-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K6DAEVnxzOXaI4ZTgSKUBc3KbPdnizGoOhlBuYHnvbRtHh7DqSw0MpgwIPXO7H9p kID9EMlG2/ShXnZjoPxiAw== 0001005477-00-002185.txt : 20000315 0001005477-00-002185.hdr.sgml : 20000315 ACCESSION NUMBER: 0001005477-00-002185 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991226 FILED AS OF DATE: 20000314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW YORK TIMES CO CENTRAL INDEX KEY: 0000071691 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 131102020 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-05837 FILM NUMBER: 569279 BUSINESS ADDRESS: STREET 1: 229 W 43RD ST CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2125561234 MAIL ADDRESS: STREET 1: 229 W 43RD STREET CITY: NEW YORK STATE: NY ZIP: 10036 10-K 1 FORM 10-K ================================================================================ 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 26, 1999 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 (I.R.S. Employer incorporation or organization) Identification No.) 229 West 43rd Street, New York, N.Y. 10036 (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: Name of each exchange on Title of each class 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 (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| 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. |_| The aggregate market value of Class A Common Stock held by non-affiliates as of February 28, 2000, was approximately $5.76 billion. As of such date, non-affiliates held 93,870 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 28, 2000, was as follows: 171,847,239 shares of Class A Common Stock and 847,158 shares of Class B Common Stock. Document incorporated by reference Part -------------------------------- ---- Proxy Statement for the 2000 Annual Meeting of Stockholders..... III ================================================================================ INDEX TO THE NEW YORK TIMES COMPANY 1999 FORM 10-K ----------------- PART I Item No. Page - ------- ---- 1. Business.............................................................. 1 Introduction........................................................ 1 Newspapers.......................................................... 1 The New York Times................................................ 1 Circulation..................................................... 1 Advertising..................................................... 2 Production and Distribution..................................... 2 Related Businesses.............................................. 3 New England Newspaper Group....................................... 4 The Boston Globe................................................ 4 Circulation................................................... 4 Advertising................................................... 4 Production and Distribution................................... 5 Regional Newspapers............................................... 5 Times Company Digital............................................. 5 Broadcasting........................................................ 6 Magazines........................................................... 7 Investments......................................................... 7 Forest Products Investments and Other Joint Venture................. 7 Forest Product Investments........................................ 7 Other Joint Venture............................................... 8 Raw Materials....................................................... 8 Competition ....................................................... 9 Employees........................................................... 9 Labor Relations................................................... 9 2. Properties............................................................ 11 3. Legal Proceedings..................................................... 11 4. Submission of Matters to a Vote of Security Holders................... 12 Executive Officers of the Registrant................................ 12 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................................................... 13 6. Selected Financial Data............................................... 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 13 8. Financial Statements and Supplementary Data........................... 13 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................. 14 PART III 10. Directors and Executive Officers of the Registrant.................... 14 11. Executive Compensation................................................ 14 12. Security Ownership of Certain Beneficial Owners and Management........ 14 13. Certain Relationships and Related Transactions........................ 14 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....... 14 1 PART I 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 diversified media company including newspapers, television and radio stations, magazines, electronic information and publishing, Internet businesses, and forest products investments. Financial information about industry segments is incorporated by reference to Note 17 to the Consolidated Financial Statements on page F-32 of this report. The Company currently classifies its businesses into the following segments: o Newspapers: The New York Times ("The Times"); the New England Newspaper Group, consisting of The Boston Globe, a daily newspaper, the Boston Sunday Globe (both editions, "The Globe") and the Worcester Telegram & Gazette, in Worcester, Massachusetts (acquired January 7, 2000); 18 other daily and three non-daily newspapers in Alabama, California, Florida, Louisiana, North Carolina and South Carolina ("Regional Newspapers"); newspaper distributors in the New York City and Boston metropolitan areas; news, photo and graphics services and news and features syndication; TimesFax; The New York Times Index; and licensing of electronic databases and microform, CD-ROM products, and the trademarks and copyrights of The Times and The Globe. Additionally, Times Company Digital, a division of the Company but not a separate segment for financial reporting purposes in 1999, operates the Company's major Internet businesses, which include the following Web sites: NYTimes.com (www.nytimes.com); Boston.com (www.boston.com), NYToday.com (www.nytoday.com), WineToday.com (www.winetoday.com), GolfDigest.com (www.golfdigest.com) and Abuzz (www.abuzz.com). The financial results of all of these Internet businesses, except GolfDigest.com, are included in the results of the Newspaper Group. The financial results of GolfDigest.com are included in the results of the Magazine Group. o Broadcasting: television stations WREG-TV in Memphis, Tennessee; WTKR-TV in Norfolk, Virginia; KFOR-TV in Oklahoma City, Oklahoma; WNEP-TV in Scranton, Pennsylvania; WHO-TV in Des Moines, Iowa; WHNT-TV in Huntsville, Alabama; WQAD-TV in Moline, Illinois; and KFSM-TV in Fort Smith, Arkansas; and radio stations WQXR(FM) and WQEW(AM) in New York City. o Magazines: Golf Digest, Golf World and Golf Shop Operations. o Forest Products Investments and Other Joint Ventures: Minority equity interests in a Canadian newsprint company and a supercalendered paper manufacturing partnership in Maine, and a one-half interest in the International Herald Tribune. NEWSPAPERS The Newspaper Group segment consists of two categories: Newspapers (consisting of The Times, the New England Newspaper Group, 21 Regional Newspapers, newspaper distributors, and certain related businesses) and Times Company Digital, of which the following Web sites are included in the results of the Newspaper Group for 1999: NYTimes.com, Boston.com, NYToday.com, WineToday.com, and Abuzz.com. The New York Times Circulation The Times is a standard-size daily (Monday through Saturday) and Sunday newspaper which commenced publication in 1851. The Times is circulated in each of the 50 states, the District of Columbia and worldwide. Approximately 60% of the weekday (Monday through Friday) circulation is sold in the 31 counties that make up the greater New York City area, which 2 includes New York City, Westchester and parts of upstate New York, Connecticut and New Jersey; 40% is sold elsewhere. On Sundays, approximately 56% of the circulation is sold in the greater New York City area and 44% elsewhere. According to reports filed with the Audit Bureau of Circulations ("ABC"), an independent agency that audits the circulation of most U.S. newspapers and magazines, for the six-month period ended September 30, 1999, of all seven-day United States newspapers, The Times's daily circulation was the largest and its Sunday circulation was the largest. The Times's average weekday and Sunday circulations for the two 12-month periods ended September 30, 1998, and September 30, 1999, as audited by ABC (except as indicated), are shown in the table below: Weekday (Mon. - Fri.) Sunday --------------------- ------ (Thousands of copies) 1999 (unaudited)..................... 1,109.7 1,671.2 1998................................. 1,088.1 1,638.9 Approximately 60% of the weekday circulation and 55% of the larger Sunday circulation were sold through home and office delivery in 1999. During the year ended December 26, 1999, the average weekday circulation of The Times increased approximately 16,100 copies above 1998 to approximately 1,110,200 copies and the average Sunday circulation increased by approximately 23,300 copies above 1998 to approximately 1,668,100 copies. Advertising Total advertising volume in The Times for the two years ended December 27, 1998, and December 26, 1999, as measured by The Times, is shown in the table below. The "National" heading in the table below includes such categories as entertainment, financial, magazine and general advertising.
Full Run ------------------------------------ Preprint Retail National Classified Zoned Total(1) Copies Inches Inches Inches Inches Inches Distributed ------ -------- ---------- ------- -------- ----------- (Inches and Preprints in Thousands) 1999....................... 567.3 1,582.1 984.1 1,015.7 4,149.2 427,857 1998....................... 587.2 1,392.7 996.9 1,019.6 3,996.4 343,070
The table includes volume for The New York Times Magazine, which published 3,651 pages of advertising in 1999, compared with 3,176 pages in 1998. Advertising rates for The Times increased an average of 6% in January 1999, and 7% in January 2000. Based on recent data provided by Competitive Media Reporting, Inc., an independent agency that measures advertising sales volume and estimates advertising revenue, and The Times's internal analysis, The Times believes that it ranks first by a substantial margin in advertising revenue in the general weekday and Sunday newspaper field in the New York City metropolitan area. Production and Distribution Generally, The Times is printed at its production and distribution facilities in Edison, New Jersey, and Flushing, New York, as well as the regional print sites described below. The Edison and Flushing facilities print all sections of the weekday and Sunday newspapers (except The New York Times Magazine and the Sunday Television section) for distribution in the New York metropolitan area. Both facilities have the capacity to print in color and have modern, automated presses, packaging and distribution equipment. - ---------- (1) All totals exclude preprint inches. 3 The Times has agreements with two commercial printing companies to print its Sunday Television section and The New York Times Magazine. The editions of The Times distributed outside of the New York City area are printed under contract at the following sites: Region(1) Print Sites ------------------------------------------------------------------------- Midwest Chicago, IL; Canton, OH ------------------------------------------------------------------------- Northeast Billerica, MA(2); Springfield, VA ------------------------------------------------------------------------- Southeast Atlanta, GA; Ft. Lauderdale, FL; Lakeland, FL(3) ------------------------------------------------------------------------- Southwest Austin, TX; Phoenix, AZ ------------------------------------------------------------------------- West Torrance and Concord, CA; Tacoma, WA; Denver, CO(4) ------------------------------------------------------------------------- The Times currently has agreements with various newspapers and other delivery agents located in the United States and Canada to deliver The Times in their respective markets and, in some cases, to expand current markets. The agreements include various arrangements for delivery on Sundays and daily to homes and newsstands. A subsidiary of the Company, City & Suburban Delivery Systems, Inc. ("City & Suburban"), operates a wholesale newspaper distribution business that distributes The Times and other newspapers and periodicals in New York City, Long Island (New York), the counties of Westchester (New York) and Fairfield (Connecticut) and New Jersey. Approximately 85% of The Times's single-copy daily circulation and 82% of its single-copy Sunday circulation in the New York City metropolitan area are delivered by City & Suburban. Approximately 86% of The Times's daily home-delivered circulation and 90% of its Sunday home-delivered circulation in the New York City metropolitan area are delivered to depots by City & Suburban. Related Businesses Name Description of Business - -------------------------------------------------------------------------------- Business Information Services Produces online computer databases and The New York Times Index, a print publication Licenses LEXIS/NEXIS, Dow Jones Business Information Services, Bell & Howell Information and Learning, The Dialog Corp., Online Computer Library Center and Reuters to store, market and distribute the Company's online computer databases Also licenses Bell & Howell Information and Learning to produce and sell The New York Times Index and The Times on microfilm and CD-ROM - -------------------------------------------------------------------------------- The New York Times News Services Division: - -------------------------------------------------------------------------------- The New York Times News Service Transmits articles, graphics and photographs from The Times, The Globe and other publications to approximately 650 newspapers and magazines in the United States and in more than 50 countries worldwide - -------------------------------------------------------------------------------- The New York Times Syndicate Markets other supplemental news services and feature material, graphics and photographs from The Times and other leading news sources to newspapers and magazines around the world - -------------------------------------------------------------------------------- NYT Television Pursues certain programming ventures utilizing The Times and other content - -------------------------------------------------------------------------------- - ---------- (1) Most advance sections of the Sunday newspaper distributed in these areas are printed at Edison, New Jersey, Flushing, New York, and Concord, California. (2) At The Globe. (3) At the Company's regional newspaper, The Ledger. (4) Commenced in 2000. 