversely affect our advertising revenues.
Advertising spending, which drives a significant portion of our revenues, is sensitive to economic conditions. Global, national and local economic conditions, particularly in the New York City and Boston metropolitan regions, affect the levels of our advertising revenues. Economic factors that have adversely affected advertising revenues include lower consumer and business spending, high unemployment and depressed home sales. Our advertising revenues are particularly adversely affected if advertisers respond to weak and uneven economic conditions by reducing their budgets or shifting spending patterns or priorities, or if they are forced to consolidate or cease operations. Continuing weak and uncertain economic conditions and outlook would adversely affect our level of advertising revenues and our business, financial condition and results of operations.
We have significant competition for advertising, which may adversely affect our advertising revenues and advertising rates.
Our print and digital products face substantial competition for advertising revenues from a variety of sources, such as newspapers and magazines; television, radio and other forms of media; direct marketing; and, increasingly, advertising-supported digital products that provide news and information, including Web sites and digital applications, news aggregators and social media sites. In recent years, the advertising industry has experienced a secular shift toward digital advertising, which is less expensive and can offer more measurable returns than traditional print media. Digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audience at scale are also playing a more significant role in the advertising marketplace. Competition from all of these media and services, many of which charge lower rates than the Company’s properties, as well as increased inventory in the digital marketplace, affect our ability to attract and retain advertisers and consumers and to maintain or increase our advertising rates, which would adversely affect advertising revenues.
If our efforts to retain and grow our digital subscriber base and build consumer revenue are not successful and if we are unable to maintain our digital audience for advertising sales, our business, financial condition and prospects may be adversely affected.
A significant portion of our revenues is from digital subscriptions for content provided on NYTimes.com and other digital platforms. Our ability to retain and continue to build our digital subscription base and audience for our digital products depends on many factors, including continued market acceptance of our digital pay model, consumer habits, pricing, available alternatives, delivery of high-quality journalism and content, an adequate and adaptable online infrastructure, terms of delivery platforms and other factors. If we are not able to continue to attract, convert and retain digital subscribers, our revenues may be reduced and we may incur additional expenses for marketing and other digital acquisition and retention efforts.
In addition, if our user or traffic levels flatten or decline as a result of, among other factors, changes in Internet search results, including results provided by Google, we may be unable to create sufficient advertiser interest in our digital businesses or to maintain or increase the advertising rates of the inventory on our digital platforms. Even if we maintain or increase traffic levels, the market position of our brands may not be enough to counteract a significant downward pressure on advertising rates as the number of Web sites with available inventory increases in the digital marketplace.
To remain competitive, we must be able to respond to and exploit changes in technology, services and standards and changes in consumer behavior, and significant capital investments may be required.
Technological developments in the media industry continue to evolve rapidly. Advances in technology have led to an increasing number of methods for the delivery of news and other content and have driven consumer demand and expectations in unanticipated directions. If we are unable to exploit new and existing technologies to distinguish our products and services from those of our competitors or adapt to new distribution methods that provide optimal


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user experiences, our business, financial condition and prospects may be adversely affected.
Technological developments also pose other challenges that could adversely affect our revenues and competitive position. New delivery platforms may lead to pricing restrictions, the loss of distribution control and the loss of a direct relationship with consumers. We may also be adversely affected if the use of technology developed to block the display of advertising on Web sites proliferates.
Technological developments and any changes we may make to our business model may require significant capital investments. We may be limited in our ability to invest funds and resources in digital products, services or opportunities, and we may incur costs of research and development in building and maintaining the necessary and continually evolving technology infrastructure. It may also be difficult to attract and retain talent for critical positions. Some of our existing competitors and new entrants may have greater operational, financial and other resources or may otherwise be better positioned to compete for opportunities and as a result, our digital businesses may be less successful.
Decreases in print circulation volume adversely affect our circulation and advertising revenues.
Advertising and circulation revenues are affected by circulation and readership levels of our newspaper properties. Competition for circulation and readership is generally based upon format, content, quality, service, timeliness and price. In recent years, our newspaper properties, and the newspaper industry as a whole, have experienced declining print circulation volume. This is primarily due to increased competition from digital media formats and sources other than traditional newspapers (often free to users), declining discretionary spending by consumers affected by weak economic conditions, high subscription and single-copy rates and a growing preference among some consumers to receive all or a portion of their news from sources other than a newspaper. If these or other factors result in a continued decline in circulation volume, the rate and volume of advertising revenues may be adversely affected (as rates reflect circulation and readership, among other factors). These factors could also affect our ability to institute circulation price increases for our products at a rate sufficient to offset circulation volume declines. We may also incur increased spending on marketing designed to attract and retain subscribers or drive traffic to our digital products, and we may not be able to recover these costs through circulation and advertising revenues.
If we are unable to execute cost-control measures successfully, our total operating costs may be greater than expected, which may adversely affect our profitability.
Over the last several years, we have significantly reduced operating costs by reducing staff and employee benefits and implementing general cost-control measures across the Company, and expect to continue these cost management efforts. If we do not achieve expected savings or our operating costs increase as a result of our strategic initiatives, our total operating costs may be greater than anticipated. In addition, if our cost-control strategy is not managed properly, such efforts may affect the quality of our products and our ability to generate future revenue. Reductions in staff and employee compensation and benefits could also adversely affect our ability to attract and retain key employees.
Significant portions of our expenses are fixed costs that neither increase nor decrease proportionately with revenues. In addition, our ability to make short-term adjustments to manage our costs may be limited by certain of our collective bargaining agreements. If we are not able to implement further cost-control efforts or reduce our fixed costs sufficiently in response to a decline in our revenues, we may experience a higher percentage decline in our income from continuing operations.
The underfunded status of our pension plans may adversely affect our operations, financial condition and liquidity.
We sponsor several qualified defined benefit pension plans. We are required to make contributions to our qualified defined benefit pension plans to comply with minimum funding requirements imposed by laws governing these employee benefit plans. The difference between the obligations and assets of the qualified defined benefit pension plans, or the funded status of the qualified defined benefit pension plans, is a significant factor in determining pension expense and the ongoing funding requirements for those plans. Our qualified defined benefit pension plans were underfunded as of December 30, 2012, and we will continue to evaluate whether to make contributions in the future to fund this deficiency. In addition, while we sold the Regional Media Group in January 2012, we retained pension assets and liabilities and postretirement obligations related to employees of that business. Future volatility and disruption in the stock and bond markets could cause further declines in the asset values of our qualified defined benefit pension plans. In addition, a decrease in the discount rate used to determine the liabilities for pension obligations will result in increased liabilities. If investment returns on plan assets are below expectations


THE NEW YORK TIMES COMPANY – P. 9


or interest rates decrease, our contributions may be higher than currently anticipated. As a result, we may have less cash available for working capital and other corporate uses, which may have an adverse impact on our operations, financial condition and liquidity.
Due to our participation in multiemployer pension plans, we have exposures under those plans that may extend beyond what our obligations would be with respect to our employees.
We participate in, and make periodic contributions to, various multiemployer pension plans that cover many of our current and former union employees. Our required contributions to these plans could increase because of a shrinking contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or failure of withdrawing companies to pay their withdrawal liability, low interest rates, lower than expected returns on pension fund assets or other funding deficiencies.
We have incurred significant withdrawal liabilities to the multiemployer pension plans in which we participate, such as the liability assessed against us in 2009 in connection with amendments to various collective bargaining agreements affecting certain multiemployer pension plans. We may be required to make additional contributions under applicable law with respect to those plans or other multiemployer pension plans from which we may withdraw or partially withdraw. Our withdrawal liability for any multiemployer pension plan will depend on the extent of that plan’s funding of vested benefits. If a multiemployer pension plan in which we participate has significant underfunded liabilities, such underfunding will increase the size of our potential withdrawal liability.
A significant number of our employees are unionized, and our business and results of operations could be adversely affected if labor negotiations or contracts were to further restrict our ability to maximize the efficiency of our operations.
Approximately half of our full-time equivalent work force is unionized. As a result, we are required to negotiate the wages, salaries, benefits, staffing levels and other terms with many of our employees collectively. Our results could be adversely affected if future labor negotiations or contracts were to further restrict our ability to maximize the efficiency of our operations. If we were to experience labor unrest, strikes or other business interruptions in connection with labor negotiations or otherwise, or if we are unable to negotiate labor contracts on reasonable terms, our ability to produce and deliver our most significant products could be impaired. In addition, our ability to make short-term adjustments to control compensation and benefits costs, rebalance our portfolio of businesses or otherwise adapt to changing business needs may be limited by the terms and duration of our collective bargaining agreements.
A significant increase in the price of newsprint, or limited availability of newsprint, would have an adverse effect on our operating results.
The cost of raw materials, of which newsprint is the major component, represented approximately 7% of our total operating costs in 2012. The price of newsprint has historically been volatile and may increase as a result of various factors, including:
a reduction in the number of suppliers as a result of restructurings, bankruptcies and consolidations in the North American newsprint industry;
declining newsprint supply as a result of paper mill closures and conversions to other grades of paper; and
other factors that adversely impact supplier profitability, including increases in operating expenses caused by raw material and energy costs, and a rise in the value of the Canadian dollar, which adversely affects Canadian suppliers whose costs are incurred in Canadian dollars but whose newsprint sales are priced in U.S. dollars.
In addition, we rely on our suppliers for deliveries of newsprint. The availability of our newsprint supply may be affected by various factors, including strikes and other disruptions that may affect deliveries of newsprint.
If newsprint prices increase significantly or we experience significant disruptions in the availability of our newsprint supply in the future, our operating results will be adversely affected.
We may buy or sell different properties as a result of our evaluation of our portfolio of businesses. Such acquisitions or divestitures would affect our costs, revenues, profitability and financial position.
From time to time, we evaluate the various components of our portfolio of businesses and may, as a result, buy or sell different properties. In that regard, we recently announced that we have retained a strategic adviser in connection with a sale of the New England Media Group and our 49% equity interest in Metro Boston. Acquisitions or