4 New England Newspaper Group The Boston Globe The Globe is owned and published by the Company's subsidiary, Globe Newspaper Company, Inc. ("The Globe" may also be used to refer to Globe Newspaper Company, Inc.). On January 7, 2000, the Company acquired the Worcester Telegram & Gazette ("Worcester"), in Worcester, Massachusetts. Commencing in the year 2000, The Globe and Worcester will be divisions of the Company's New England Newspaper Group. Circulation The Globe is a standard-size daily (Monday through Saturday) and Sunday newspaper which commenced publication in 1872, and was acquired by the Company in 1993. The Globe is distributed throughout New England, although its circulation is concentrated in the Boston metropolitan area. According to ABC reports, as of September 26, 1999, the weekday (Monday through Friday) circulation of The Globe was the 14th largest of any weekday newspaper; circulation of the Sunday edition was the tenth largest of any Sunday newspaper published in the United States; and its daily and Sunday circulation was the largest of all newspapers published in either Boston or New England. The Globe's average weekday and Sunday paid circulation for the two 12-month periods ended March 28, 1999, and March 29, 1998, as audited by ABC, are shown in the table below: Weekday (Mon. - Fri.) Sunday --------------------- ------ (Thousands of copies) 1999...................................... 470.0 741.2 1998...................................... 474.9 754.0 During the year ended December 26, 1999, the average weekday circulation of The Globe decreased approximately 1,000 copies below 1998 to approximately 468,900 copies and the average Sunday circulation decreased by approximately 16,700 copies below 1998 to approximately 728,500 copies. Approximately 74% of the weekday circulation and 64% of the larger Sunday circulation were sold through home or office delivery; the remainder were sold primarily on newsstands. Advertising The Globe's total advertising volume by category of advertising for the two years ended December 26, 1999, for all editions, as measured by The Globe, is set forth below:
Full Run ------------------------------------ Preprint Retail National Classified Zoned Total(1) Copies Inches Inches Inches Inches Inches Distributed ------ -------- ---------- ------ -------- ----------- (Inches and Preprints in Thousands) 1999 ...................... 667.5 753.1 1,354.3 256.2 3,031.1 801,842 1998....................... 701.9 697.4 1,350.5 278.9 3,028.7 787,016
Advertising rates in each category of advertising were adjusted in 1999. The latest increase in certain retail advertising rates occurred on September 1, 1999. Increases in classified and national advertising rates were effective as of April 1, 1999, and July 1, 1999. These rate increases ranged from 2% to 6%. - ---------- (1) All totals exclude preprint inches. 5 Based on information supplied by major daily newspapers published in New England and assembled by the New England Newspaper Association, Inc., for the 12-month period ending December 26, 1999, The Globe ranked first in advertising inches among all newspapers published in Boston and New England. Production and Distribution All editions of The Globe are printed and prepared for delivery at its main Boston plant or its Billerica, Massachusetts, satellite plant. Virtually all of The Globe's home-delivered circulation is delivered through The Globe's distribution subsidiary, Community Newsdealers, Inc. Direct single-copy distribution by The Globe and its subsidiary Retail Sales, Inc. accounted for 65% and 58% of the average weekday and Sunday single-copy distribution in 1999. Regional Newspapers The Company currently owns 18 daily and in most cases, Sunday, and three non-daily smaller-city newspapers. Daily Newspapers - ----------------------------------------------------------------------------- The Gadsden Times (Ala.) The Gainesville Sun (Fla.) The Tuscaloosa News (Ala.) The Ledger (Lakeland, Fla.) Times Daily (Florence, Ala.) Daily World (Opelousas, La.) Santa Barbara News-Press (Calif.) The Courier (Houma, La.) The Press Democrat (Santa Rosa, Calif.) The Daily Comet (Thibodaux, La.) Daily News (Palatka, Fla.) The Dispatch (Lexington, N.C.) Lake City Reporter (Fla.) Times-News (Hendersonville, N.C.) Sarasota Herald-Tribune (Fla.) Wilmington Morning Star (N.C.) Star-Banner (Ocala, Fla.) Spartanburg Herald-Journal (S.C.) Non-Daily Newspapers - --------------------------------------- Marco Island Eagle (Fla.) The News-Leader (Fernandina Beach, Fla.) The News-Sun (Sebring/Avon Park, Fla.) The Regional Newspapers' circulation for the years ended December 26, 1999, and December 27, 1998, is shown in the table below: Daily Weekday Non-Daily Sunday(1) ------------- --------- --------- (Thousands of Copies) 1999................. 732.7 32.4 779.5 1998................. 736.8 32.6 787.6 Advertising volume, stated on the basis of six columns per page, was 16,187,100 inches in 1999, compared with 16,073,900 inches in 1998. Preprints distributed in 1999 were 1,115,303,000, compared with 1,082,712,000 in 1998. On February 17, 2000, the Company made a decision to offer for sale the Santa Barbara News-Press, the Daily World, the Daily News, the Lake City Reporter, The News-Sun, The News-Leader and the Marco Island Eagle. Times Company Digital Times Company Digital operates the Company's major Internet businesses, which include the following Web sites: - -------------------------------------------------------------------------------- NYTimes.com Exclusive Internet access to the complete contents of The Times, plus enhanced features, regularly updated breaking news and The New York Times Learning Network, an offering to parents, students and teachers of grades 3-12 (www.nytimes.com/learning). - -------------------------------------------------------------------------------- NYToday.com Information concerning life in New York City, including neighborhood news, classifieds and entertainment and restaurant reviews and listings. - -------------------------------------------------------------------------------- - ---------- (1) Includes fourteen daily newspapers and does not include one non-daily newspaper with a Sunday edition. 6 - -------------------------------------------------------------------------------- Boston.com Information concerning Boston and New England and featuring exclusive Internet access to the complete contents of The Globe. - -------------------------------------------------------------------------------- WineToday.com News and information about wine, including a searchable database containing expert tastings of over 5,000 wines from around the world. - -------------------------------------------------------------------------------- GolfDigest.com Custom news, features and instructional information for golfers featuring exclusive Internet access to the complete contents of Golf Digest, Golf World and Golf Digest Woman. - -------------------------------------------------------------------------------- Abuzz.com Community-building question and answer Web site featuring the Abuzz technology. - -------------------------------------------------------------------------------- In July 1999, the Company acquired Abuzz Technologies, Inc., which has developed techniques for directing information queries to the persons most capable of answering them and archiving the resulting communication dialogue for future use. BROADCASTING The Company's television and radio stations are operated under licenses from the Federal Communications Commission ("FCC") and are subject to FCC regulations. Radio and television license renewals are now normally granted for terms of eight years. Station License Expiration Date ------------------------------------------------------------------- WTKR-TV (Norfolk, Va.) October 1, 2004 ------------------------------------------------------------------- WHNT-TV (Huntsville, Ala.) April 1, 2005 KFSM-TV (Ft. Smith, Ark.) June 1, 2005 WREG-TV (Memphis, Tenn.) August 1, 2005 WQAD-TV (Moline, Ill.) December 1, 2005 ------------------------------------------------------------------- WHO-TV (Des Moines, Iowa) February 1, 2006 KFOR-TV (Oklahoma City, Okla.) June 1, 2006 ------------------------------------------------------------------- WNEP-TV (Scranton, Penn.) August 1, 2007 ------------------------------------------------------------------- WQXR(FM) (New York, NY) June 1, 2006 WQEW(AM) (New York, NY) June 1, 2006 ------------------------------------------------------------------- The Company anticipates that its future applications for renewal of its station licenses will result in the licenses being renewed for eight-year periods. All of the television stations have three principal sources of revenue: local advertising sold to advertisers in the immediate geographic areas of the stations, national spot advertising (sold to national clients by individual stations rather than networks), and compensation paid by the networks for carrying commercial network programs. Market's Network Station Nielsen Ranking(1) Affiliation Band ---------------------------------------------------------------------- WREG-TV 40 CBS VHF ---------------------------------------------------------------------- WTKR-TV 42 CBS VHF ---------------------------------------------------------------------- KFOR-TV 45 NBC VHF ---------------------------------------------------------------------- WNEP-TV 51 ABC UHF(2) ---------------------------------------------------------------------- WHO-TV 70 NBC VHF ---------------------------------------------------------------------- WHNT-TV 82 CBS UHF(2) ---------------------------------------------------------------------- WQAD-TV 88 ABC VHF ---------------------------------------------------------------------- KFSM-TV 118 CBS VHF ---------------------------------------------------------------------- - ---------- (1) According to Nielsen Media Research, a research company that measures audiences for television stations. (2) All other stations in this market are also in the UHF band. 7 The Company's two radio stations serve the New York City metropolitan area. WQXR(FM) is currently the only commercial classical music station serving this market, which is the nation's largest radio audience. In December 1998, the Company entered into a Time Brokerage Agreement with ABC, Inc., under which ABC, Inc. is providing substantially all of the programming for WQEW(AM) for an eight-year period. Under a separate option agreement, ABC, Inc. has acquired the right to purchase WQEW(AM) at the end of the eight-year period. MAGAZINES The Magazine Group segment includes: Magazines (including those publications set forth in the table below) and related activities in the golf field. As of December 26, 1999, the Company published the magazines listed in the chart below:
Percentage Percentage Increase Increase (Decrease) in (Decrease) in Average Advertising Subject/ Average Circulation Advertising Pages Magazine Frequency Audience Rate Base Circulation(1) Over 1998 Pages(2) Over 1998 - -------------------- ------------------ -------- --------- ----------- ------------- ----------- ------------- Golf Digest Monthly Golf 1,550,000 1,553,900 0.4 1,540 10.7 Golf World 46 issues per year Golf 150,000 158,000 (1.3) 1,299 (1.7) Golf Shop Operations 10 issues per year Golf trade 17,500(3) 17,700 (0.6) 858 (19.3)