P. 10 – THE NEW YORK TIMES COMPANY


divestitures affect our costs, revenues, profitability and financial position. We may also consider the acquisition of specific properties or businesses that fall outside our traditional lines of business if we deem such properties sufficiently attractive.
Divestitures have inherent risks, including possible delays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested businesses, unexpected costs associated with the separation of the business to be sold from our integrated information technology systems and other operating systems, and potential post-closing claims for indemnification. In addition, adverse economic or market conditions may result in fewer potential bidders and unsuccessful sales efforts. Expected cost savings, which are offset by revenue losses from divested businesses, may also be difficult to achieve or maximize due to our fixed cost structure, and we may experience varying success in reducing fixed costs or transferring liabilities previously associated with the divested businesses.
Acquisitions also involve risks, including difficulties in integrating acquired operations, diversions of management resources, debt incurred in financing these acquisitions (including the related possible reduction in our credit ratings and increase in our cost of borrowing), differing levels of management and internal control effectiveness at the acquired entities and other unanticipated problems and liabilities. Competition for certain types of acquisitions, particularly digital properties, is significant. Even if successfully negotiated, closed and integrated, certain acquisitions or investments may prove not to advance our business strategy and may fall short of expected return on investment targets.
Our debt agreements contain restrictions that limit our flexibility in operating our business.
Our debt agreements contain various covenants that limit our ability to engage in specified types of transactions. For example, these covenants, among other things, restrict, subject to certain exceptions, our ability and the ability of our subsidiaries to:
incur or guarantee additional debt or issue certain preferred equity;
pay dividends on or make distributions to holders of our common stock or make other restricted payments;
create or incur liens on certain assets to secure debt;
make certain investments, acquisitions or dispositions;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; or
enter into certain transactions with affiliates.
These restrictions limit our flexibility in operating our business and responding to opportunities.
Changes in our credit ratings or macroeconomic conditions may affect our liquidity, increasing borrowing costs and limiting our financing options.
Our long-term debt is currently rated below investment grade by Standard & Poor’s and Moody’s Investors Service. If our credit ratings remain below investment grade or are lowered further, borrowing costs for future long-term debt or short-term borrowing facilities may increase and our financing options, including our access to the unsecured borrowing market, would be limited. We may also be subject to additional restrictive covenants that would reduce our flexibility. In addition, macroeconomic conditions, such as continued or increased volatility or disruption in the credit markets, could adversely affect our ability to refinance existing debt or obtain additional financing to support operations or to fund new acquisitions or capital-intensive internal initiatives.
Our Class B Common Stock is principally held by descendants of Adolph S. Ochs, through a family trust, and this control could create conflicts of interest or inhibit potential changes of control.
We have two classes of stock: Class A Common Stock and Class B Common Stock. Holders of Class A Common Stock are entitled to elect 30% of the Board of Directors and to vote, with holders of Class B Common Stock, on the reservation of shares for equity grants, certain material acquisitions and the ratification of the selection of our auditors. Holders of Class B Common Stock are entitled to elect the remainder of the Board and to vote on all other matters. Our Class B Common Stock is principally held by descendants of Adolph S. Ochs, who purchased The Times in 1896. A family trust holds approximately 90% of the Class B Common Stock. As a result, the trust has the ability to elect 70% of the Board of Directors and to direct the outcome of any matter that does not require a vote of the Class A Common Stock. Under the terms of the trust agreement, the trustees are directed to retain the Class B Common Stock


THE NEW YORK TIMES COMPANY – P. 11


held in trust and to vote such stock against any merger, sale of assets or other transaction pursuant to which control of The Times passes from the trustees, unless they determine that the primary objective of the trust can be achieved better by the implementation of such transaction. Because this concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to our businesses, the market price of our Class A Common Stock could be adversely affected.
We may not be able to protect intellectual property rights upon which our business relies, and if we lose intellectual property protection, our assets may lose value.
Our business depends on our intellectual property, including our valuable brands, content, services and internally developed technology. We believe our proprietary trademarks and other intellectual property rights are important to our continued success and our competitive position.
Unauthorized parties may attempt to copy or otherwise obtain and use our content, services, technology and other intellectual property, and we cannot be certain that the steps we have taken to protect our proprietary rights will prevent any misappropriation or confusion among consumers and merchants, or unauthorized use of these rights.
Advancements in technology have exacerbated the risk by making it easier to duplicate and disseminate content. In addition, as our business and the risk of misappropriation of our intellectual property rights have become more global in scope, we may not be able to protect our proprietary rights in a cost-effective manner in a multitude of jurisdictions with varying laws.
If we are unable to procure, protect and enforce our intellectual property rights, we may not realize the full value of these assets, and our business may suffer. If we must litigate in the United States or elsewhere to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of others, such litigation may be costly and divert the attention of our management.
Security breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively.
Network and information systems and other technologies, including those related to our network management, are important to our business activities. Despite our security measures and those of our third-party service providers, our systems may be vulnerable to interruption or damage from computer hackings, computer viruses, worms or other destructive or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing. Our computer systems have been, and will likely continue to be, subject to attack. For example, during 2012, The Times’s computer network was the target of a cyber-attack that we believe was sponsored by a foreign government, designed to interfere with our journalism and undermine our reporting. The systems housing confidential customer and employee data were not breached in this attack. While we have implemented controls and taken other preventative actions to further strengthen our systems against future attacks, we can give no assurance that these controls and preventative actions will be effective against future attacks. Any breach of our data security could result in a disruption of our services or improper disclosure of personal data or confidential information, which could harm our reputation, require us to expend resources to remedy such a security breach or defend against further attacks or subject us to liability under laws that protect personal data, resulting in increased operating costs or loss of revenue.
Legislative and regulatory developments may result in increased costs and lower revenues from our digital businesses.
Our digital businesses are subject to government regulation in the jurisdictions in which we operate, and our Web sites, which are available worldwide, may be subject to laws regulating the Internet even in jurisdictions where we do not do business. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. Revenues from our digital businesses could be adversely affected, directly or indirectly, in particular by existing or future laws and regulations relating to online privacy and the collection and use of consumer data in digital media.
Our international operations expose us to risks inherent in foreign operations.
As we expand the international scope of our operations, we face the increased risk of doing business abroad, including complying with unfamiliar laws and regulations, effectively managing and staffing foreign operations, successfully navigating local customs and practices, responding to government policies that restrict the digital flow of information, adapting to currency exchange rate fluctuations and complying with restrictions on repatriation of


P. 12 – THE NEW YORK TIMES COMPANY


funds. Adverse developments in any of these areas could have an adverse impact on our business, financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive offices are located in our New York headquarters building in the Times Square area. The building was completed in 2007 and consists of approximately 1.54 million gross square feet, of which approximately 828,000 gross square feet of space have been allocated to us. We owned a leasehold condominium interest representing approximately 58% of the New York headquarters building until March 2009, when we entered into an agreement to sell and simultaneously lease back a portion of our leasehold condominium interest (the “Condo Interest”). The sale-leaseback transaction encompassed 21 floors, or approximately 750,000 rentable square feet, currently occupied by us. The sale price for the Condo Interest was $225 million. We have an option exercisable in 2019 to repurchase the Condo Interest for $250 million. The lease term is 15 years, and we have three renewal options that could extend the term for an additional 20 years. We continue to own a leasehold condominium interest in seven floors in our New York headquarters building, totaling approximately 216,000 rentable square feet that were not included in the sale-leaseback transaction, of which six floors are leased to a third party.
In addition, we built a printing and distribution facility with 570,000 gross square feet located in College Point, N.Y., on a 31-acre site for which we have a ground lease. We have an option to purchase the property at any time before the lease ends in 2019. We own a facility in Boston, Mass., of 703,000 gross square feet that includes printing operations and offices. We also currently own other properties with an aggregate of approximately 194,000 gross square feet and lease other properties with an aggregate of approximately 281,000 rentable square feet in various locations.
ITEM 3. LEGAL PROCEEDINGS
There are various legal actions that have arisen in the ordinary course of business and are now pending against us. Such actions are usually for amounts greatly in excess of the payments, if any, that may be required to be made. It is the opinion of management after reviewing such actions with our legal counsel that the ultimate liability that might result from such actions will not have a material adverse effect on our consolidated financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.



THE NEW YORK TIMES COMPANY – P. 13


EXECUTIVE OFFICERS OF THE REGISTRANT
Name
 
Age
 
Employed By
Registrant Since
 

Recent Position(s) Held as of February 28, 2013
Arthur Sulzberger, Jr.
 
61
 
1978
 
Chairman (since 1997) and Publisher of The Times (since 1992); Chief Executive Officer (December 2011 to November 2012)
Mark Thompson
 
55
 
2012
 
President and Chief Executive Officer (since November 2012); Director-General, the British Broadcasting Corporation (“BBC”) (2004 to September 2012); Chief Executive, Channel 4 Television Corporation (2002 to 2004); and various positions of increasing responsibility at the BBC (1979 to 2001)
Michael Golden
 
63
 
1984
 
Vice Chairman (since 1997); President and Chief Operating Officer, Regional Media Group (2009 to January 2012); Publisher of the IHT (2003 to 2008); Senior Vice President (1997 to 2004)
James M. Follo
 
53
 
2007
 
Senior Vice President and Chief Financial Officer (since 2007); Chief Financial and Administrative Officer, Martha Stewart Living Omnimedia, Inc. (2001 to 2006)
R. Anthony Benten
 
49
 
1989
 
Senior Vice President, Finance (since 2008) and Corporate Controller (since 2007); Vice President (2003 to 2008); Treasurer (2001 to 2007)
Christopher M. Mayer
 
50
 
1984

 
Publisher of the Globe and President of the New England Media Group (since 2010); Senior Vice President, Circulation and Operations, of the Globe (2008 to 2009); Chief Information Officer and Senior Vice President of the Globe (2005 to 2008); Vice President, Circulation Sales, of the Globe (2002 to 2005)
Kenneth A. Richieri
 
61
 
1983
 
Senior Vice President (since 2007) and General Counsel (since 2006); Secretary (2008 to 2011); Vice President (2002 to 2007); Deputy General Counsel (2001 to 2005); Vice President and General Counsel, New York Times Digital (1999 to 2003)




P. 14 – THE NEW YORK TIMES COMPANY


PART II        
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED  STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
The Class A Common Stock is listed on the New York Stock Exchange. The Class B Common Stock is unlisted and is not actively traded.
The number of security holders of record as of February 22, 2013, was as follows: Class A Common Stock: 7,333; Class B Common Stock: 28.
No dividends have been declared or paid on our Class A or Class B Common Stock since the fourth quarter of 2008. The decision to pay a dividend in future periods and the appropriate level of dividends will be considered by our Board of Directors in light of our earnings, capital requirements, financial condition and other factors considered relevant. In addition, our Board of Directors will consider restrictions in any existing indebtedness, such as the terms of our 6.625% senior unsecured notes due 2016, which restrict our ability to pay dividends. See also “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Our Strategy” and “— Third-Party Financing.”
The following table sets forth, for the periods indicated, the high and low closing sales prices for the Class A Common Stock as reported on the New York Stock Exchange.
 