Times Company Digital, a division of the Company (described above), operates GolfDigest.com. In 2000, Golf Digest Woman will be launched as a separate publication. INVESTMENTS The Company has minority equity investments in: - -------------------------------------------------------------------------------- TheStreet.com An online provider of financial and investment news and commentary. - -------------------------------------------------------------------------------- Classified Ventures A national online network providing classified advertising through both nationally branded and local affiliate Web sites. - -------------------------------------------------------------------------------- CareerPath.com An employment database on the Internet. - -------------------------------------------------------------------------------- OVATION A visual and performing arts cable television network. - -------------------------------------------------------------------------------- WineShopper.com First Web site to offer nationwide wine sales. - -------------------------------------------------------------------------------- FOREST PRODUCTS INVESTMENTS AND OTHER JOINT VENTURE The Company has ownership interests in one newsprint mill and one supercalendered (glossy paper used in magazines) paper mill (the "Forest Products Investments") and the International Herald Tribune. Forest Products Investments The Company has a 49% equity interest in a Canadian newsprint company, Donohue Malbaie Inc. ("Malbaie"). The other 51% is owned by Donohue, Inc. ("Donohue"), a publicly-traded Canadian company whose voting shares are controlled by Quebecor, a Canadian publishing company. On February 11, 2000, Abitibi-Consolidated, Inc. announced that it will offer to purchase all of the shares of Donohue and that Quebecor has agreed to sell its shares to Abitibi-Consolidated Inc. Malbaie purchases pulp from Donohue and manufactures newsprint from this raw material on the paper machine it owns within the Donohue paper mill at Clermont, Quebec. Malbaie is wholly dependent upon Donohue for its pulp. In 1999 Malbaie - ---------- (1) As reported by the publisher to ABC or the Business Publications Association. (2) As reported by the publisher to Publisher's Information Bureau ("PIB"); or, in the case of Golf Shop Operations, as calculated by the publisher using the same methodology as for PIB. (3) For this trade publication, the average print order is disclosed as the applicable measure for advertisers. 8 produced 216,000 metric tons of newsprint, 52,000 tons of which were sold to the Company, with the balance sold to Donohue for resale. The Company has an equity interest in a partnership operating a supercalendered paper mill in Maine, Madison Paper Industries ("Madison"). The Company's interest in Madison is 40%. Madison produces supercalendered paper at its facility in Madison, Maine. Madison purchases all of its wood from local suppliers, mostly under long-term contracts. In 1999 Madison produced 175,000 metric tons, 12,000 tons of which were sold to the Company. The debt of Malbaie and Madison is not guaranteed by the Company. Malbaie and Madison are subject to comprehensive environmental protection laws, regulations and orders of provincial, federal, state and local authorities of Canada or 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 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, the Company believes that Malbaie and Madison are in substantial compliance with such Environmental Laws and Governmental Authorizations. Other Joint Venture The Company and The Washington Post Company each own a one-half interest in the International Herald Tribune S.A.S., which publishes the International Herald Tribune. The newspaper is edited in Paris and printed in Athens, Bangkok, Bologna, Frankfurt, Hong Kong, Jakarta, Kuala Lumpur, London, Madrid, Marseille, New York, Paris, Singapore, Tel Aviv, The Hague, Tokyo, Toulouse and Zurich. RAW MATERIALS The primary raw materials used by the Company are newsprint and supercalendered and coated paper. Neither the Company nor any of its businesses is dependent on any one supplier of paper. In 1999 and 1998, the Company used the following types and quantities of paper (all amounts in metric tons): Coated, Supercalendered Publication Newsprint and Other Paper --------------------------------------------------------------------- 1999 1998 1999 1998 --------------------------------------------------------------------- The Times(1) 322,000 312,000 26,000 22,000 --------------------------------------------------------------------- The Globe(1) 141,000 141,000 4,000 4,000 --------------------------------------------------------------------- Regional Newspapers 100,500 98,500 -- -- --------------------------------------------------------------------- Magazine Group -- -- 10,200 9,900 --------------------------------------------------------------------- Total 563,500 551,500 40,200 35,900 --------------------------------------------------------------------- The paper used by The Times, The New York Times Magazine, The Globe, the Regional Newspapers and the magazines published by the Magazine Group was purchased under long-term contracts with unrelated suppliers and related suppliers in which the Company holds equity interests (see "Forest Products Investments"). - ---------- (1) The Times and The Globe use coated, supercalendered or other paper for The New York Times Magazine and The Globe's Sunday Magazine. 9 COMPETITION The Times competes with newspapers of general circulation in New York City and its suburbs, as well as with national publications such as The Wall Street Journal and USA Today. The Times also competes with magazines, television, radio, direct mail, the Internet and other media. The Globe competes with other daily, weekly and national newspapers distributed in Boston, its neighboring suburbs and the greater New England region, including, among others, The Boston Herald (daily and Sunday). The Globe also competes with other communications media, such as direct mail, magazines, radio, the Internet and television. The Regional Newspapers and the International Herald Tribune compete with a variety of other advertising media in their respective markets. The magazines published by the Company compete directly with other golfing publications as well as with general interest magazines and other media, primarily broadcast and cable television. All of the Company's television stations compete directly with other television stations in their respective markets and with other video services, such as cable network programming carried on local cable systems and satellite-to-home systems and, to a lesser extent, with the Internet. WQXR(FM) competes for listeners with WNYC(FM) (a non-commercial station) for the classical music audience and for listeners and revenues with many adult-audience commercial radio stations and other media in New York City and surrounding suburbs. The New York Times Syndicate's operations compete with several other syndicated features and supplemental news services. EMPLOYEES As of December 26, 1999, the Company had approximately 13,400 full-time equivalent employees. The Times 4,900 The Globe 3,200 Regional Newspapers 3,500 Broadcast Group 900 Magazine Group 200 Times Company Digital 300 Corporate/Shared Service Center 400 ------ Total Company 13,400 ====== Labor Relations Approximately 3,690 full-time equivalent employees of The Times and City & Suburban are represented by 16 unions for collective bargaining purposes. Approximately 30 employees of Times Company Digital are represented by the Newspaper Guild of New York. The Times has collective bargaining agreements in effect through at least March 30, 2003, with all of its unions except: the New York Mailers' Union and the Paperhandlers' Union, both of which have contracts expiring March 30, 2000, that cover approximately 430 full-time production employees; and the International Brotherhood of Electricians, which has a contract expiring March 30, 2002, that covers approximately five full-time maintenance employees. City & Suburban's collective bargaining agreement with its drivers' union expires March 30, 2008; its six agreements with its truck maintenance and building maintenance unions (covering approximately 37 full-time employees) expire in 2000; and its agreement with its support staff union (covering approximately 14 full-time employees) expired in 1995. City & Suburban is in the process of negotiating successor agreements. 10 The Times's agreement with its printing pressmens' union (which covers approximately 450 production employees) provides that wages for the 2000-2005 period are to be negotiated by the parties. If the negotiations do not result in an agreement, the issue of wages for this period is to be submitted to binding arbitration for resolution. Approximately 2,100 full-time equivalent employees of The Globe are represented by 12 unions. In 1999 The Globe concluded its negotiations with the Boston Globe Employees Association, an affiliate of The Newspaper Guild representing non-production employees, for a three-year contract effective January 1, 1998 through December 31, 2000. The Globe has a six-year contract with Boston Mailers Union No. 1 which extends until December 31, 2001. The Globe concluded negotiations with five other production unions, one for a three-year contract effective January 1, 1999, through December 31, 2001, a second for a four-year contract effective January 1, 1999, through December 31, 2002, two for six-year contracts effective January 1, 1999, through December 31, 2004, and one for a ten-year contract effective January 1, 1997, through December 31, 2006, with a provision permitting at specified times after December 31, 2002, negotiation of wages. Four other production unions have contracts that expired December 31, 1998. Negotiations have commenced for successor contracts. The Globe expects to conclude these negotiations during 2000. One other production union has a contract that continues to be in effect through December 31, 2001. This contract is open for negotiation of wages. The Globe expects to complete negotiation on this contract during 2000. Approximately one-fourth of the 655 full-time equivalent employees of Worcester are represented by four unions. Contracts with three production unions expire October 8, 2000, August 31, 2002, and November 30, 2002, respectively. The Providence Newspaper Guild was certified as the bargaining agent for newsroom employees in 1993. Negotiations are ongoing. The Company cannot predict the timing or the outcome of the various negotiations described above. Two other entities owned by the Company (The Press Democrat and WQXR(FM)) also have collective bargaining agreements covering certain of their employees. 11 ITEM 2. Properties. The general character, location, terms of occupancy and approximate size of the Company's principal plants and other materially important properties at December 26, 1999, are listed below. General Character Approximate Area in Approximate Area in of Property Square Feet (Owned) Square Feet (Leased) ------------------------------------------------------------------------- Newspaper Publishing: ------------------------------------------------------------------------- Printing plants, business and editorial offices, garages and warehouse space located in: ------------------------------------------------------------------------- New York, NY 714,000 107,500 ------------------------------------------------------------------------- Flushing, NY -- 515,000(1) ------------------------------------------------------------------------- Edison, NJ -- 1,300,000(2) ------------------------------------------------------------------------- Boston, MA 652,000 -- ------------------------------------------------------------------------- Billerica, MA 290,000 -- ------------------------------------------------------------------------- Westwood, MA 115,000 -- ------------------------------------------------------------------------- Other locations 1,324,600 548,000 ------------------------------------------------------------------------- Broadcasting ------------------------------------------------------------------------- Business offices, studios and transmitters at various locations 324,820 26,725 ------------------------------------------------------------------------- Magazine Publishing 87,000 34,500 ------------------------------------------------------------------------- Total 3,507,420 2,531,725 ------------------------------------------------------------------------- ITEM 3. Legal Proceedings. There are various legal actions that have arisen in the ordinary course of business and are now pending against the Company. 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 legal counsel to the Company that the ultimate liability which might result from such actions will not have a material adverse effect on the consolidated financial statements. - ---------- (1) The Company is leasing a 31-acre site in Flushing, New York, where its printing and distribution plant is located, and has the option to purchase the property at any time prior to the end of the lease in 2019. (2) The Edison production and distribution facility is occupied pursuant to a long-term lease with renewal and purchase options. 12 ITEM 4. Submission of Matters to a Vote of Security Holders. Not applicable. Executive Officers of the Registrant