 
 
2012
 
2011
Quarters
 
High

 
Low

 
High

 
Low

First Quarter
 
$
8.08

 
$
6.50

 
$
10.90

 
$
8.86

Second Quarter
 
7.04

 
5.98

 
9.67

 
7.19

Third Quarter
 
9.80

 
6.66

 
9.21

 
5.76

Fourth Quarter
 
10.88

 
7.86

 
7.97

 
5.65


ISSUER PURCHASES OF EQUITY SECURITIES(1) 
Period
 
Total number of
shares of Class A
Common Stock
purchased
(a)
 
Average
price paid
per share of
Class A
Common Stock
(b)
 
Total number of
shares of Class A
Common Stock
purchased
as part of
publicly
announced plans
or programs
(c)
 
Maximum 
number (or
approximate
dollar value)
of shares of
Class A
Common
Stock that may
yet be
purchased
under the plans
or programs
(d)
September 24, 2012 - October 28, 2012
 
 
 
 
$
91,386,000

October 29, 2012 - November 25, 2012
 
 
 
 
$
91,386,000

November 26, 2012 - December 30, 2012
 
 
 
 
$
91,386,000

Total for the fourth quarter of 2012
 
 
 
 
$
91,386,000

(1)
On April 13, 2004, our Board of Directors authorized repurchases in an amount up to $400 million. During the fourth quarter of 2012, we did not purchase any shares of Class A Common Stock pursuant to our publicly announced share repurchase program. As of February 22, 2013, we had authorization from our Board of Directors to repurchase an amount of up to approximately $91 million of our Class A Common Stock. Our Board of Directors has authorized us to purchase shares from time to time as market conditions permit. There is no expiration date with respect to this authorization.


THE NEW YORK TIMES COMPANY – P. 15


EQUITY COMPENSATION PLAN INFORMATION
The following table presents information regarding our existing equity compensation plans as of December 30, 2012. 
Plan category
Number of securities to
be issued upon
exercise of outstanding
options, warrants
and rights
(a)
 
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
 
Equity compensation plans approved by security holders
 
 
 
 
 
Stock options and stock-based awards
14,593,000

(1) 
$
24

5,300,000

(2) 
Employee Stock Purchase Plan

 

6,410,000

(3) 
Total
14,593,000

 
 
11,710,000

 
Equity compensation plans not approved by security holders
None

 
None

None

 
(1)
Includes shares of Class A Common Stock to be issued upon exercise of outstanding stock options granted under the Company’s 1991 Executive Stock Incentive Plan (the “1991 Incentive Plan”) and the Company’s 2010 Incentive Compensation Plan (the “2010 Incentive Plan”), as well as its Non-Employee Directors’ Stock Option Plan or Non-Employee Directors’ Stock Incentive Plan (together, the “Directors’ Plans”). Includes shares of Class A Common Stock to be issued upon conversion of stock-settled restricted stock units under the 2010 Incentive Plan.
(2)
Includes shares of Class A Common Stock available for future stock options to be granted under the 2010 Incentive Plan and the Directors’ Plans. As of December 30, 2012, the 2010 Incentive Plan had 5,060,000 shares remaining for issuance upon the grant, exercise or other settlement of share-based awards. The Directors’ Plans provide for the issuance of up to 500,000 shares of Class A Common Stock in the form of stock options or restricted stock units. The amount reported for stock options includes the aggregate number of securities remaining (approximately 240,000 as of December 30, 2012) for future issuances under those plans. Stock options granted under the 1991 Incentive Plan, 2010 Incentive Plan and the Directors’ Plans must provide for an exercise price of 100% of the fair market value on the date of grant and, except in the case of the 2010 Incentive Plan (which does not specify a maximum term), a maximum term of 10 years.
(3)
Includes shares of Class A Common Stock available for future issuance under the Company’s Employee Stock Purchase Plan (“ESPP”). We have not had an offering under the ESPP since 2010.


P. 16 – THE NEW YORK TIMES COMPANY


PERFORMANCE PRESENTATION
The following graph shows the annual cumulative total stockholder return for the five fiscal years ending December 30, 2012, on an assumed investment of $100 on December 30, 2007, in the Company, the Standard & Poor’s S&P MidCap 400 Stock Index and an index of peer group media companies. The peer group returns are weighted by market capitalization at the beginning of each year. The peer group is comprised of the Company and the following media companies: Gannett Co., Inc., Media General, Inc., The McClatchy Company and The Washington Post Company. Stockholder return is measured by dividing (a) the sum of (i) the cumulative amount of dividends declared for the measurement period, assuming reinvestment of dividends, and (ii) the difference between the issuer’s share price at the end and the beginning of the measurement period, by (b) the share price at the beginning of the measurement period. As a result, stockholder return includes both dividends and stock appreciation.

Stock Performance Comparison Between the S&P 400 Midcap Index, The New York Times Company’s
Class A Common Stock and Peer Group Common Stock


THE NEW YORK TIMES COMPANY – P. 17


 
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data should be read in conjunction with “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and the related Notes in Item 8. The results of operations for the About and Regional Media Groups have been presented as discontinued operations and certain assets and liabilities are classified as held for sale for all periods presented (see Note 15 of the Notes to the Consolidated Financial Statements). The results of operations for WQXR-FM have been presented as discontinued operations for all periods presented before its sale in 2009. The pages following the table show certain items included in Selected Financial Data. All per share amounts on those pages are on a diluted basis. Fiscal year 2012 comprises 53 weeks and all other fiscal years presented in the table below comprise 52 weeks.
 
 
As of and for the Years Ended
(In thousands)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

 
December 27,
2009

 
December 28,
2008

 
 
(53 Weeks)

 
(52 Weeks)

 
(52 Weeks)

 
(52 Weeks)

 
(52 Weeks)

Statement of Operations Data
 
 
 
 
 
 
Revenues
 
$
1,990,080

 
$
1,952,630

 
$
1,980,727

 
$
2,022,455

 
$
2,440,204

Operating costs
 
1,830,391

 
1,791,025

 
1,813,003

 
1,964,417

 
2,376,552

Pension settlement expense
 
48,729

 

 

 

 

Other expenses
 
2,620

 
4,500

 

 
34,633

 

Impairment of assets
 

 
9,225

 
16,148

 
4,179

 
197,879

Pension withdrawal expense
 

 
4,228

 
6,268

 
78,931

 

Net pension curtailment gain
 

 

 

 
53,965

 

Operating profit/(loss)
 
108,340

 
143,652

 
145,308

 
(5,740
)
 
(134,227
)
Gain on sale of investments
 
220,275

 
71,171

 
9,128

 

 

Impairment of investments
 
5,500

 

 

 

 

Income from joint ventures
 
3,004

 
28

 
19,035

 
20,667

 
17,062

Premium on debt redemptions
 

 
46,381

 

 
9,250

 

Interest expense, net
 
62,815

 
85,243

 
85,062

 
81,701

 
47,790

Income/(loss) from continuing operations before income taxes
 
263,304

 
83,227

 
88,409

 
(76,024
)
 
(164,955
)
Income/(loss) from continuing operations, net of income taxes
 
159,822

 
51,295

 
55,092

 
(46,944
)
 
(124,207
)
(Loss)/income from discontinued operations, net of income taxes
 
(26,483
)
 
(91,519
)
 
53,626

 
66,845

 
66,869

Net income/(loss) attributable to The New York Times Company common stockholders
 
$
133,173

 
$
(39,669
)
 
$
107,704

 
$
19,891

 
$
(57,839
)
Balance Sheet Data
 
 
 
 
 
 
 
 
Cash and cash equivalents and short-term investments
 
$
955,309

 
$
279,997

 
$
399,642

 
$
36,520

 
$
56,784

Property, plant and equipment, net
 
860,385

 
937,140

 
997,326

 
1,083,399

 
1,163,740

Total assets
 
2,806,335

 
2,883,450

 
3,285,741

 
3,088,557

 
3,401,680

Total debt and capital lease obligations
 
697,078

 
773,120

 
996,384

 
769,117

 
1,059,321

Total New York Times Company stockholders’ equity
 
632,500

 
506,360

 
659,927

 
604,042

 
503,963




P. 18 – THE NEW YORK TIMES COMPANY


 
 
 
As of and for the Years Ended
(In thousands, except ratios, per share
and employee data)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

 
December 27,
2009

 
December 28,
2008

 
(53 Weeks)

 
(52 Weeks)

 
(52 Weeks)

 
(52 Weeks)

 
(52 Weeks)

Per Share of Common Stock
 
 
 
 
 
 
 
 
 
Basic earnings/(loss) per share attributable to The New York Times Company common stockholders:
Income/(loss) from continuing operations
 
$
1.08

 
$
0.35

 
$
0.37

 
$
(0.33
)
 
$
(0.87
)
(Loss)/income from discontinued operations, net of income taxes
 
(0.18
)
 
(0.62
)
 
0.37

 
0.47

 
0.47

Net income/(loss)
 
$
0.90

 
$
(0.27
)
 
$
0.74

 
$
0.14

 
$
(0.40
)
Diluted earnings/(loss) per share attributable to The New York Times Company common stockholders: 
Income/(loss) from continuing operations
 
$
1.04

 
$
0.34

 
$
0.35

 
$
(0.33
)
 
$
(0.87
)
(Loss)/income from discontinued operations, net of income taxes
 
(0.17
)
 
(0.60
)
 
0.35

 
0.47

 
0.47

Net income/(loss)
 
$
0.87

 
$
(0.26
)
 
$
0.70

 
$
0.14

 
$
(0.40
)
Dividends per share
 
$

 
$

 
$

 
$

 
$
0.750

Stockholders’ equity per share
 
$
4.14

 
$
3.33

 
$
4.32

 
$
4.19

 
$
3.51

Average basic shares outstanding
 
148,147

 
147,190

 
145,636

 
144,188

 
143,777

Average diluted shares outstanding
 
152,693

 
152,007

 
152,600

 
144,188

 
143,777

Key Ratios
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) to revenues
 
5
%
 
7
%
 
7
%
 
0
%
 
(6
)%
Return on average common stockholders’ equity
 
23
%
 
(7
)%
 
17
%
 
4
%
 
(8
)%
Return on average total assets
 
5
%
 
(1
)%
 
3
%
 
1
%
 
(2
)%
Total debt and capital lease obligations to total capitalization
 
52
%
 
60
%
 
60
%
 
56
%
 
68
%
Current assets to current liabilities
 
3.10

 
2.46

 
3.12

 
2.46

 
1.35

Ratio of earnings to fixed charges(1)
 
4.96

 
1.95

 
1.84

 

 

Full-Time Equivalent Employees
 
5,363

 
7,273

 
7,414

 
7,665

 
9,346

(1)
In 2009 and 2008, earnings were inadequate to cover fixed charges by approximately $95 million and $149 million, respectively, due to certain charges in each year.