Employed By Position(s) As Of Name Age Registrant Since March 13, 2000 - --------------------------- --- ---------------- -------------------------------------------------------------------- Corporate Officers Arthur Sulzberger, Jr. 48 1978 Chairman (since 1997) and Publisher of The Times (since 1992) Russell T. Lewis 52 1966(1) President (since 1996) and Chief Executive Officer (since 1997); Chief Operating Officer (1996 to 1997); President and General Manager of The Times (1993 to 1996) Michael Golden 50 1984 Vice Chairman and Senior Vice President (since 1997); Vice President, Operations Development (1996 to 1997); Executive Vice President, Sports/Leisure Magazines and Publisher of Tennis (1994 to 1995) Cynthia H. Augustine 42 1986(2) Senior Vice President (since 1998), Human Resources; Partner in Sabin, Bermant and Gould LLP (1994 to 1998) John M. O'Brien 57 1960 Senior Vice President and Chief Financial Officer (since 1998); Senior Vice President (1996 to 1998), Operations; Executive Vice President (1992 to 1996) and Deputy General Manager (1991 to 1996) of The Times Solomon B. Watson IV 55 1974 Senior Vice President (since 1996); Vice President (1990 to 1996); General Counsel (since 1989) Laura J. Corwin 55 1980 Vice President (since 1997); Secretary (since 1989) and Corporate Counsel (1993 to 1997) James C. Lessersohn 45 1987 Vice President and Treasurer (since 1999); Vice President, Corporate Planning (1997 to 1999); Managing Director, Corporate Planning (1994 to 1997) Stuart Stoller 44 1996 Vice President and Corporate Controller (since 1996); Controller of Coopers and Lybrand L.L.P. (1995); Senior Vice President, Control and Accounting, of R. H. Macy & Co., Inc. (1993 to 1995)
- ---------- (1) Mr. Lewis left the Company in 1973 and returned in 1977. (2) Ms. Augustine left the Company in 1993 and returned in 1998. 13
Employed By Position(s) As Of Name Age Registrant Since March 13, 2000 - --------------------------- --- ---------------- -------------------------------------------------------------------- Operating Unit Executives Leonard P. Forman 54 1974(1) President and Chief Executive Officer, The New York Times Company Magazine Group, Inc. (since 1998); Senior Vice President (1996-1998), Corporate Development, New Ventures and Electronic Businesses; President and Chief Executive Officer of NYNEX/Newsday electronic service joint venture (1995) Richard H. Gilman 49 1983 Publisher of The Globe (since 1999); Senior Vice President, Operations (1993 to 1998) and Circulation (1998 to 1999) of The Times Lynn O. Matthews 55 1973 President and Chief Operating Officer, The New York Times Company Regional Newspaper Group (since 2000); Publisher, Sarasota Herald-Tribune (1991-2000) Martin A. Nisenholtz 44 1995 Chief Executive Officer, Times Company Digital, Inc. (since 1999); President, The New York Times Electronic Media Company (1995-1999); Corporate Director, Content Strategy, Ameritech Corporation (1994 to 1995) C. Frank Roberts 56 1970 Vice President, Broadcasting (since 1986); President, The New York Times Company Broadcast Group (since 1985) Janet L. Robinson 49 1983 President and General Manager of The Times (since 1996); Senior Vice President, Advertising of The Times (1995-1996); Vice President (1993-1995) and Director (1994-1995) of Advertising of The Times
PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters. The information required by this item appears at page F-40 of this Form 10-K. ITEM 6. Selected Financial Data. The information required by this item appears at page F-1 of this Form 10-K. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information required by this item appears at pages F-3 to F-12 of this Form 10-K. ITEM 8. Financial Statements and Supplementary Data. The information required by this item appears at pages F-13 to F-37 and page F-39 to F-40 of this Form 10-K. - ---------- (1) Mr. Forman left the Company in 1986 and returned in 1996. 14 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III ITEM 10. Directors and Executive Officers of the Registrant. In addition to the information set forth under the caption "Executive Officers of the Registrant" in Part I of this Form 10-K, the information required by this item is incorporated by reference to the sections entitled "Section 16(a) Beneficial Ownership Reporting Compliance," "Proposal Number 1 - Election of Directors," and "Interest of Directors in Certain Transactions of the Company," but only up to and not including the section entitled "Certain Information About the Board of Directors," of the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders. ITEM 11. Executive Compensation. The information required by this item is incorporated by reference to the sections entitled "Compensation of Directors; Liability and Reimbursement Insurance" and "Compensation of Executive Officers," but only up to and not including the section entitled "Performance Presentation," of the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this item is incorporated by reference to the sections entitled "Solicitation of Proxies," "Voting Securities of The Company," "Principal Holders of Common Stock," "Security Ownership of Management," "Section 16(a) Beneficial Ownership Reporting Compliance," "The 1997 Trust," and "Globe Voting Trust" of the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders. ITEM 13. Certain Relationships and Related Transactions. The information required by this item is incorporated by reference to the sections entitled "Interest of Directors in Certain Transactions of the Company," "Compensation of Executive Officers," but only up to and not including the section entitled "Performance Presentation," of the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders. PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (A) DOCUMENTS FILED AS PART OF THIS REPORT (1) Financial Statements and Supplemental Schedules (a) The Consolidated Financial Statements of the Company are filed as part of this Form 10-K and are set forth on pages F-13 to F-37. The report of Deloitte & Touche LLP, Independent Auditors, dated January 28, 2000 (February 17, 2000, as to Note 18), is set forth on page F-38 of this Form 10-K. (b) The following additional consolidated financial information is filed as part of this Form 10-K and should be read in conjunction with the Consolidated Financial Statements set forth on pages F-13 to F-37. Schedules not included with this additional consolidated financial information have been omitted either because they are not applicable or because the required information is shown in the Consolidated Financial Statements at the aforementioned pages. 15
Page ---- Ratio of Earnings to Fixed Charges....................................... Exhibit 12 Independent Auditors' Consent............................................ Exhibit 23 Consolidated Schedules for the Three Years Ended December 26, 1999: II--Valuation and Qualifying Accounts............................... S-1
Separate financial statements and supplemental schedules of associated companies accounted for by the equity method are omitted in accordance with the provisions of Rule 3-09 of Regulation S-X. (2) Exhibits (3.1) Certificate of Incorporation as amended and restated to reflect amendments effective June 19, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (3.2) By-laws as amended through May 21, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (4) The Company agrees to furnish to the Commission upon request a copy of any instrument with respect to long-term debt of the Company and any subsidiary for which consolidated or unconsolidated financial statements are required to be filed, and for which the amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. (9.1) Globe Voting Trust Agreement, dated as of October 1, 1993, as amended effective October 1, 1995 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.1) The Company's Executive Incentive Compensation Plan as amended through December 20, 1990 (filed as an Exhibit to the Company's Form 10-K dated March 1, 1991, and incorporated by reference herein). (10.2) The Company's 1991 Executive Stock Incentive Plan, as amended through December 16, 1999. (10.3) The Company's 1991 Executive Cash Bonus Plan, as amended through April 15, 1999 (filed as an Exhibit to the Company's 10-Q dated May 12, 1999, and incorporated by reference herein). (10.4) The Company's Non-Employee Directors' Stock Option Plan, as amended through December 16, 1999. (10.5) The Company's Supplemental Executive Retirement Plan, as amended and restated through January 1, 1993 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.6) Amendment No. 1, dated May 1, 1997, to the Company's Supplemental Executive Retirement Plan (filed as an Exhibit to the Company's Form 10-Q dated March 30, 1997, and incorporated by reference herein). (10.7) Lease (short form) between the Company and Z Edison Limited Partnership, dated April 8, 1987 (filed as an Exhibit to the Company's Form 10-K dated March 27, 1988, and incorporated by reference herein). (10.7.1) Amendment to Lease between the Company and Z Edison Limited Partnership, dated May 14, 1997 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.7.2) Second Amendment to Lease between the Company and Z Edison Limited Partnership, dated June 30, 1998 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.8) Agreement of Lease, dated as of December 15, 1993, between The City of New York, Landlord, and the Company, Tenant (as successor to New York City Economic Development Corporation (the "EDC"), pursuant to an Assignment and Assumption of Lease With Consent, made as of December 15, 1993, between the EDC, as 16 Assignor, to the Company, as Assignee) (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.9) Funding Agreement #1, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.10) Funding Agreement #2, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.11) Funding Agreement #3, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.12) Funding Agreement #4, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.13) New York City Public Utility Service Power Service Agreement, made as of May 3, 1993, between The City of New York, acting by and through its Public Utility Service, and The New York Times Newspaper Division of the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.14) Employment Agreement, dated May 19, 1993, between API, Globe Newspaper Company and William O. Taylor (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.15) API's 1989 Stock Option Plan (filed as Annex F-1 to API's Proxy Statement-Joint Prospectus, dated as of April 28, 1989, contained in API's Registration Statement on Form S-4 (Registration Statement No. 33-28373) declared effective April 28, 1989, and incorporated by reference herein). (10.16) Globe Newspaper Company, Inc. Supplemental Executive Retirement Plan, as amended effective December 16, 1998 (filed as an Exhibit to the Company's Form 10-K dated February 26, 1999, and incorporated by reference herein). (10.17) API's 1990 Stock Option Plan (Restated 1991) (filed as Exhibit 1 to API's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1991 (Commission File No. 1-10251), and incorporated by reference herein). (10.18) The Company's Deferred Executive Compensation Plan, as amended effective December 8, 1999. (10.19) The Company's Non-Employee Directors Deferral Plan (filed as an Exhibit to the Company's Form 10-Q dated November 12, 1997, and incorporated by reference herein). (10.20) Distribution Agreement, dated as of September 24, 1998, by and among the Company, Morgan Stanley & Co., Incorporated, Chase Securities Inc. and Salomon Smith Barney Inc. (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.21) Exchange Rate Agency Agreement, dated as of September 24, 1998, by and between the Company and Morgan Stanley Dean Witter (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.22) Calculation Agent Agreement, dated as of September 24, 1998, by and between the Company and The Chase Manhattan Bank (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.23) Employment Agreement, dated as of September 1, 1999, between the Company and Martin Nisenholtz. (12) Ratio of Earnings to Fixed Charges. 17 (21) Subsidiaries of the Company. (23) Consent of Deloitte & Touche LLP. (27) Financial Data Schedules. (B) REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the fiscal year ended December 26, 1999. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 14, 2000 (Registrant) THE NEW YORK TIMES COMPANY By: /S/ LAURA J. CORWIN --------------------------------------------- Laura J. Corwin, Vice President and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- ARTHUR OCHS SULZBERGER Chairman Emeritus, Director March 14, 2000 ARTHUR SULZBERGER, JR. Chairman, Director (Principal March 14, 2000 Executive Officer) RUSSELL T. LEWIS Chief Executive Officer, March 14, 2000 President and Director MICHAEL GOLDEN Vice Chairman, Senior Vice March 14, 2000 President and Director JOHN F. AKERS Director March 14, 2000 BRENDA C. BARNES Director March 14, 2000 RAUL E. CESAN Director March 14, 2000 RICHARD L. GELB Director March 14, 2000 ROBERT A. LAWRENCE Director March 14, 2000 ELLEN R. MARRAM Director March 14, 2000 JOHN M. O'BRIEN Senior Vice President and March 14, 2000 Chief Financial Officer (Principal Financial Officer) CHARLES H. PRICE II Director March 14, 2000 HENRY B. SCHACHT Director March 14, 2000 DONALD M. STEWART Director March 14, 2000 STUART STOLLER Vice President, Corporate March 14, 2000 Controller (Principal Accounting Officer) JUDITH P. SULZBERGER Director March 14, 2000 EXHIBIT INDEX Exhibit Number Description - ------- ----------- (3.1) Certificate of Incorporation as amended and restated to reflect amendments effective June 19, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (3.2) By-laws as amended through May 21, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (4) The Company agrees to furnish to the Commission upon request a copy of any instrument with respect to long-term debt of the Company and any subsidiary for which consolidated or unconsolidated financial statements are required to be filed, and for which the amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. (9.1) Globe Voting Trust Agreement, dated as of October 1, 1993, as amended effective October 1, 1995 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.1) The Company's Executive Incentive Compensation Plan as amended through December 20, 1990 (filed as an Exhibit to the Company's Form 10-K dated March 1, 1991, and incorporated by reference herein). (10.2) The Company's 1991 Executive Stock Incentive Plan, as amended through December 16, 1999. (10.3) The Company's 1991 Executive Cash Bonus Plan, as amended through April 15, 1999 (filed as an Exhibit to the Company's 10-Q dated May 12, 1999, and incorporated by reference herein). (10.4) The Company's Non-Employee Directors' Stock Option Plan, as amended through December 16, 1999. (10.5) The Company's Supplemental Executive Retirement Plan, as amended and restated through January 1, 1993 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.6) Amendment No. 1, dated May 1, 1997, to the Company's Supplemental Executive Retirement Plan (filed as an Exhibit to the Company's Form 10-Q dated March 30, 1997, and incorporated by reference herein). (10.7) Lease (short form) between the Company and Z Edison Limited Partnership, dated April 8, 1987 (filed as an Exhibit to the Company's Form 10-K dated March 27, 1988, and incorporated by reference herein). (10.7.1) Amendment to Lease between the Company and Z Edison Limited Partnership, dated May 14, 1997 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.7.2) Second Amendment to Lease between the Company and Z Edison Limited Partnership, dated June 30, 1998 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.8) Agreement of Lease, dated as of December 15, 1993, between The City of New York, Landlord, and the Company, Tenant (as successor to New York City Economic Development Corporation (the "EDC"), pursuant to an Assignment and Assumption of Lease With Consent, made as of December 15, 1993, between the EDC, as Assignor, to the Company, as Assignee) (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.9) Funding Agreement #1, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.10) Funding Agreement #2, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.11) Funding Agreement #3, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.12) Funding Agreement #4, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.13) New York City Public Utility Service Power Service Agreement, made as of May 3, 1993, between The City of New York, acting by and through its Public Utility Service, and The New York Times Newspaper Division of the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.14) Employment Agreement, dated May 19, 1993, between API, Globe Newspaper Company and William O. Taylor (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.15) API's 1989 Stock Option Plan (filed as Annex F-1 to API's Proxy Statement-Joint Prospectus, dated as of April 28, 1989, contained in API's Registration Statement on Form S-4 (Registration Statement No. 33-28373) declared effective April 28, 1989, and incorporated by reference herein). (10.16) Globe Newspaper Company, Inc. Supplemental Executive Retirement Plan, as amended effective December 16, 1998 (filed as an Exhibit to the Company's Form 10-K dated February 26, 1999, and incorporated by reference herein). (10.17) API's 1990 Stock Option Plan (Restated 1991) (filed as Exhibit 1 to API's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1991 (Commission File No. 1-10251), and incorporated by reference herein). (10.18) The Company's Deferred Executive Compensation Plan, as amended effective December 8, 1999. (10.19) The Company's Non-Employee Directors Deferral Plan (filed as an Exhibit to the Company's Form 10-Q dated November 12, 1997, and incorporated by reference herein). (10.20) Distribution Agreement, dated as of September 24, 1998, by and among the Company, Morgan Stanley & Co., Incorporated, Chase Securities Inc. and Salomon Smith Barney Inc. (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.21) Exchange Rate Agency Agreement, dated as of September 24, 1998, by and between the Company and Morgan Stanley Dean Witter (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.22) Calculation Agent Agreement, dated as of September 24, 1998, by and between the Company and The Chase Manhattan Bank (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.23) Employment Agreement, dated as of September 1, 1999, between the Company and Martin Nisenholtz. (12) Ratio of Earnings to Fixed Charges. (21) Subsidiaries of the Company. (23) Consent of Deloitte & Touche LLP. (27) Financial Data Schedules. THE NEW YORK TIMES COMPANY 1999 Financial Report - ------------------------------------------------------------------------------- Contents Page - ------------------------------------------------------------------------------- Selected Financial Data................................................. F-1 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. F-3 Consolidated Statements of Income....................................... F-13 Consolidated Balance Sheets............................................. F-14 Consolidated Statements of Cash Flows................................... F-16 Consolidated Statements of Stockholders' Equity......................... F-18 Notes to the Consolidated Financial Statements.......................... F-19 Independent Auditors' Report............................................ F-38 Management's Responsibilities Report.................................... F-38 Quarterly Information................................................... F-39 Market Information...................................................... F-40 Ten-Year Supplemental Financial Data.................................... F-41 F-1 SELECTED FINANCIAL DATA
Years Ended -------------------------------------------------------------------------- December 26, December 27, December 28, December 29, December 31, (In thousands, except per share and employee data) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- REVENUES AND INCOME Revenues $ 3,130,629 $ 2,936,705 $ 2,866,418 $ 2,628,271 $ 2,428,124 Operating profit 571,282 515,220 455,102 173,280 232,749 Income before income taxes and extraordinary item 538,464 505,520 437,365 197,909 233,839 Extraordinary item, net of tax - debt extinguishment(1) -- (7,716) -- -- -- Net income 310,177 278,914 262,301 84,534 135,860 - ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Property, plant and equipment - net $ 1,218,396 $ 1,326,196 $ 1,366,931 $ 1,358,029 $ 1,266,609 Total assets 3,495,802 3,465,109 3,623,183 3,539,871 3,389,704 Long-term debt and capital lease obligations 598,327 597,818 535,428 636,632 637,873 Common stockholders' equity 1,448,658 1,531,470 1,729,297 1,623,523 1,610,437 - ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OF COMMON STOCK Basic earnings per share Earnings before extraordinary item $ 1.77 $ 1.52 $ 1.36 $ .43 $ .70 Extraordinary item, net of tax - debt extinguishment(1) -- (.04) -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 1.77 $ 1.48 $ 1.36 $ .43 $ .70 - ----------------------------------------------------------------------------------------------------------------------------------- Diluted earnings per share Earnings before extraordinary item $ 1.73 $ 1.49 $ 1.33 $ .43 $ .70 Extraordinary item, net of tax - debt extinguishment(1) -- (.04) -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 1.73 $ 1.45 $ 1.33 $ .43 $ .70 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends $ .41 $ .37 $ .32 $ .29 $ .28 Common stockholders' equity $ 8.08 $ 7.94 $ 8.77 $ 8.25 $ 8.27 - ----------------------------------------------------------------------------------------------------------------------------------- KEY RATIOS Operating profit to revenues(2) 19% 18% 16% 12% 10% Return on average common stockholders' equity(2) 21% 17% 15% 11% 8% Return on average total assets(2) 9% 8% 7% 5% 4% Long-term debt and capital lease obligations to total capitalization 29% 28% 24% 28% 28% Current assets to current liabilities .91 .82 .92 .74 .91 - ----------------------------------------------------------------------------------------------------------------------------------- FULL-TIME EQUIVALENT EMPLOYEES 13,400 13,200 13,100 12,800 12,300 - -----------------------------------------------------------------------------------------------------------------------------------
All earnings per share amounts for special items on the following page are the same for basic and diluted earnings per share unless otherwise noted. (1) See Note 7 of the Notes to the Consolidated Financial Statements. (2) Key operating ratios exclude special items from income as noted on page F-2. F-2 Income used in computing the key operating ratios on page F-1 exclude the following special items: 1999 This item reduced earnings per share by $.05. o The Company recorded a $15.5 million pre-tax charge ($8.9 million after-tax) principally for work force reduction charges ("Buyouts") at The Boston Globe (see Note 9 of the Notes to the Consolidated Financial Statements). 1998 These items reduced earnings per share by $.03. o The Company recorded a $4.6 million pre-tax gain ($2.6 million after-tax) from the sale of equipment (see Note 2 of the Notes to the Consolidated Financial Statements). o The Company recorded a $7.7 million after-tax extraordinary item in connection with its repurchase of $78.1 million of its $150.0 million, 8.25% notes due in 2025 (see Note 7 of the Notes to the Consolidated Financial Statements). o The Company recorded an $8.0 million pre-tax gain ($4.5 million after-tax) from the satisfaction of a post-closing requirement related to the sale of assets of its tennis, sailing and ski magazines in 1997 (see Note 2 of the Notes to the Consolidated Financial Statements). o The Company recorded a $5.4 million pre-tax charge ($3.1 million after-tax) for Buyouts (see Note 9 of the Notes to the Consolidated Financial Statements). 1997 These items increased earnings per share by $.07. o The Company recorded an $18.0 million favorable tax adjustment resulting from the completion of its federal income tax audits for periods through 1992 (see Note 8 of the Notes to the Consolidated Financial Statements). o The Company recorded aggregate pre-tax gains totaling $10.4 million ($5.7 million after-tax) from the sale of assets of its tennis, sailing and ski magazines and certain small properties, net of costs associated with the exit of a golf tee-time reservation operation (see Note 2 of the Notes to the Consolidated Financial Statements). o The Company recorded a $10.1 million pre-tax noncash charge ($5.7 million after-tax) relating to the adoption of Emerging Issues Task Force Issue No. 97-13, Accounting for Costs Incurred in Connection with a Consulting Contract or an Internal Project That Combines Business Process Reengineering and Information Technology Transformation ("EITF 97-13") (see Note 3 of the Notes to the Consolidated Financial Statements). o The Company recorded an $8.5 million pre-tax charge ($4.7 million after-tax) for Buyouts (see Note 9 of the Notes to the Consolidated Financial Statements). 1996 These items reduced basic earnings per share by $.53 and diluted earnings per share by $.51. o The Company recorded a $126.8 million pre-tax noncash charge ($94.5 million after-tax) relating to Statement of Financial Accounting Standards No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of ("SFAS 121 charge"). o The Company recorded pre-tax gains totaling $32.9 million ($17.5 million after-tax) from the sale of a building and the realization of a gain contingency from the disposition of a paper mill in a prior year. o The Company recorded a $44.1 million pre-tax charge ($24.4 million after-tax) for Buyouts. 1995 These items had no net effect on earnings per share. o The Company recorded a pre-tax gain of $11.3 million ($5.0 million after-tax) from the sale of several small regional newspapers. o The Company recorded a $10.1 million pre-tax charge ($5.9 million after-tax) for Buyouts. F-3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW In 1999 newspapers contributed 92% of the Company's $3.1 billion in revenues, while broadcasting accounted for 5% and magazines accounted for 3%. Advertising revenues were 72% and circulation revenues were 22% of the Company's total revenues in 1999, and newspaper distribution operations and database royalties principally made up the balance. Newsprint is the major component of the Company's cost of raw materials. Newsprint market prices in 1999 decreased from 1998 and are expected to rise in 2000 over 1999 levels. Below is a chart of the Company's consolidated costs and expenses for the three years ended December 26, 1999. All percentages presented below for consolidated costs and expenses include production costs as well as selling, general and administrative expenses. Components of Consolidated Costs and Expenses [The following table was depicted as a bar chart in the printed material.] 1999 1998 1997 ---- ---- ---- Wages and Benefits 42% 41% 42% Raw Materials 13% 15% 14% Other Operating Costs 37% 36% 37% Depreciation & Amortization 8% 8% 7% ---- ---- ---- 100% 100% 100% Consolidated Costs and Expenses as a Percentage of Revenues [The following table was depicted as a bar chart in the printed material.] 