THE NEW YORK TIMES COMPANY – P. 19


The items below are included in the Selected Financial Data.
2012 (53-week fiscal year)
The items below had a net favorable effect on our results from continuing operations of $88.0 million, or $.57 per share:
a $220.3 million pre-tax gain ($134.7 million after tax, or $.87 per share) on the sales of our ownership interest in Indeed.com and our remaining units in Fenway Sports Group.
a $48.7 million pre-tax charge ($28.3 million after tax, or $.18 per share) for the settlement of pension obligations in connection with lump-sum payments made under an immediate pension benefit offer to certain former employees.
an $18.1 million pre-tax charge ($10.0 million after tax, or $.07 per share) for severance costs.
a $6.7 million pre-tax charge ($3.7 million after tax, or $.02 per share) for accelerated depreciation expense for certain assets at the T&G’s facility in Millbury, Mass., associated with the consolidation of most of its printing into the Globe’s facility in Boston, Mass.
a $5.5 million pre-tax, non-cash charge ($3.2 million after tax, or $.02 per share) for the impairment of certain investments, primarily related to our investment in Ongo Inc., a consumer service for reading and sharing digital news and information from multiple publishers.
a $2.6 million pre-tax charge ($1.5 million after tax, or $.01 per share) in connection with a legal settlement.
2011
The items below had a net unfavorable effect on our results from continuing operations of $4.9 million, or $.03 per share:
a $71.2 million pre-tax gain ($41.4 million after tax, or $.27 per share) from the sales of 390 of our units in Fenway Sports Group and a portion of our interest in Indeed.com.
a $46.4 million pre-tax charge ($27.6 million after tax, or $.18 per share) in connection with the prepayment of all $250.0 million aggregate principal amount of our 14.053% senior unsecured notes.
a $12.9 million pre-tax charge ($7.6 million after tax, or $.04 per share) for severance costs.
a $9.2 million pre-tax charge ($5.8 million after tax, or $.04 per share) for the impairment of assets related to certain assets held for sale, primarily of Baseline, Inc. (“Baseline”), an online subscription database and research service for information on the film and television industries and a provider of premium film and television data to Web sites.
a $4.5 million pre-tax charge ($2.6 million after tax, or $.02 per share) for a retirement and consulting agreement in connection with the retirement of our former chief executive officer.
a $4.2 million estimated pre-tax charge ($2.7 million after tax, or $.02 per share) for a pension withdrawal obligation under a multiemployer pension plan at the Globe.
2010
The items below had a net unfavorable effect on our results from continuing operations of $16.4 million, or $.12 per share:
a $16.1 million pre-tax charge ($10.1 million after tax, or $.07 per share) for the impairment of assets at the Globe’s printing facility in Billerica, Mass.
a $12.7 million pre-tax gain from the sale of an asset at one of the paper mills in which we have an investment. Our share of the pre-tax gain, after eliminating the noncontrolling interest portion, was $10.2 million ($6.4 million after tax, or $.04 per share).
an $11.4 million charge ($.07 per share) for the reduction in future tax benefits for retiree health benefits resulting from the federal health-care legislation enacted in 2010.
a $9.1 million pre-tax gain ($5.3 million after tax, or $.03 per share) from the sale of 50 of our units in Fenway


P. 20 – THE NEW YORK TIMES COMPANY


Sports Group.
a $6.3 million pre-tax charge ($3.9 million after tax, or $.03 per share) for an adjustment to estimated pension withdrawal obligations under several multiemployer pension plans at the Globe.
a $4.5 million pre-tax charge ($2.7 million after tax, or $.02 per share) for severance costs.
2009
The items below had a net unfavorable effect on our results from continuing operations of $76.6 million, or $.53 per share:
a $78.9 million pre-tax charge ($49.5 million after tax, or $.34 per share) for a pension withdrawal obligation under certain multiemployer pension plans primarily at the Globe.
a $54.0 million pre-tax net pension curtailment gain ($30.7 million after tax, or $.21 per share) resulting from freezing of benefits under various Company-sponsored qualified and non-qualified pension plans.
a $50.0 million pre-tax charge ($29.9 million after tax, or $.22 per share) for severance costs.
a $34.6 million pre-tax charge ($20.0 million after tax, or $.13 per share) for a loss on leases ($31.1 million) and a fee ($3.5 million) for the early termination of a third-party printing contract. The lease charge included a $22.8 million charge for a loss on leases associated with the closure of City & Suburban, our retail and newsstand distribution subsidiary, and $8.3 million for office space at The New York Times Media Group.
a $9.3 million pre-tax charge ($5.3 million after tax, or $.04 per share) for a premium on the redemption of $250.0 million principal amount of our 4.5% notes, which was completed in April 2009.
a $4.2 million pre-tax charge ($2.6 million after tax, or $.01 per share) for the impairment of assets due to the reduced scope of a systems project.
2008
The items below had a net unfavorable effect on our results from continuing operations of $176.5 million, or $1.23 per share:
a $160.4 million pre-tax, non-cash charge ($109.3 million after tax, or $.76 per share) for the impairment of property, plant and equipment, intangible assets and goodwill at the New England Media Group.
a $74.7 million pre-tax charge ($42.6 million after tax, or $.31 per share) for severance costs.
a $19.2 million pre-tax, non-cash charge ($10.7 million after tax, or $.07 per share) for the impairment of an intangible asset at the IHT.
an $18.3 million pre-tax, non-cash charge ($10.4 million after tax, or $.07 per share) for the impairment of assets for a systems project.
a $5.6 million pre-tax, non-cash charge ($3.5 million after tax, or $.02 per share) for the impairment of our 49% ownership interest in Metro Boston.


THE NEW YORK TIMES COMPANY – P. 21


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition as of December 30, 2012, and results of operations for the three years ended December 30, 2012. This item should be read in conjunction with our Consolidated Financial Statements and the related Notes included in this Annual Report.
EXECUTIVE OVERVIEW
We are a leading global, multimedia news and information company that currently includes newspapers, digital businesses, investments in paper mills and other investments. We had previously classified our businesses into two reportable segments, the News Media Group and the About Group. As a result of the sale of the About Group and effective for the quarter ended September 23, 2012, we have one reportable segment.
We currently have two divisions:
The New York Times Media Group, which includes The Times, the IHT, NYTimes.com and related businesses; and
the New England Media Group, which includes the Globe, BostonGlobe.com, Boston.com, the T&G, Telegram.com and related businesses.
In February 2013, we announced that we have retained a strategic adviser in connection with a sale of the New England Media Group and our 49% equity interest in Metro Boston, which publishes a free daily newspaper in the greater Boston area.
Our revenues were $2.0 billion in 2012. We generate revenues principally from advertising and circulation. Other revenues primarily consist of revenues from news services/syndication, commercial printing and distribution, rental income, digital archives and direct mail advertising services. Our main operating costs are employee-related costs and raw materials, primarily newsprint.
Joint Ventures
Our investments accounted for under the equity method are primarily as follows:
a 49% interest in a Canadian newsprint company, Malbaie;
a 40% interest in a partnership, Madison, operating a supercalendered paper mill in Maine; and
a 49% interest in Metro Boston.
Discontinued Operations
Results of operations for each of the About Group and the Regional Media Group, which previously was a division of the News Media Group, have been treated as discontinued operations in all periods presented in this report. For further information regarding these discontinued operations, see Note 15 of the Notes to the Consolidated Financial Statements.
About Group
On September 24, 2012, we completed the sale of the About Group, consisting of About.com, ConsumerSearch.com, CalorieCount.com and related businesses, to IAC/InterActiveCorp for $300.0 million in cash, plus a net working capital adjustment of approximately $17 million. The sale resulted in a pre-tax gain of $96.7 million ($61.9 million after tax). The net after-tax proceeds from the sale were approximately $291 million.
Regional Media Group
On January 6, 2012, we completed the sale of the Regional Media Group, consisting of 16 regional newspapers, other print publications and related businesses in Alabama, California, Florida, Louisiana, North Carolina and South Carolina, to Halifax Media Holdings LLC for approximately $140 million in cash. The sale resulted in an after-tax gain of $23.6 million in 2012. The net after-tax proceeds from the sale, including a tax benefit, were approximately $150 million.


P. 22 – THE NEW YORK TIMES COMPANY


Business Environment
We believe that a number of factors and industry trends have had, and will continue to have, an adverse effect on our business and prospects. These include the following:
Economic conditions
The business environment in 2012 remained challenging due in large part to uneven economic conditions and uncertainty about the economic outlook. Advertising spending, which drives a significant portion of our revenues, is sensitive to economic conditions. The level of advertising sales in any period may be affected by advertisers’ decisions to increase or decrease their advertising expenditures in response to anticipated consumer demand and general economic conditions. Weak global, national and local economic conditions affect the levels of our advertising revenues. Changes in spending patterns and priorities, including shifts in marketing strategies and budget cuts of key advertisers, in response to weak and uneven economic conditions, have depressed and may continue to depress our advertising revenues.
Secular shift to digital media choices
The competition for advertising revenues in various markets has intensified as a result of the continued development of digital media technologies and platforms.
We have expanded and will continue to expand our digital offerings; however, the largest portion of our revenues are currently from traditional print products where advertising revenues are declining. We believe that the shift from traditional media forms to a growing number of digital media choices and changing consumer behavior have contributed to, and are likely to continue to contribute to, a decline in print advertising.
Furthermore, the digital advertising marketplace has become increasingly complex and fragmented, particularly as digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audience at scale play a more significant role. Competition from a wide variety of digital media and services and a significant increase in inventory in the digital marketplace have affected, and we expect will continue to affect, our ability to attract and retain advertisers and to maintain or increase our advertising rates. In addition, search technology has continued to improve the organization of and access to a broad range of Web sites and online information, reshaping consumer behavior and expectations for consuming news and information. As economic conditions and the advertising environment remain challenged, media companies have increasingly re-evaluated their business models that have been largely dependent on advertising, with increasing numbers shifting their focus toward various forms of digital subscription models.
Circulation
Circulation is a significant source of revenue for us and an increasingly important driver as the overall composition of our revenues has shifted, and we expect will continue to shift, in response to the transformations in our industry. Circulation revenues are affected by circulation and readership levels. In recent years, our newspaper properties, and the newspaper industry as a whole, have experienced declining print circulation volume. This is due to, among other factors, increased competition from digital platforms and sources other than traditional newspapers (often free to users), declining discretionary spending by consumers affected by weak economic conditions, higher subscription and single-copy rates and a growing preference among some consumers for receiving their news from a variety of sources. Our paid digital subscription model, launched in 2011, has created a meaningful new revenue stream. Our ability to retain and continue to build on our digital subscription base and audience for our digital products depends on continued market acceptance of our digital subscription model, consumer habits, pricing, available alternatives, delivery of high-quality journalism and content, an adequate and adaptable online infrastructure, terms of delivery platforms and other factors.
Costs
A significant portion of our costs are fixed, and therefore we are limited in our ability to reduce these costs in the short term. Our most significant costs are employee-related costs and raw materials, which together accounted for approximately 50% of our total operating costs in 2012. Changes in employee-related costs and the price and availability of newsprint can materially affect our operating results.
For a discussion of these and other factors that could affect our business, results of operations and financial condition, see “Forward-Looking Statements” and “Item 1A — Risk Factors.”


THE NEW YORK TIMES COMPANY – P. 23


Our Strategy
Our results in 2012 reflect our ability to manage the business during a period of transformation for our industry and amidst uncertain and uneven economic conditions. We anticipate that the challenges we currently face will continue, and we believe that the following elements are key to our efforts to address them.
Focusing on our core business by strengthening and extending our brands and digital offerings
Because of our high-quality journalism, we believe we have very powerful and trusted brands that attract educated, affluent and influential audiences. As we continue to face uncertain economic conditions and a challenging advertising environment, we are focused on building on the strength of our brands, particularly The New York Times brand, and extending our digital presence into new products, markets and endeavors.
The growth in our digital subscriber base in 2012, more than a year into the implementation of our paid digital subscription model, underscores the willingness of our readers and users to pay for the high-quality journalism our news properties provide across multiple platforms. The Times’s paid digital subscription model has created a meaningful new revenue stream that has helped to partially offset the softness in our advertising and print circulation businesses. As home-delivery subscribers receive all digital access for free, we have also seen benefits to The Times’s home-delivery circulation since the launch of digital subscriptions, with a slight growth in Sunday home-delivery circulation volume in 2012. Due in part to our digital subscription initiatives, 2012 marked the first time in the Company’s history that annual circulation revenues surpassed revenues from advertising. As our news and content are being featured on an increasingly broad range of platforms and devices, we will continue to examine our circulation pricing and pay model in coordination with our overall multiplatform strategy while we focus on building our digital subscriber base by increasing engagement and subscription opportunities.
We also continue to look for opportunities to grow our brands and digital businesses. We plan to further leverage The New York Times brand to create new products and services. Key areas in which we expect to focus include expanding our portfolio of paid digital products, growing our international footprint to exploit the strong global recognition of The New York Times brand, developing more strategic video capabilities, building on our mobile initiatives and expanding our conference and events business. As part of this plan, we recently announced that the IHT will be rebranded the International New York Times later in 2013. As we continue to look for ways to optimize and monetize our products and services, we remain committed to creating quality content and a quality user experience, regardless of the distribution model of news and information.
In addition, the sale of certain assets, such as the About and Regional Media Groups, has enabled us to focus on further developing and growing our core business, as well as investing in our transition to a more digitally-focused multimedia news and information company. Our priority will be to better position our organization for innovation and growth and to maintain a robust news-gathering operation capable of continuing the high-quality news and information that sets our Company apart.
Managing our expenses
Over the past few years as we have transformed our Company to respond to the evolving media landscape and rebalanced our portfolio of businesses, we have focused on realigning our cost base to ensure that we are operating our businesses as efficiently as possible, while maintaining our commitment to investing in high-quality content and achieving our long-term strategy. For the first time in several years, our operating costs increased modestly in 2012, in part as a result of our investment in our digital capabilities, subscription acquisition efforts and other digital initiatives. Yet, we remained disciplined in our approach toward costs in 2012 and focused on realigning our work force, finding efficiencies in our production and distribution operations and further leveraging our centralized processes and resources. We expect to continue to invest in growing our business digitally and globally to better position our organization for innovation and growth, which may increase our costs. Managing expenses will remain a priority and our focus will be on identifying operational efficiencies across our organization to respond to the ongoing secular changes in our industry.
Rebalancing and managing our portfolio of businesses
Over the past several years, we have been rebalancing and managing our portfolio of businesses, concentrating more on growth areas, such as digital. We have focused, and will continue to focus, on investing in our expanding digital operations, including our digital pay model and other digital initiatives.


P. 24 – THE NEW YORK TIMES COMPANY


We also continuously evaluate our businesses to determine whether they are meeting our targets for financial performance, growth and return on investment and whether our businesses remain relevant to our strategy and align with our core purpose. As a result, in 2012, we sold the About Group for $300 million in cash, plus a working capital adjustment of approximately $17 million, and the Regional Media Group for approximately $140 million in cash. Over the past few years, we have also sold our ownership interest in Fenway Sports Group. These divestitures have enabled us to focus on the development and growth of our core business and to further invest in our transformation to a more digitally-focused multimedia news and information company. More recently, we announced that we have retained a strategic adviser in connection with a sale of the New England Media Group and our 49% equity interest in Metro Boston.
Strengthening our liquidity
We have continued to strengthen our liquidity position and we remain focused on further de-leveraging and de-risking our balance sheet.
Over the past few years, we have taken decisive steps to strengthen our liquidity position, including prepaying in August 2011 all $250.0 million outstanding aggregate principal amount of our 14.053% senior unsecured notes due January 15, 2015 (“14.053% Notes”). We have further improved our debt profile by repaying at maturity in September 2012 all $75.0 million outstanding aggregate principal amount of our 4.610% senior notes (“4.610% Notes”). As of December 30, 2012, we had total debt and capital lease obligations of approximately $697 million and our remaining debt matures in 2015 or later. In addition, we terminated our $125.0 million asset-backed, five-year revolving credit facility in November 2012.
At the end of 2012, we had cash, cash equivalents and short-term investments of approximately $955 million, compared with approximately $280 million at the end of 2011, even after making contributions totaling approximately $144 million during 2012 to certain qualified pension plans and repaying at maturity all $75.0 million of the 4.610% Notes. Our cash position improved significantly in 2012, primarily due to the proceeds from the sales of the About and Regional Media Groups and our ownership interests in Indeed.com and Fenway Sports Group. We believe our cash balance and cash provided by operations, in combination with other financing sources, will be sufficient to meet our financing needs over the next 12 months.
Our main priorities in 2013 in evaluating our uses of cash will be investing to grow our business, returning to sustainable growth in revenue and profitability and finding opportunities to further de-leverage our balance sheet and reduce our exposure under our pension plans. Until we have made progress in these areas, we believe it is in the best interests of the Company to maintain a conservative balance sheet and, therefore, we do not believe that this is the appropriate time to restore a dividend.
Managing our pension-related obligations
The funded status of our qualified defined benefit pension plans has been adversely affected by the current interest rate environment, and required contributions to our qualified pension plans can have a significant effect on future cash flows. We remain focused on managing the underfunded status of our pension plans and adjusting the size of our pension obligations relative to the size of our Company.
Our qualified pension plans were underfunded (meaning the present value of future obligations exceeded the fair value of plan assets) as of December 30, 2012, by approximately $396 million, compared with approximately $522 million as of December 25, 2011. The funded status of these pension plans was negatively affected by the decline in interest rates in 2012, although that was more than offset by contributions, solid returns on pension assets and lump-sum payments in connection with an immediate pension benefit offer to certain former employees.
We made contributions of approximately $144 million to certain qualified pension plans in 2012. The majority of these contributions were discretionary. In January 2013, we made a contribution of approximately $57 million to The New York Times Newspaper Guild pension plan, of which $20 million was estimated to be necessary to satisfy minimum funding requirements in 2013. We expect mandatory contributions to other qualified pension plans will increase our total contributions to approximately $71 million for the full year of 2013. We will continue to evaluate whether to make additional discretionary contributions in 2013 to our qualified pension plans depending on cash flows, pension asset performance, interest rates and other factors.
We have taken a number of other steps to manage our pension-related obligations and the resulting volatility of our overall financial condition. In September 2012, we offered certain former employees who participate in The New


THE NEW YORK TIMES COMPANY – P. 25


York Times Companies Pension Plan the option to receive a one-time lump-sum payment equal to the present value of the participant’s pension benefit (payable in cash or rolled over into a qualified retirement plan or IRA) or to commence an immediate monthly annuity. We recorded a non-cash settlement charge of $48.7 million in connection with the lump-sum payments made in the fourth quarter of 2012, which totaled approximately $112 million. These lump-sum payments were made with existing assets of The New York Times Companies Pension Plan and not with Company cash. The lump-sum payments resulted in an actuarial gain of approximately $30 million as of December 30, 2012, thereby improving the underfunded status of The New York Times Companies Pension Plan. The actuarial gain was due to a higher discount rate used to value the lump-sum payments than was used to value the plan’s liabilities as of December 30, 2012.
During 2012, we also modified our investment strategy to reduce the volatility in the funded status of our qualified pension plans. We plan to re-allocate a portion of the pension plan assets from equity investments to fixed-income investments as the pension plans become more fully funded. Over time, we expect to have a significant percentage of the pension plan assets invested in fixed-income instruments.
These steps build on our actions over the last few years as part of our ongoing strategy to address our pension obligations, such as freezing accruals under the qualified defined benefit pension plans that cover both our non-union employees and those covered by collective bargaining agreements. In November 2012, in connection with ratified amendments to a collective bargaining agreement covering employees in The New York Times Newspaper Guild, we froze benefit accruals under the existing defined benefit pension plan and adopted a new defined benefit pension plan, subject to the approval of the Internal Revenue Service, that will significantly reduce funding volatility and, accordingly, volatility of the Company’s overall financial condition. We will continue to look for ways to limit the size of our pension obligations.
We also remain focused on managing our multiemployer pension plans. Certain of our cost management efforts have created significant withdrawal obligations under the multiemployer pension plans in which we participate, such as the liability assessed against us in 2009 in connection with amendments to various collective bargaining agreements affecting certain multiemployer pension plans. However, we believe these withdrawals are an important step to limit pension obligations that we projected could otherwise have continued to grow over time.
Outlook
We remain in a challenging business environment, reflecting continuing uncertainty in economic conditions, and an increasingly competitive and fragmented landscape. Advertising revenues continue to be affected by uncertain and uneven economic conditions, and visibility remains limited.
We expect total advertising revenue trends for the first quarter of 2013 to be below the level experienced in the fourth quarter of 2012, excluding the estimated effect of the additional week in 2012.
Total circulation revenues are projected to increase in the mid-single digits in the first quarter of 2013, as we expect to benefit from our digital subscription initiatives, as well as from the print circulation price increase at The Times implemented in the first quarter of 2013.
We expect operating costs in the first quarter of 2013 to decrease in the low- to mid-single digits largely because we will be cycling against approximately $7 million in accelerated depreciation in the first quarter of 2012.
In addition, we expect the following on a pre-tax basis in 2013:
Results from joint ventures: loss of $1 to $5 million,
Depreciation and amortization: $90 to $95 million,
Interest expense, net: $55 to $60 million, and
Capital expenditures: $40 to $50 million.