1999 1998 1997 ---- ---- ---- Wages and Benefits 35% 34% 36% Raw Materials 10% 12% 11% Other Operating Costs 31% 30% 31% Depreciation & Amortization 6% 6% 6% ---- ---- ---- 82% 82% 84% RESULTS OF OPERATIONS CONSOLIDATED RESULTS The Company's consolidated financial results for 1999, 1998 and 1997 were as follows: - -------------------------------------------------------------------------------- % Change ------------ (In millions, except per share data) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- Revenues $3,130.6 $2,936.7 $2,866.4 6.6 2.5 - -------------------------------------------------------------------------------- Operating profit $ 571.3 $ 515.2 $ 455.1 10.9 13.2 - -------------------------------------------------------------------------------- Income before special items $ 319.1 $ 282.6 $ 249.1 12.9 13.5 Special items (8.9) (3.7) 13.2 * * - -------------------------------------------------------------------------------- Net income $ 310.2 $ 278.9 $ 262.3 11.2 6.3 - -------------------------------------------------------------------------------- Diluted earnings per share before special items $ 1.78 $ 1.48 $ 1.26 20.3 17.5 Special items (.05) (.03) .07 66.7 * - -------------------------------------------------------------------------------- Diluted earnings per share $ 1.73 $ 1.45 $ 1.33 19.3 9.0 - -------------------------------------------------------------------------------- For an explanation of special items, see "Special Items" on page F-5. All references to earnings per share in this Management's Discussion and Analysis of Financial Condition and Results of Operations are to diluted earnings per share. Years presented each comprise 52 weeks. *Represents percentages greater than or equal to 100%. Revenues were $3.1 billion in 1999, up 6.6% from $2.9 billion in 1998. In 1998 revenues were up 2.5% from $2.9 billion in 1997. On a comparable basis, adjusted for dispositions, revenues increased 4.3% in 1998. The effect of dispositions on revenues in 1999 was nominal. Revenues in 1999 improved mostly as a result of higher advertising rates, increased advertising volume and an improved advertising mix. Revenues in 1998 improved as a result of higher advertising rates and volume. Operating profit for 1999 increased 10.9% to $571.3 million from $515.2 million in 1998. Operating profit for 1999, exclusive of special items, rose 12.7% to $586.7 million from $520.6 million in 1998. The increases were mainly due to higher advertising revenues and lower newsprint expense at the Company's newspapers. In 1998 operating profit rose 13.2% to $515.2 million from $455.1 million in 1997. Operating profit for 1998, exclusive of special items, rose 9.9% to $520.6 million from $473.7 million in 1997. The improvement in operating profit was mainly due to higher advertising revenues at the Company's newspapers and tighter cost controls throughout the Company, despite higher newsprint expense. F-4 Net income for 1999 increased 11.2% to $310.2 million from $278.9 million in 1998. Net income for 1999, exclusive of special items, rose 12.9% to $319.1 million from $282.6 million in 1998. The increases were primarily attributable to higher advertising revenues and lower newsprint expense. Net income in 1998 increased 6.3% to $278.9 million from $262.3 million in 1997. Net income for 1998, exclusive of special items, rose 13.5% to $282.6 million from $249.1 million in 1997. The increases in net income were primarily attributable to higher advertising revenues. The Company's consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) for 1999 increased 7.9% to $786.7 million. EBITDA for 1999 increased 9.9% to $802.1 million, excluding special items. EBITDA for 1998 rose 11.6% to $729.4 million from $653.4 million. Excluding special items, EBITDA for 1998 rose 10.3% to $729.9 million from $661.6 million in 1997. EBITDA is presented because it is a widely accepted indicator of funds available to service debt, although it is not a measure of liquidity or of financial performance under generally accepted accounting principles ("GAAP"). The EBITDA presented may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. OPERATING EXPENSES Consolidated operating expenses were as follows: - -------------------------------------------------------------------------------- % Change ----------------- (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- Production costs Raw materials $ 321.4 $ 354.9 $ 324.7 (9.4) 9.3 Wages and benefits 621.3 608.2 584.0 2.2 4.1 Other 436.1 418.1 381.8 4.3 9.5 - -------------------------------------------------------------------------------- Total production costs 1,378.8 1,381.2 1,290.5 (0.2) 7.0 - -------------------------------------------------------------------------------- Selling, general and administrative expenses 1,180.5 1,040.3 1,120.8 13.5 (7.2) - -------------------------------------------------------------------------------- Total $2,559.3 $2,421.5 $2,411.3 5.7 0.4 - -------------------------------------------------------------------------------- Production costs for 1999 were flat compared to 1998 at $1.4 billion. Lower newsprint expense was primarily offset by higher compensation and contracted printing costs associated with The New York Times newspaper's national expansion. In 1998 production costs increased 7.0% to $1.4 billion. That increase was mainly due to higher newsprint expense offset by lower costs as a result of the divestiture of certain properties. Selling, general and administrative ("SGA") expenses for 1999, exclusive of special items, increased 14.4% to $1.2 billion from 1998, principally as a result of higher incentive compensation tied to improved earnings, increased costs associated with The New York Times newspaper's national expansion and higher promotional spending. SGA expenses for 1998, exclusive of special items, decreased 8.2% to $1.0 billion from $1.1 billion in 1997, principally from lower compensation and promotional costs and lower costs as a result of the divestiture of certain properties in 1997. OTHER ITEMS Joint Ventures Income from joint ventures decreased to $17.9 million in 1999 from $21.0 million in 1998. In 1998 income from joint ventures increased to $21.0 million from $14.0 million in 1997. The fluctuations year over year are primarily a result of varying levels of paper prices at the mills in which the Company has equity interests. Interest Expense Interest expense, net increased to $50.7 million in 1999 from $43.3 million in 1998. The increase was principally due to additional borrowings to fund the Company's share repurchase program. In 1998 interest expense, net increased to $43.3 million from $42.1 million in 1997. The increase was primarily the result of a reduction in capitalized interest, partially offset by lower interest expense on long-term borrowings. Total interest income and capitalized interest were $1.8 million in 1999, $3.8 million in 1998 and $8.3 million in 1997. Taxes The Company's annual effective income tax rates were 42.4% in 1999, 43.3% in 1998 and 44.1% in 1997. These effective income tax rates exclude the tax effects of special items. The decline in the effective income tax rates was primarily attributable to lower state and local income taxes. EARNINGS PER SHARE Diluted earnings per share in 1999 were $1.78, up 20.3% from $1.48 in 1998, and up 17.5% from $1.26 in 1997, excluding special items. The increases were mostly due to stronger advertising revenues in the Newspaper Group and lower outstanding share levels resulting from the Company's share repurchase program. Diluted earnings per share as reported in the Company's Consolidated Statements of Income were $1.73 in 1999, $1.45 in 1998 and $1.33 in 1997. The effect of repurchases on diluted earnings per share was an increase to earnings per share of $.07 in 1999 and $.05 in 1998. The average basic Class A and Class B common shares outstanding were 175.6 million in 1999, 188.8 million in 1998 and 193.0 million in 1997. The average diluted Class A and Class B common shares outstanding were 179.2 million in 1999, 192.8 million in 1998 and 197.2 million in 1997. F-5 SPECIAL ITEMS Over the past three years, the Company has realized gains on the disposition of certain assets and favorably settled a federal tax audit. The Company also recorded expenses for a noncash accounting charge, Buyouts, and a debt extinguishment (see Note 7 of the Notes to the Consolidated Financial Statements). These items were as follows: 1999 This item reduced net income by $8.9 million and earnings per share by $.05. o A $15.5 million pre-tax charge principally for Buyouts at The Boston Globe (see Note 9 of the Notes to the Consolidated Financial Statements). 1998 These items reduced net income by $3.7 million and earnings per share by $.03. o A $4.6 million pre-tax gain from the sale of equipment. This gain increased earnings per share by $.01 (see Note 2 of the Notes to the Consolidated Financial Statements). o A $7.7 million after-tax extraordinary charge in connection with the Company's repurchase of $78.1 million of its $150.0 million, 8.25% notes due in 2025. This charge reduced earnings per share by $.04 (see Note 7 of the Notes to the Consolidated Financial Statements). o An $8.0 million pre-tax gain from the satisfaction of a post-closing requirement related to the 1997 sale of the Company's assets of its tennis, sailing and ski magazines. This gain increased earnings per share by $.02 (see Note 2 of the Notes to the Consolidated Financial Statements). o A $5.4 million pre-tax charge for Buyouts: $2.5 million (The Boston Globe), $3.0 million (Magazine Group), $1.9 million (Broadcast Group) offset by a reversal of $2.0 million (Corporate). This charge reduced earnings per share by $.02 (see Note 9 of the Notes to the Consolidated Financial Statements). 1997 These items increased net income by $13.2 million and earnings per share by $.07. o A $10.4 million pre-tax gain from the sale of assets of the Company's tennis, sailing and ski magazines and certain small properties, net of costs associated with the exit of a golf tee-time reservation operation. This gain increased earnings per share by $.03 (see Note 2 of the Notes to the Consolidated Financial Statements). o A $10.1 million pre-tax charge resulting from a noncash charge relating to the adoption of EITF 97-13. This charge reduced earnings per share by $.03 (see Note 3 of the Notes to the Consolidated Financial Statements). o An $18.0 million after-tax gain resulting from a favorable tax adjustment from the completion of the Company's federal income tax audits for periods through 1992. This gain increased earnings per share by $.09 (see Note 8 of the Notes to the Consolidated Financial Statements). o An $8.5 million pre-tax charge for Buyouts: $7.5 million (Newspaper Group) and $1.0 million (Corporate). This charge reduced earnings per share by $.02 (see Note 9 of the Notes to the Consolidated Financial Statements). F-6 OPERATING SEGMENT INFORMATION REVENUES, EBITDA AND OPERATING PROFIT Consolidated revenues, EBITDA and operating profit by business segment were as follows: - -------------------------------------------------------------------------------- % Change (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- Revenues Newspapers $2,869.9 $2,664.4 $2,557.1 7.7 4.2 Broadcast 150.1 151.2 144.5 (0.7) 4.6 Magazines 110.6 121.1 164.8 (8.7) (26.5) - -------------------------------------------------------------------------------- Total segment revenues $3,130.6 $2,936.7 $2,866.4 6.6 2.5 - -------------------------------------------------------------------------------- EBITDA Newspapers $ 724.9 $ 644.3 $ 594.2 12.5 8.4 Broadcast 63.2 62.8 57.3 0.7 9.6 Magazines 19.4 17.7 21.0 9.4 (15.5) - -------------------------------------------------------------------------------- Total Segment EBITDA $ 807.5 $ 724.8 $ 672.5 11.4 7.8 - -------------------------------------------------------------------------------- Operating Profit Newspapers $ 556.3 $ 477.8 $ 434.1 16.4 10.1 Broadcast 45.8 45.1 39.4 1.6 14.6 Magazines 18.1 22.1 28.3 (18.4) (22.0) Unallocated corporate expenses (48.9) (29.8) (46.7) (64.0) 36.1 - -------------------------------------------------------------------------------- Total segment operating profit $ 571.3 $ 515.2 $ 455.1 10.9 13.2 - -------------------------------------------------------------------------------- Newspaper Group For the years presented, the Newspaper Group includes The New York Times ("The Times"), The Boston Globe ("The Globe"), 21 regional newspapers ("The Regionals"), newspaper distributors, a news service, a features syndicate, TimesFax, licensing operations of the New York Times databases and microfilm and Internet-related ventures. The Company acquired certain assets and liabilities of the Worcester Telegram & Gazette on January 7, 2000, and the related results of operations are not included herein. Beginning in 2000 the Worcester Telegram & Gazette and The Globe will be presented as the New England Newspaper Group. Internet-related revenues and operating losses are principally from NYTimes.com, NYToday.com, Boston.com, WineToday.com, Abuzz and Web sites of The Regionals. See "Proposed Public Offering of Securities" on page F-9 for additional information regarding the Company's Internet Operations. - -------------------------------------------------------------------------------- % Change (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- Revenues Newspapers $2,839.4 $2,646.9 $2,546.0 7.3 4.0 Internet 30.5 17.5 11.1 74.7 57.4 - -------------------------------------------------------------------------------- Total revenues $2,869.9 $2,664.4 $2,557.1 7.7 4.2 - -------------------------------------------------------------------------------- EBITDA Newspapers $ 741.5 $ 656.1 $ 601.4 13.0 9.1 Internet (16.6) (11.8) (7.2) (41.1) (64.8) - -------------------------------------------------------------------------------- Total EBITDA $ 724.9 $ 644.3 $ 594.2 12.5 8.4 - -------------------------------------------------------------------------------- Operating Profit (Loss) Newspapers $ 577.9 $ 490.8 $ 441.4 17.7 11.2 Internet (21.6) (13.0) (7.3) (65.7) (79.3) - -------------------------------------------------------------------------------- Total Operating Profit $ 556.3 $ 477.8 $ 434.1 16.4 10.1 - -------------------------------------------------------------------------------- The Newspaper Group's operating profit for 1999 rose to $556.3 million, compared with $477.8 million in 1998. For 1999 operating profit rose to $571.6 million, compared with $480.3 million in 1998, excluding special items. The improvement primarily resulted from higher advertising revenues and lower newsprint expense. In 1999 the Company's newsprint expense fell 10.9%, which resulted from a decrease in the cost of newsprint of 12.9% and an increase in consumption of 2.0% due to strong advertising compared with 1998. Revenues grew to $2.9 billion in 1999, up 7.7% from $2.7 billion in 1998. The increase in revenue was primarily due to higher advertising rates and volume and an improved advertising mix. Performance was strongest at The Times and The Globe, where advertising revenues climbed 12.6% and 6.5%. Both newspapers benefited from strong national advertising including increased business from technology companies, and Internet businesses. At The Regionals, advertising revenues were also strong, due in part to the success of Celebrate 2000, a comprehensive program of millennium-related advertising, circulation and promotion initiatives. Across the Newspaper Group there was also a slight increase in circulation revenue. Other revenue increased $10.2 million in 1999 principally due to a special printing project at The Globe. The Newspaper Group's operating profit for 1998 rose to $477.8 million, compared with $434.1 million in 1997. In 1998 operating profit rose to $480.3 million, compared with $441.6 million in 1997, excluding special items. The improvement was mainly from higher advertising revenues and cost containment, despite an increase of 12.9% in newsprint expense. In 1998 the Company's newsprint expense rose 8.8% and consumption increased 4.1% compared with 1997. Revenues grew to $2.7 billion in 1998, up 4.2% from $2.6 billion in 1997. The increases in revenues for 1998 over 1997 were primarily due to higher advertising rates and volume, as well as a slight increase in circulation revenues. F-7 Advertising, circulation and other revenue, by major product of the Newspaper Group, were as follows: - -------------------------------------------------------------------------------- % Change (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- The New York Times Advertising $1,192.0 $1,058.9 $ 989.5 12.6 7.0 Circulation 452.6 440.6 426.0 2.7 3.4 Other 144.4 142.1 144.2 1.6 (1.4) - -------------------------------------------------------------------------------- Total $1,789.0 $1,641.6 $1,559.7 9.0 5.3 - -------------------------------------------------------------------------------- The Boston Globe Advertising $ 477.5 $ 448.2 $ 440.3 6.5 1.8 Circulation 133.7 133.4 134.5 0.2 (0.8) Other 14.0 8.2 7.8 70.7 5.3 - -------------------------------------------------------------------------------- Total $ 625.2 $ 589.8 $ 582.6 6.0 1.2 - -------------------------------------------------------------------------------- Regional Newspapers Advertising $ 362.7 $ 341.7 $ 323.2 6.1 5.7 Circulation 76.9 77.3 77.6 (0.5) (0.4) Other 16.1 14.0 14.0 15.6 -- - -------------------------------------------------------------------------------- Total $ 455.7 $ 433.0 $ 414.8 5.3 4.4 - -------------------------------------------------------------------------------- Total Newspaper Group Advertising $2,032.2 $1,848.8 $1,753.0 9.9 5.5 Circulation 663.2 651.3 638.1 1.8 2.1 Other 174.5 164.3 166.0 6.2 (1.0) - -------------------------------------------------------------------------------- Total $2,869.9 $2,664.4 $2,557.1 7.7 4.2 - -------------------------------------------------------------------------------- Advertising volume for The Times, The Globe and The Regionals was as follows: - -------------------------------------------------------------------------------- (Inches in thousands, preprints in % Change thousands --------------- of copies) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- The New York Times Retail 567.3 587.2 606.8 (3.4) (3.2) National 1,582.1 1,392.7 1,330.8 13.6 4.7 Classified 984.1 996.9 971.1 (1.3) 2.7 Zoned 1,015.7 1,019.6 1,034.6 (0.4) (1.4) - -------------------------------------------------------------------------------- Total 4,149.2 3,996.4 3,943.3 3.8 1.3 - -------------------------------------------------------------------------------- Preprints 427,857 343,070 318,490 24.7 7.7 - -------------------------------------------------------------------------------- The Boston Globe Retail 667.5 701.9 729.6 (4.9) (3.8) National 753.1 697.4 629.6 8.0 10.6 Classified 1,354.3 1,350.5 1,346.1 0.3 0.4 Zoned 256.2 278.9 304.5 (8.2) (8.2) - -------------------------------------------------------------------------------- Total 3,031.1 3,028.7 3,009.8 0.1 0.6 - -------------------------------------------------------------------------------- Preprints 801,842 787,016 729,228 1.9 7.9 - -------------------------------------------------------------------------------- Regional Newspapers Retail 7,575.4 7,884.4 7,830.4 (3.9) 0.7 National 285.0 252.7 274.9 12.8 (8.0) Classified 7,870.3 7,460.4 7,086.7 5.5 5.3 Zoned 456.4 476.4 453.9 (4.2) 4.8 - -------------------------------------------------------------------------------- Total 16,187.1 16,073.9 15,645.9 0.7 2.7 - -------------------------------------------------------------------------------- Preprints 1,115,303 1,082,712 1,013,200 3.0 6.9 - -------------------------------------------------------------------------------- Circulation for The Times, The Globe and The Regionals was as follows: - -------------------------------------------------------------------------------- Weekday Sunday --------------------- ---------------------- (Copies in thousands) 1999 % Change 1999 % Change - -------------------------------------------------------------------------------- Average Circulation The New York Times 1,110.2 1.5 1,668.1 1.4 The Boston Globe 468.9 (0.2) 728.5 (2.2) Regional Newspapers 732.7 (0.6) 779.5 (1.0) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Weekday Sunday --------------------- ---------------------- (Copies in thousands) 1998 % Change 1998 % Change - -------------------------------------------------------------------------------- Average Circulation The New York Times 1,094.1 0.5 1,644.8 (0.4) The Boston Globe 469.9 (1.1) 745.2 (1.3) Regional Newspapers 736.8 0.5 787.6 (0.1) - -------------------------------------------------------------------------------- Circulation growth for The Times was primarily due to additional availability and promotion in major markets across the nation combined with programs to improve the quality and levels of its home delivery circulation base. Additionally, The Times and The Globe have continued to make improvements in delivery and customer service to attract new readers and retain existing ones. These improvements included the use of The Times's and The Globe's Web sites for new subscriptions and customer service. Broadcast Group The Broadcast Group is comprised of eight network-affiliated television stations and two radio stations. - -------------------------------------------------------------------------------- % Change (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- Revenues $150.1 $151.2 $144.5 (0.7) 4.6 - -------------------------------------------------------------------------------- EBITDA 63.2 62.8 57.3 0.7 9.6 - -------------------------------------------------------------------------------- Operating Profit $ 45.8 $ 45.1 $ 39.4 1.6 14.6 - -------------------------------------------------------------------------------- The Broadcast Group's operating profit was $45.9 million in 1999, $47.0 million in 1998 and $39.4 million in 1997, excluding Buyouts. Revenues and operating profit varied in the three years presented primarily as a result of the level of political advertising revenue in each year. Additionally, the Broadcast Group employed tight cost controls to aid profitability. F-8 Magazine Group This group consists of three golf publications and related activities in the golf field. - -------------------------------------------------------------------------------- % Change (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- Revenues - -------------------------------------------------------------------------------- Magazines $110.6 $115.3 $154.8 (4.1) (25.5) Non-Compete Agreement -- 5.8 10.0 * * - -------------------------------------------------------------------------------- Total Revenues $110.6 $121.1 $164.8 (8.7) (26.5) - -------------------------------------------------------------------------------- EBITDA $ 19.4 $ 17.7 $ 21.0 9.4 (15.5) - -------------------------------------------------------------------------------- Operating Profit - -------------------------------------------------------------------------------- Magazines $ 18.1 $ 16.3 $ 18.3 10.8 (11.2) Non-Compete Agreement -- 5.8 10.0 * * - -------------------------------------------------------------------------------- Total Operating Profit $ 18.1 $ 22.1 $ 28.3 (18.4) (22.0) - -------------------------------------------------------------------------------- The Magazine Group's operating profit declined in 1999 to $18.1 million from $22.1 million in 1998 and $28.3 million in 1997. On a comparable basis, excluding divestitures and income from a non-compete agreement, revenues in 1999 decreased by 3.3% compared to 1998 and 1997. Consolidation in the golf equipment industry and a competitive rate environment adversely affected the Group's performance in 1999 and 1998. The revenue related to the non-compete agreement ceased in July 1998. In 1998 operating profit was also negatively affected by a $3.0 million charge for Buyouts, and was positively affected by the absence of losses related to a golf tee-time reservation operation that the Company exited in late 1997. In November 1997 the Company completed the sale of assets of its tennis, sailing and ski magazines and certain small properties (see Note 2 of the Notes to the Consolidated Financial Statements). LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $601.1 million in 1999, compared with $496.9 million in 1998 and $449.7 million in 1997. The increases were primarily due to higher earnings and improvements in working capital. Operating cash flow was primarily used for share repurchases, capital expenditures, acquisitions and dividend payments to stockholders. Net cash used in investing activities was $82.9 million in 1999, compared with $56.2 million in 1998 and $116.7 million in 1997. The increase of $26.7 million in 1999 was primarily due to additional minority interest investments in Internet-related companies. The 1999 increase was partially offset by reduced levels of capital expenditures. The decrease in 1998 from 1997 was principally from reduced capital expenditures. Net cash used in financing activities was $490.4 million in 1999, compared with $511.6 million in 1998 and $265.3 million in 1997. The decrease of $21.2 million in 1999 was primarily related to the debt extinguishment in 1998. The increase in 1998 over 1997 was principally from increased levels of stock repurchases. Cash generated from the Company's operations and the funds available from external sources are expected to be adequate to cover all cash requirements, including working capital needs, stock repurchases, planned capital expenditures and acquisitions, and dividend payments to stockholders. The ratio of current assets to current liabilities rose to 91.3% at December 26, 1999, from 82.1% at December 27, 1998 as a result of a higher cash balance and a lower level of short-term borrowings. Long-term debt and capital lease obligations, as a percentage of total capitalization, were 29.2% at December 26, 1999, and 28.1% at December 27, 1998. This increase was principally from reductions in stockholders' equity and increases in debt associated with stock repurchases. FINANCING In July 1999 the Company increased its borrowing capacity under a revolving credit agreement to $200.0 million from $100.0 million. That agreement expires in June 2000. An additional $200.0 million revolving credit agreement remains unchanged and expires in July 2002. The Company has a total of $400.0 million in revolving credit agreements, which require, among other provisions, specified levels of stockholders' equity. The amount of stockholders' equity over required levels was $509.2 million at December 26, 1999, compared with $600.8 million at December 27, 1998. The decrease in the level of unrestricted stockholders' equity is mainly due to stock repurchases. The revolving credit agreements permit borrowings, which bear interest at the Company's option (i) for domestic borrowings: based on a certificates of deposit rate, a Federal Funds rate, a base rate or a quoted rate; or (ii) for Eurodollar borrowings: based on the LIBOR rate, plus various margins based on the Company's credit rating. In July 1999 the Company increased its ability to issue commercial paper from $300.0 million to $400.0 million, which is supported by the Company's revolving credit agreements. Borrowings