P. 26 – THE NEW YORK TIMES COMPANY


RESULTS OF OPERATIONS
Overview
Fiscal year 2012 comprises 53 weeks and fiscal years 2011 and 2010 each comprise 52 weeks. The effect of the 53rd week (“additional week”) on revenues and operating costs is discussed below. The following table presents our consolidated financial results:
 
 
Years Ended
 
% Change
(In thousands)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

 
12-11

 
11-10

 
 
(53 weeks)
 
(52 weeks)
 
(52 weeks)
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
898,078

 
$
954,531

 
$
994,144

 
(5.9
)
 
(4.0
)
Circulation
 
952,968

 
862,982

 
851,077

 
10.4

 
1.4

Other
 
139,034

 
135,117

 
135,506

 
2.9

 
(0.3
)
Total
 
1,990,080

 
1,952,630

 
1,980,727

 
1.9

 
(1.4
)
Operating costs
 
 
 
 
 
 
 
 
 
 
Production costs:
 
 
 
 
 
 
 
 
 
 
Raw materials
 
136,526

 
138,622

 
136,639

 
(1.5
)
 
1.5

Wages and benefits
 
443,756

 
422,200

 
421,067

 
5.1

 
0.3

Other
 
251,946

 
249,747

 
248,768

 
0.9

 
0.4

Total production costs
 
832,228

 
810,569

 
806,474

 
2.7

 
0.5

Selling, general and administrative costs
 
901,405

 
886,232

 
909,909

 
1.7

 
(2.6
)
Depreciation and amortization
 
96,758

 
94,224

 
96,620

 
2.7

 
(2.5
)
Total operating costs
 
1,830,391

 
1,791,025

 
1,813,003

 
2.2

 
(1.2
)
Pension settlement expense
 
48,729

 

 

 
N/A

 
N/A

Other expense
 
2,620

 
4,500

 

 
(41.8
)
 
N/A

Impairment of assets
 

 
9,225

 
16,148

 
N/A

 
(42.9
)
Pension withdrawal expense
 

 
4,228

 
6,268

 
N/A

 
(32.5
)
Operating profit
 
108,340

 
143,652

 
145,308

 
(24.6
)
 
(1.1
)
Gain on sale of investments
 
220,275

 
71,171

 
9,128

 
*

 
*

Impairment of investments
 
5,500

 

 

 
N/A

 
N/A

Income from joint ventures
 
3,004

 
28

 
19,035

 
*

 
(99.9
)
Premium on debt redemption
 

 
46,381

 

 
N/A

 
N/A

Interest expense, net
 
62,815

 
85,243

 
85,062

 
(26.3
)
 
0.2

Income from continuing operations before income taxes
 
263,304

 
83,227

 
88,409

 
*

 
(5.9
)
Income tax expense
 
103,482

 
31,932

 
33,317

 
*

 
(4.2
)
Income from continuing operations
 
159,822

 
51,295

 
55,092

 
*

 
(6.9
)
Discontinued operations:
 
 
 
 
 
 
 


 


(Loss)/income from discontinued operations, net of income taxes
 
(112,003
)
 
(91,519
)
 
53,613

 
22.4

 
*

Gain on sale, net of income taxes
 
85,520

 

 
13

 
N/A

 
N/A

(Loss)/income from discontinued operations, net of income taxes
 
(26,483
)
 
(91,519
)
 
53,626

 
(71.1
)
 
*

Net income/(loss)
 
133,339

 
(40,224
)
 
108,718

 
*

 
*

Net (income)/loss attributable to the noncontrolling interest
 
(166
)
 
555

 
(1,014
)
 
*

 
*

Net income/(loss) attributable to The New York Times Company common stockholders
 
$
133,173

 
$
(39,669
)
 
$
107,704

 
*

 
*

* Represents an increase or decrease in excess of 100%.


THE NEW YORK TIMES COMPANY – P. 27


Revenues
Advertising, circulation and other revenues were as follows: 
 
 
Years Ended
 
% Change
(In thousands)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

 
12-11

 
11-10

 
 
(53 weeks)
 
(52 weeks)
 
(52 weeks)
 
 
 
 
The New York Times Media Group
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
711,829

 
$
756,148

 
$
780,424

 
(5.9
)
 
(3.1
)
Circulation
 
795,037

 
705,163

 
683,717

 
12.7

 
3.1

Other
 
88,475

 
93,263

 
92,697

 
(5.1
)
 
0.6

Total
 
$
1,595,341

 
$
1,554,574

 
$
1,556,838

 
2.6

 
(0.1
)
New England Media Group
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
186,249

 
$
198,383

 
$
213,720

 
(6.1
)
 
(7.2
)
Circulation
 
157,931

 
157,819

 
167,360

 
0.1

 
(5.7
)
Other
 
50,559

 
41,854

 
42,809

 
20.8

 
(2.2
)
Total
 
$
394,739

 
$
398,056

 
$
423,889

 
(0.8
)
 
(6.1
)
Total Company
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
898,078

 
$
954,531

 
$
994,144

 
(5.9
)
 
(4.0
)
Circulation
 
952,968

 
862,982

 
851,077

 
10.4

 
1.4

Other
 
139,034

 
135,117

 
135,506

 
2.9

 
(0.3
)
Total
 
$
1,990,080

 
$
1,952,630

 
$
1,980,727

 
1.9

 
(1.4
)
Advertising Revenues
Advertising revenues are primarily determined by the volume, rate and mix of advertisements. Advertising spending, which drives a significant portion of revenues, is sensitive to economic conditions and the ongoing transformation in our industry. During 2012, the advertising marketplace remained challenging as advertisers continued to exercise caution in response to the uneven economic environment and uncertainty about the economic outlook. Changes in spending patterns and marketing strategies of our advertisers in response to such conditions and an increasingly complex and fragmented digital advertising marketplace contributed to declines in advertising revenues during 2012. The market for standard Web-based digital display advertising has also been challenging, due to an abundance of available advertising inventory and a shift toward digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audience at scale, which has led to downward pricing pressure.
In 2012, total advertising revenues decreased primarily due to lower print advertising revenues across all advertising categories, partially offset by the effect of the additional week in 2012. Print advertising revenues, which represented approximately 76% of total advertising revenues, declined 7.7% in 2012 compared with 2011, due to weakness in national, classified and retail advertising. Digital advertising revenues in 2012 were flat compared with 2011, as growth in national and retail display advertising revenues, driven in part by the effect of the additional week in 2012, was partially offset by declines in classified advertising revenues.
In 2011, total advertising revenues decreased primarily due to lower print advertising revenues across all advertising categories, offset in part by growth in digital advertising revenues. Print advertising revenues, which represented approximately 78% of total advertising revenues, declined 7.2% in 2011 compared with 2010, led by weakness in national and retail advertising revenues. Digital advertising revenues grew 9.0% in 2011 compared with 2010, primarily due to growth in national display advertising revenues.



P. 28 – THE NEW YORK TIMES COMPANY


Advertising revenues (print and digital) by category were as follows:
 
 
Years Ended
 
% Change
(In thousands)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

 
12-11

 
11-10

 
 
(53 weeks)
 
(52 weeks)
 
(52 weeks)
 
 
 
 
National
 
$
601,630

 
$
639,626

 
$
654,202

 
(5.9
)
 
(2.2
)
Retail
 
153,217

 
159,259

 
171,495

 
(3.8
)
 
(7.1
)
Classified
 
117,675

 
128,515

 
140,760

 
(8.4
)
 
(8.7
)
Other
 
25,556

 
27,131

 
27,687

 
(5.8
)
 
(2.0
)
Total
 
$
898,078

 
$
954,531

 
$
994,144

 
(5.9
)
 
(4.0
)
Below is a percentage breakdown of 2012 advertising revenues (print and digital) by division:
 
National
Retail
and
Preprint
Classified
Total
Classified
Other
Advertising
Revenues
Total
  
Help
Wanted
Real
Estate
Auto
Other
The New York Times Media Group
77
%
13
%
2
%
4
%
1
%
2
%
9
%
1
%
100
%
New England Media Group
30

31

5

6

10

7

28

11

100

Total Company
67

17

3

4

3

3

13

3

100

The New York Times Media Group
Total advertising revenues decreased in 2012 compared with 2011 due to lower print and digital advertising revenues, partially offset by the effect of the additional week in 2012. Print advertising revenues were affected by declines in advertiser spending in most advertising categories, reflecting the continued uneven U.S. economic environment, uncertain global conditions and the secular transformation of our industry. Market factors, including the weak economic climate and an increasingly competitive landscape, also contributed to reduced spending on digital platforms and pricing pressure in digital advertising. Digital advertising revenues declined slightly overall, primarily due to declines in the real estate classified advertising category, partially offset by improvement in the national and retail display advertising categories, which benefited in part from the additional week in 2012.
Total advertising revenues declined mainly due to lower national and classified advertising revenues in 2012 compared with 2011. Total national advertising revenues decreased reflecting the uncertain economic environment, which led to declines mainly in the financial services, studio entertainment, corporate and technology categories, partially offset by growth in the luxury category. The soft economic environment, coupled with secular changes in our industry, contributed to declines in total classified advertising revenues, primarily in the real estate and automotive categories.
Total advertising revenues declined in 2011 compared with 2010 due to lower print advertising revenues, offset in part by growth in digital advertising revenues. Print advertising revenues were negatively affected by the declines in advertiser spending in all advertising categories, reflecting the continued uneven economic environment, global events and secular forces. Growth in digital advertising revenues was driven by increased spending on digital platforms, primarily in the national display category.
While total national, classified and retail advertising revenues declined, total classified advertising revenue trends improved as the rate of decline moderated in 2011 compared with 2010. The continued uneven economic conditions and secular changes in our industry contributed to lower advertising revenues in 2011 compared with 2010. Total national advertising revenues decreased led by declines in the travel, corporate and financial services categories, offset in part by gains in the luxury and technology categories. The declines in total classified advertising revenues were primarily in the real estate and automotive categories. Total retail advertising revenues declined as advertisers reduced spending in the face of the uncertain economic climate, coupled with secular changes in our industry, primarily in the mass market, home furnishings and department stores advertising categories.


THE NEW YORK TIMES COMPANY – P. 29


New England Media Group
Total advertising revenues declined in 2012 compared with 2011 due to declines in print advertising revenues, partially offset by growth in digital advertising revenues and the effect of the additional week in 2012. The decline in print advertising revenues was driven by lower advertising in most categories, reflecting uncertain national and local economic conditions and secular changes in our industry. Digital advertising revenues grew, primarily in the automotive classified and retail advertising categories, mainly as a result of the effect of the additional week in 2012.
Total advertising revenues declined mainly due to lower retail, national and classified advertising revenues in 2012 compared with 2011. The uncertain national and local economic conditions continued to negatively affect total retail advertising revenues, as retailers cut spending mainly in the department stores and home furnishings categories. Total national advertising revenues decreased primarily due to declines in the banks and financial services categories. While the soft economic environment, coupled with secular changes in our industry, contributed to declines in total classified advertising revenues, primarily in the real estate category, advertisers increased spending in the automotive and help-wanted categories.
Total advertising revenues declined in 2011 compared with 2010 due to declines in print advertising revenues, partially offset by growth in digital advertising revenues. The decline in print advertising revenues was driven by lower advertising in all categories, reflecting uncertain national and local economic conditions and secular forces in our industry. The increase in digital advertising revenues was due to higher spending in the national and automotive classified categories.
While total retail, national and classified advertising revenues declined, an improvement was seen in the retail advertising revenue trend as the rate of decline moderated in 2011 compared with 2010. The uncertain national and local economic conditions continued to negatively affect total retail advertising revenues, as retailers cut spending mainly in the department stores and home furnishings categories. The uneven economic environment, coupled with secular changes in our industry, contributed to declines in total national advertising revenues led by lower advertiser spending in the financial services, telecommunications and studio entertainment categories. These factors also adversely affected total classified advertising revenues, primarily in the real estate category.
Circulation Revenues
Circulation revenues are based on the number of copies of the printed newspaper (through home-delivery subscriptions and single-copy and bulk sales) and digital subscriptions sold and the rates charged to the respective customers. Total circulation revenues consist of revenues from our print and digital products, including The Times digital subscription packages on NYTimes.com and across other digital platforms, which began in the second quarter of 2011, as well as BostonGlobe.com and digital subscription packages at the IHT, which started in the fourth quarter of 2011.
Circulation revenues increased in 2012 compared with 2011 mainly as growth in digital subscriptions, the increase in print circulation prices in the first half of 2012 at The Times and the Globe, and the effect of the additional week in 2012 offset a decline resulting from fewer print copies sold. In addition, as home-delivery subscribers receive all digital access for free, we saw benefits to The Times’s home-delivery circulation with a slight growth in Sunday home-delivery circulation volume in 2012 compared with 2011.
Circulation revenues in 2011 increased compared with 2010 as the addition of digital subscription offerings primarily at The Times offset a decline in print copies sold. In addition, during 2011, the rate of home-delivery circulation volume declines moderated at The Times, with an increase in new home-delivery orders and improved retention rates following the launch of The Times digital subscriptions.
Other Revenues
Other revenues consist primarily of revenues from news services/syndication, commercial printing and distribution, rental income, digital archives and direct mail advertising services.
Other revenues increased in 2012 compared with 2011, mainly due to higher commercial printing and distribution revenues at the New England Media Group.
Other revenues decreased slightly in 2011 compared with 2010.


P. 30 – THE NEW YORK TIMES COMPANY


Operating Costs
Operating costs were as follows:
 
 
Years Ended
 
% Change
(In thousands)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

 
12-11

 
11-10

 
 
(53 weeks)

 
(52 weeks)

 
(52 weeks)

 
 
 
 
Production costs:
 
 
 
 
 
 
 
 
 
 
Raw materials
 
$
136,526

 
$
138,622

 
$
136,639

 
(1.5
)
 
1.5

Wages and benefits
 
443,756

 
422,200

 
421,067

 
5.1

 
0.3

Other
 
251,946

 
249,747

 
248,768

 
0.9

 
0.4

Total production costs
 
832,228

 
810,569

 
806,474

 
2.7

 
0.5

Selling, general and administrative costs
 
901,405

 
886,232

 
909,909

 
1.7

 
(2.6
)
Depreciation and amortization
 
96,758

 
94,224

 
96,620

 
2.7

 
(2.5
)
Total operating costs
 
$
1,830,391

 
$
1,791,025

 
$
1,813,003

 
2.2

 
(1.2
)
The components of operating costs as a percentage of total operating costs were as follows:
 
Years Ended
 
December 30,
2012

December 25,
2011

December 26,
2010

 
(53 weeks)

(52 weeks)

(52 weeks)

Components of operating costs as a percentage of total operating costs
 
 
 
Wages and benefits
42
%
41
%
42
%
Raw materials
7
%
8
%
8
%
Other operating costs
46
%
46
%
45
%
Depreciation and amortization
5
%
5
%
5
%
Total
100
%
100
%
100
%
The components of operating costs as a percentage of total revenues were as follows:
 
Years Ended
 
December 30,
2012

December 25,
2011

December 26,
2010

 
(53 weeks)

(52 weeks)

(52 weeks)

Components of operating costs as a percentage of total revenues
 
 
 
Wages and benefits
38
%
38
%
39
%
Raw materials
7
%
7
%
7
%
Other operating costs
42
%
42
%
41
%
Depreciation and amortization
5
%
5
%
5
%
Total
92
%
92
%
92
%


THE NEW YORK TIMES COMPANY – P. 31


Production Costs
Production costs increased in 2012 compared with 2011 primarily due to higher compensation costs (approximately $17 million) and various other costs, offset in part by lower outside printing costs (approximately $5 million) and raw materials expense (approximately $2 million), mainly newsprint. Compensation costs increased mainly due to new hires for our digital initiatives, the effect of the additional week in 2012 and annual salary increases. Cost savings from the expiration of certain contractual commitments and contract negotiations mainly contributed to lower outside printing costs. Newsprint expense declined 1.2% in 2012, with 3.4% from lower consumption offset in part by 2.2% from higher pricing.
Total production costs increased in 2011 compared with 2010 primarily due to higher compensation costs (approximately $5 million), higher raw materials expense (approximately $2 million), primarily newsprint, and various other costs, offset in part by lower outside printing costs (approximately $5 million). Compensation costs increased mainly due to costs associated with our digital initiatives. Cost-saving initiatives primarily contributed to the declines in outside printing costs. Newsprint expense increased 2.5%, with 8.3% from higher pricing offset in part by 5.8% from lower consumption. Newsprint prices were higher in the first half of 2011 compared with the same period in 2010.
Selling, General and Administrative Costs
Selling, general and administrative costs increased in 2012 compared with 2011 primarily due to higher costs associated with our commercial printing and distribution operations (approximately $6 million), severance (approximately $5 million), promotion (approximately $4 million), various other costs and the effect of the additional week in 2012, offset in part by lower professional fees (approximately $7 million). Costs associated with our commercial printing and distribution operations increased mainly as a result of a new contract related to the New England Media Group’s commercial distribution operations. Severance costs were higher due to the level of workforce reduction programs year-over-year. Promotion costs were higher mainly due to our digital initiatives and print circulation marketing at The Times. Professional fees were lower due to the level of consulting services.
Total selling, general and administrative costs in 2011 decreased compared with 2010 primarily due to lower compensation costs (approximately $38 million) and professional fees (approximately $7 million), partially offset by higher promotion (approximately $13 million) and severance (approximately $9 million) costs. Compensation costs declined mainly as a result of lower variable compensation expense. The decline in professional fees mainly resulted from the costs incurred in the prior year associated with our digital initiatives as well as cost-saving initiatives. Promotion costs were higher mainly because of the launch of digital subscription packages at The Times in 2011. Severance costs were higher due to the level of workforce reduction programs year-over-year.
Depreciation and Amortization
Depreciation and amortization expense increased in 2012 compared with 2011, primarily due to the $6.7 million of accelerated depreciation expense recognized for certain assets at T&G’s facility in Millbury, Mass., associated with the consolidation of most of T&G’s printing into the Globe’s facility in Boston, Mass., which was completed early in the second quarter of 2012.
Other Items
Pension Settlement Expense
As part of our strategy to reduce our pension obligations and the resulting volatility of our overall financial condition, in September 2012, we offered certain former employees who participate in The New York Times Companies Pension Plan the option to receive a one-time lump-sum payment equal to the present value of the participant’s pension benefit (payable in cash or rolled over into a qualified retirement plan or IRA) or to commence an immediate monthly annuity.
Approximately 2,600 eligible terminated vested participants in The New York Times Companies Pension Plan accepted the offer in the fourth quarter of 2012. The actual amount of the settlement was actuarially determined, which resulted in the acceleration of the recognition of the accumulated unrecognized actuarial loss. Therefore, we recorded a non-cash settlement charge of $48.7 million in connection with the lump-sum payments made in the fourth quarter of 2012, which totaled approximately $112 million. These lump-sum payments were made with existing assets of The New York Times Companies Pension Plan and not with Company cash. The lump-sum payments resulted in an actuarial gain of approximately $30 million as of December 30, 2012, thereby improving the underfunded status of


P. 32 – THE NEW YORK TIMES COMPANY


The New York Times Companies Pension Plan. The actuarial gain was due to a higher discount rate used to value the lump-sum payments than was used to value the plan’s liabilities as of December 30, 2012.
Other Expense
2012
In 2012, we recorded a $2.6 million charge in connection with a legal settlement.
2011
In 2011, we recorded a $4.5 million charge for a retirement and consulting agreement in connection with the retirement of our former chief executive officer at the end of 2011.
Impairment of Assets
2011
In the second quarter of 2011, we classified certain assets as held for sale, primarily of Baseline. The carrying value of these assets was greater than their fair value, less cost to sell, resulting in an impairment of certain intangible assets and property totaling $9.2 million. The impairment charge reduced the carrying value of intangible assets to zero and the property to a nominal value. The fair value for these assets was determined by estimating the most likely sale price with a third-party buyer based on market data. In October 2011, we completed the sale of Baseline, which resulted in a nominal gain.
2010
We consolidated the printing facility of the Globe in Billerica, Mass., into the Boston, Mass., printing facility in the second quarter of 2009. After exploring different opportunities for the assets at Billerica, we entered into an agreement in the third quarter of 2010 to sell the majority of these assets to a third party. Therefore, assets with a carrying value of approximately $20 million were written down to their fair value, resulting in a $16.1 million impairment charge in 2010.
Pension Withdrawal Expense
Over the past three years, certain events, such as amendments to various collective bargaining agreements, resulted in withdrawals from multiemployer pension plans. These actions along with a reduction in covered employees have resulted in us estimating withdrawal liabilities to the respective plans for our proportionate share of any unfunded vested benefits. We recorded an estimated charge for pension plan withdrawal obligations of $4.2 million in 2011 and $6.3 million in 2010. There were nominal charges in 2012 for withdrawal obligations related to our multiemployer pension plans. Our multiemployer pension plan withdrawal liability was approximately $109 million as of December 30, 2012, and $100 million as of December 25, 2011. This liability represents the present value of the obligations related to complete and partial withdrawals from certain plans, as well as an estimate of future partial withdrawals that we considered probable and reasonably estimable. For the plans that have yet to provide us with a demand letter, the actual liability will not be known until those plans complete a final assessment of the withdrawal liability and issue a demand to us. Therefore, the estimate of our multiemployer pension plan liability will be adjusted as more information becomes available that allows us to refine our estimates.
NON-OPERATING ITEMS
Income from Joint Ventures
As of December 30, 2012, we had investments in Metro Boston, two paper mills (Malbaie and Madison) and quadrantONE that were accounted for under the equity method. Our proportionate share of the operating results of these investments is recorded in “Income from joint ventures” in our Consolidated Statements of Operations. See Note 7 of the Notes to the Consolidated Financial Statements for additional information regarding these investments.
In 2012, we had income from joint ventures of $3.0 million compared with $28,000 in 2011. Joint venture results in 2012 were primarily impacted by improved results from the paper mills and the sale of our ownership interest in Fenway Sports Group. We changed the accounting for our ownership interest in Fenway Sports Group from the equity method to the cost method after the sale of a portion of our ownership interest in February 2012 reduced our influence on the operations of Fenway Sports Group. Therefore, starting in February 2012, we no longer recognized our proportionate share of the operating results of Fenway Sports Group in joint venture results in our Consolidated Statements of Operations.


THE NEW YORK TIMES COMPANY – P. 33


In 2011, we had income from joint ventures of $28,000 compared with $19.0 million in 2010. In 2010, we recorded a pre-tax gain of $12.7 million from the sale of an asset at one of the paper mills in which we have an investment. Our share of the pre-tax gain, after eliminating the noncontrolling interest portion, was $10.2 million. The $12.7 million gain is included in “Income from joint ventures” in our Consolidated Statements of Operations. Excluding this gain, joint venture results in 2011 were negatively impacted by Fenway Sports Group’s acquisition of Liverpool Football Club, mainly due to the amortization expense associated with the purchase, offset in part by improved results driven by higher paper selling prices at both paper mills in which we have investments.
Gain on Sale of Investments
2012
In the fourth quarter of 2012, Indeed.com, a search engine for jobs in which we had an ownership interest, was sold. The proceeds from the sale of our interest were approximately $167 million and we recognized a pre-tax gain of $164.6 million.
In the first quarter of 2012, we sold 100 of our units in Fenway Sports Group for an aggregate price of $30.0 million, resulting in a pre-tax gain of $17.8 million, and in the second quarter of 2012, we sold our remaining 210 units for an aggregate price of $63.0 million, resulting in a pre-tax gain of $37.8 million.
2011
In the third quarter of 2011, we sold 390 of our units in Fenway Sports Group, resulting in a pre-tax gain of $65.3 million.
In the first quarter of 2011, we sold a minor portion of our interest in Indeed.com, resulting in a pre-tax gain of $5.9 million.
2010
In the second quarter of 2010, we recognized a pre-tax gain of $9.1 million resulting from the sale of 50 of our units in Fenway Sports Group.
Impairment of Investments
In 2012, we recorded non-cash impairment charges of $5.5 million to reduce the carrying value of certain investments to fair value. The impairment charges were primarily related to our investment in Ongo Inc., a consumer service for reading and sharing digital news and information from multiple publishers.
Premium on Debt Redemption
On August 15, 2011, we prepaid in full all $250.0 million outstanding aggregate principal amount of the 14.053% Notes. The prepayment totaled approximately $280 million, comprising (1) the $250.0 million aggregate principal amount of the 14.053% Notes, (2) approximately $3 million representing all interest that was accrued and unpaid on the 14.053% Notes, and (3) a make-whole premium amount of approximately $27 million due in connection with the prepayment. We funded the prepayment from available cash. As a result of this prepayment, we recorded a $46.4 million pre-tax charge in the third quarter of 2011 and expect to save in excess of $39 million annually in interest expense through January 15, 2015, the original maturity date.
Interest Expense, Net
Interest expense, net, was as follows:
 
 
Years Ended
(In thousands)
 
December 30,
2012

 
December 25,
2011

 
December 26,
2010

Cash interest expense
 
$
58,726

 
$
79,187

 
$
79,349

Non-cash amortization of discount on debt
 
4,516

 
6,933

 
7,251

Capitalized interest
 
(17
)
 
(427
)
 
(299
)
Interest income
 
(410
)
 
(450
)
 
(1,239
)
Total interest expense, net
 
$
62,815

 
$
85,243

 
$
85,062

    


P. 34 – THE NEW YORK TIMES COMPANY


Interest expense, net decreased in 2012 compared with 2011 mainly due to the prepayment in August 2011 of the 14.053% Notes and our payment at maturity in September 2012 of all $75.0 million outstanding aggregate principal amount of the 4.610% Notes, offset in part by charges related to the termination of our revolving credit facility in 2012 and a charge related to the repurchase of $5.9 million principal amount of our 5.0% senior unsecured notes due in 2015.
We had lower interest expense in 2011 compared with 2010 due to the prepayment in August 2011 of our 14.053% Notes. However, this was more than offset by higher interest expense in connection with the issuance of the $225.0 million aggregate principal amount of our 6.625% senior unsecured notes due December 15, 2016 (“6.625% Notes”) in November 2010 and lower interest income from a loan to a third-party, which was repaid in October 2010.
Income Taxes
We had income tax expense of $103.5 million on pre-tax income of $263.3 million in 2012. Our effective tax rate was 39.3% in 2012. The effective tax rate for 2012 was favorably affected by a lower income tax rate on the sale of our ownership interest in Indeed.com.
We had income tax expense of $31.9 million on pre-tax income of $83.2 million in 2011. Our effective tax rate was 38.4% in 2011. The effective tax rate for 2011 was favorably affected by approximately $12 million for the reversal of reserves for uncertain tax positions, primarily due to the lapse of applicable statutes of limitations.
We had income tax expense of $33.3 million on pre-tax income of $88.4 million in 2010. Our effective tax rate was 37.7% in 2010. The effective tax rate for 2010 was favorably affected by approximately $22 million for the reversal of reserves for uncertain tax positions due to the closing of tax audits and the lapse of applicable statutes of limitations and unfavorably affected by an $11.4 million tax charge as described below.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, which were enacted in 2010, eliminated the tax deductibility of certain retiree health-care costs, beginning January 1, 2013, to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare Part D. Because the future anticipated retiree health-care liabilities and related subsidies were already reflected in our financial statements, this legislation required us to reduce the related deferred tax asset recognized in our financial statements. As a result, we recorded a tax charge of $11.4 million in 2010 for the reduction in future tax benefits for retiree health benefits resulting from the federal health-care legislation enacted in 2010.
Discontinued Operations
About Group
On September 24, 2012, we completed the sale of the About Group, consisting of About.com, ConsumerSearch.com, CalorieCount.com and related businesses, to IAC/InterActiveCorp. for $300.0 million in cash, plus a net working capital adjustment of approximately $17 million. The sale resulted in a pre-tax gain of $96.7 million ($61.9 million after-tax). The net after-tax proceeds from the sale were approximately $291 million.
The results of operations of the About Group, which had previously been presented as a reportable segment, have been classified as discontinued operations for all periods presented.
Regional Media Group
On January 6, 2012, we completed the sale of the Regional Media Group, consisting of 16 regional newspapers, other print publications and related businesses, to Halifax Media Holdings LLC for approximately $140 million in cash. The net after-tax proceeds from the sale, including a tax benefit, were approximately $150 million. The sale resulted in an after-tax gain of $23.6 million (including post-closing adjustments recorded in the second and fourth quarters of 2012 totaling $6.6 million).
The results of operations for the Regional Media Group, which had previously been included in the News Media Group reportable segment, have been classified as discontinued operations for all periods presented.


THE NEW YORK TIMES COMPANY – P. 35


Discontinued operations are summarized in the following charts:
 
Year Ended December 30, 2012
(In thousands)
About Group
 
Regional Media Group
 
Total
Revenues
$
74,970

 
$
6,115

 
$
81,085

Total operating costs
51,140

 
8,017

 
59,157

Impairment of goodwill
194,732

 

 
194,732

Pre-tax loss
(170,902
)
 
(1,902
)
 
(172,804
)
Income tax benefit
(60,065
)
 
(736
)
 
(60,801
)
Loss from discontinued operations, net of income taxes
(110,837
)
 
(1,166
)
 
(112,003
)
Gain/(loss) on sale, net of income taxes:
 
 
 
 
 
Gain/(loss) on sale
96,675

 
(5,441
)
 
91,234

Income tax expense/(benefit)(1)
34,785

 
(29,071
)
 
5,714

Gain on sale, net of income taxes
61,890

 
23,630

 
85,520

(Loss)/income from discontinued operations, net of income taxes
$
(48,947
)
 
$
22,464

 
$
(26,483
)
(1)
The income tax benefit for the Regional Media Group included a tax deduction for goodwill, which was previously non-deductible, triggered upon the sale of the Regional Media Group.
 
Year Ended December 25, 2011
(In thousands)
About Group
 
Regional Media Group
 
Total
Revenues
$
110,826

 
$
259,945

 
$
370,771

Total operating costs
67,475

 
235,032

 
302,507

Impairment of assets
3,116

 
152,093

 
155,209

Pre-tax income/(loss)
40,235

 
(127,180
)
 
(86,945
)
Income tax expense/(benefit)(1)
15,453

 
(10,879
)
 
4,574

Income/(loss) from discontinued operations, net of income taxes
$
24,782

 
$
(116,301
)
 
$
(91,519
)
(1)
The income tax benefit for the Regional Media Group was unfavorably impacted because a portion of the goodwill impairment charge was non-deductible.
 
Year Ended December 26, 2010
(In thousands)
About Group
 
Regional Media Group
 
WQXR-FM(1)
Total
Revenues
$
136,077

 
$
276,659

 
$

$
412,736

Total operating costs
74,570

 
249,354

 

323,924

Pre-tax income
61,507

 
27,305

 

88,812

Income tax expense
24,416

 
10,783

 

35,199

Income from discontinued operations, net of income taxes
37,091

 
16,522

 

53,613

Gain on sale, net of income taxes:
 
 
 
 
 
 
Gain on sale

 

 
16

16

Income tax expense

 

 
3

3

Gain on sale, net of income taxes

 

 
13

13

Income from discontinued operations, net of income taxes
$
37,091

 
$
16,522

 
$
13

$
53,626

(1)
In October 2009, we completed the sale of WQXR-FM, a New York City classical radio station. In 2010, we recorded post-closing adjustments to the gain on the sale of WQXR-FM.


P. 36 – THE NEW YORK TIMES COMPANY


Impairment of Assets
2012
Our policy is to perform our annual goodwill impairment test in the fourth quarter of our fiscal year. However, due to certain impairment indicators at the About Group, we performed an interim impairment test as of June 24, 2012. The interim impairment test resulted in a $194.7 million non-cash charge in the second quarter of 2012 for the impairment of goodwill at the About Group. Our expectations for future operating results and cash flows at the About Group in the long term were lower than our previous estimates, primarily driven by a reassessment of the sustainability of our estimated long-term growth rate for display advertising. The reduction in our estimated long-term growth rate resulted in the carrying value of the net assets being greater than their fair value, and therefore a write-down of goodwill to its fair value was required.
2011
About Group
Our 2011 annual impairment test, which was completed in the fourth quarter, resulted in a non-cash impairment charge of $3.1 million relating to the write-down of an intangible asset at ConsumerSearch, Inc., which was part of the About Group. The impairment was driven by lower cost-per-click advertising revenues. This impairment charge reduced the carrying value of the ConsumerSearch trade name to approximately $3 million. The fair value of the trade name was calculated using a relief-from-royalty method.
Regional Media Group
Due to certain impairment indicators at the Regional Media Group, including lower-than-expected operating results, we performed an interim impairment test of goodwill as of June 26, 2011. The interim test resulted in an impairment of goodwill of $152.1 million mainly from lower projected long-term operating results and cash flows of the Regional Media Group, primarily due to the continued decline in print advertising revenues. These factors resulted in the carrying value of the net assets being greater than their fair value, and therefore a write-down to fair value was required. The impairment charge reduced the carrying value of goodwill at the Regional Media Group to zero.
In determining the fair value of the Regional Media Group, we made significant judgments and estimates regarding the expected severity and duration of the uneven economic environment and the secular changes affecting the newspaper industry in the Regional Media Group markets. The effect of these assumptions on projected long-term revenues, along with the continued benefits from reductions to the group’s cost structure, played a significant role in calculating the fair value of the Regional Media Group.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The following table presents information about our financial position.
Financial Position Summary