are in the form of unsecured notes sold at a discount with maturities ranging up to 270 days. The Company had no commercial paper outstanding at December 26, 1999. At December 27, 1998, the Company had $124.1 million in commercial paper outstanding with an annual weighted average interest rate of 5.3% and an average of 41 days to maturity. F-9 On August 21, 1998, the Company filed a $300.0 million shelf registration statement on Form S-3 with the Securities and Exchange Commission for unsecured debt securities that may be issued by the Company from time to time. The registration statement became effective August 28, 1998. On September 24, 1998, the Company filed a prospectus supplement to allow the issuance of up to $300.0 million in medium-term notes. As of December 26, 1999, the Company had issued a total of $198.0 million, excluding unamortized debt costs, under the medium-term note program. The notes have maturity dates ranging from October 8, 2003, through November 18, 2009, and pay interest semi-annually with rates ranging from 5.0% to 7.125%. In October 1993 the Company issued $200.0 million of senior notes. Five-year senior notes totaling $100.0 million matured in October 1998, while the remaining $100.0 million in notes are due in April 2000. In 1998, the Company made a tender offer for any and all of its $150.0 million of outstanding publicly-held 8.25% debentures due March 15, 2025. The debenture holders tendered $78.1 million of the outstanding debentures. The Company financed the purchase of the debentures with available cash and through its existing commercial paper facility. By replacing higher rate long-term borrowings with lower-rate short-term alternatives, the Company reduced interest expense and generated a positive return on a net present value basis. Total cash paid in connection with the tender offer was approximately $89.3 million. The Company incurred a charge to operations in 1998 of $13.7 million ($7.7 million after-tax) in connection with this debt extinguishment (see Note 7 of the Notes to the Consolidated Financial Statements). The Company's total long-term debt, including current portion and capital leases, was $701.2 million at December 26, 1999, and $599.7 million at December 27, 1998. The increase is primarily attributable to the issuance of additional medium-term notes. Total additional borrowings available under all financing arrangements amounted to $502.0 million as of December 26, 1999, and $272.0 million as of January 28, 2000. Total debt, including current portion and capital leases, as of January 28, 2000, amounted to $931.2 million. This increase of $230.0 million from December 26, 1999, is primarily from the acquisition of the Worcester Telegram & Gazette on January 7, 2000 (see Acquisitions/Dispositions on page F-10). PROPOSED PUBLIC OFFERING OF SECURITIES On January 20, 2000, the Board of Directors of the Company authorized, subject to shareholder approval, the issuance of a new class of stock. On January 28, 2000, the Company filed a registration statement with the Securities and Exchange Commission ("SEC") on Form S-3 (the "Form S-3") related to a proposed initial public offering of a new class of common stock ("Class C Stock") which is intended to track the performance of the Company's Internet business division, Times Company Digital (the "TCD group"). After shareholder approval and the completion of the proposed stock offering, the Company intends to separate for financial reporting purposes the TCD group and the "NYT group" (the Company excluding the TCD group except for a retained interest in the TCD group) (See Note 19 of the Notes to the Consolidated Financial Statements). The NYT group includes all of the other business segments: Newspaper, Broadcast and Magazines, except for the businesses that comprise the TCD group. The NYT group also includes a retained interest in the TCD group which is currently 100%. This retained interest will decline to reflect the issuance of Class C Stock to the public. For segment reporting purposes, the Company currently provides financial data on its Internet operations which are included in the Newspaper Group (the "Internet Operations"). The Internet Operations principally include all Internet-related operations of the Company. However, the operating results of the Internet Operations are not indicative of the operating results of the TCD group's operations. The TCD group includes NYTimes.com, NYToday.com, Boston.com, WineToday.com, GolfDigest.com and Abuzz.com. The Internet Operations also include various Internet operations of The Regionals and exclude GolfDigest.com. The TCD group's operating results as presented in the financial statements included in the Form S-3 and in Note 19 of the Notes to the Consolidated Financial Statements reflect the effect of various inter-group agreements and policies, including a license agreement, a services agreement and established tax sharing policies. Beginning in 2000, and coinciding with the effective date of these various arrangements (January 1, 2000), the Company's management has determined that its reportable segments will consist of newspapers, broadcast, magazines and the operations of the TCD group. These segments will be evaluated regularly by key management in assessing performance and allocating resources. F-10 ACQUISITIONS/DISPOSITIONS The Company acquired an Internet knowledge management concern ("Abuzz") on July 22, 1999, for $5.1 million in cash and $25.0 million in the stock of the Company's subsidiary that acquired Abuzz ("Acquisition Subsidiary") (see Note 2 in the Notes to the Consolidated Financial Statements). In the event that the Company has not issued Class C Stock to the public by December 31, 2000, the former stockholders of Abuzz and certain optionees of Acquisition Subsidiary have the right to require Acquisition Subsidiary to redeem their shares for an amount no less than $25.0 million in aggregate. After the Class C Stock is issued, the Company may be required to issue additional shares of Class C Stock, if Acquisition Subsidiary's shares held by former shareholders of Abuzz and certain optionees of Acquisition Subsidiary are exchangeable into Class C Stock at or below a value of $25.0 million. The Company has reflected this $25.0 million in "Accrued expenses" on the Company's Consolidated Balance Sheets as of December 26, 1999. Upon completion of the issuance of Class C Stock to the public, shares of Acquisition Subsidiary stock may be exchanged for Class C Stock at an exchange ratio intended to maintain the same percentage of ownership in the TCD group immediately prior to the public issuance as the exchanged shares held in Acquisition Subsidiary. If this exchange had occurred at December 26, 1999, the former stockholders of Abuzz would have been entitled to exchange their shares in Acquisition Subsidiary for 4.2% of Class C Stock. On January 7, 2000, the Company acquired certain assets and liabilities of a newspaper, the Worcester Telegram & Gazette, in Worcester, Mass., for approximately $295.0 million in cash. The cost of this acquisition was funded through the Company's commercial paper and medium-term note programs. On February 17, 2000, the Company made a decision to offer for sale the Santa Barbara News-Press in Santa Barbara, Calif., Daily World in Opelousas, La., Daily News in Palatka, Fla., Lake City Reporter in Lake City, Fla., The News-Sun in Sebring/Avon Park, Fla., The News-Leader in Fernandina Beach, Fla., and Marco Island Eagle in Marco Island, Fla. The net assets of these newspapers have been included in the caption "Assets held for sale" in the Company's Consolidated Balance Sheets as of December 26, 1999, at their carrying value. The sale is expected to be completed by December 31, 2000. The results of the operations for these newspapers are not material to the Company. CAPITAL EXPENDITURES The Company estimates that capital expenditures for 2000 will range from $120.0 million to $140.0 million, compared with $73.4 million in 1999, $81.6 million in 1998 and $160.2 million in 1997. The 1998 capital expenditures exclude $78.0 million related to the Company's Edison facility lease renegotiations (see Note 14 of the Notes to the Consolidated Financial Statements). DEPRECIATION AND AMORTIZATION The Company expects that depreciation and amortization expense will be $205.0 million to $210.0 million for 2000, compared with $197.5 million in 1999, $188.2 million in 1998 and $173.9 million in 1997. YEAR 2000 DISCLOSURE We have completed the implementation of our year 2000 remediation plan on a timely basis, and such remediation plan as implemented addressed all mission critical systems. We are not aware of any adverse effects of year 2000 issues on the Company. This includes the Company's systems and operations, and vendor, customer and service provider relationships. RECENT ACCOUNTING PRONOUNCEMENT In June 1998 the Financial Accounting Standard's Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"), which is effective for all quarters of fiscal years beginning after June 15, 1999. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Unless the entity can treat the derivative as a hedge according to certain criteria, the entity may be required to deduct any changes in the derivative's fair value from its operating income. In June 1999 the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of Financial Accounting Standards Statement No. 133 ("SFAS No. 137"). SFAS No. 137 amended the effective date for SFAS No. 133 from June 15, 1999, to June 15, 2000. The Company is currently determining the effect of SFAS No. 133 and SFAS No. 137 on the Company's Consolidated Financial Statements. FACTORS THAT COULD AFFECT OPERATING RESULTS This Form 10-K contains forward-looking statements. Additional written and oral forward-looking statements may be made by the Company from time to time in SEC filings and otherwise. The Company cautions readers that results predicted by forward-looking statements, including, without limitation, those relating to the Company's: o future business prospects o revenues o working capital o liquidity o capital needs o interest costs and o income are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. The risks and uncertainties include those listed below as well as other risks and factors identified from time to time in the Company's filings with the SEC. F-11 ADVERTISING REVENUES Advertising is the Company's most significant source of revenue. Competition from other forms of media available in the Company's various markets, including direct marketing and the Internet, affects the Company's ability to attract and retain advertisers and to increase advertising rates. Advertising could be negatively affected by an economic downturn in any of the Company's markets. Advertising revenues cause the Company's quarterly consolidated results to vary by season. Second-quarter and fourth-quarter advertising volume is higher than first- and third-quarter volume since economic activity tends to be lower after the holidays and in the summer. National and local economic conditions, particularly in the New York City and Boston metropolitan regions, affect the levels of the Company's retail, national and most particularly, classified advertising revenue. Structural changes in the retail environment may also depress the level of advertising revenue. CIRCULATION REVENUES Circulation is a significant source of revenue for the Company. Circulation revenue and the Company's ability to achieve price increases for its print products are affected by competition from other publications and other forms of media available in the Company's various markets. Decreased consumer spending on discretionary items like newspapers and magazines and the decreasing number of newspaper readers among young people could also negatively affect circulation. PAPER PRICES Newsprint and magazine paper are the Company's most important raw material and represent a significant portion of the Company's operating costs. The Company's operating results could be adversely affected to the extent that such historically volatile raw material prices increase materially. LABOR RELATIONS Advances in technology and other factors have allowed the Company to lower costs by reducing the size of its work force. There is no assurance that the Company will continue to be able to reduce costs in this way. A significant portion of the Company's employees are unionized and the Company's results could be adversely affected if labor negotiations were to restrict its ability to maximize the efficiency of its operations. In addition, if the Company experienced labor unrest, its ability to produce and deliver its largest products could be impaired. NEW PRODUCTS IN NEW MARKETS There are substantial uncertainties associated with the Company's efforts to develop new products and services for evolving markets. The success of these ventures will be determined by the Company's efforts, and in some cases by those of its partners, fellow investors and licensees. Initial timetables for the introduction and development of new products or services may not be achieved and price/profitability targets may not prove feasible. External factors, such as the development of competitive alternatives and market response, may cause new markets to move in unanticipated directions. The Company may also consider the acquisition of specific properties or businesses that fall outside its traditional lines of business if it deems such properties sufficiently attractive. PRODUCT PORTFOLIO; ACQUISITIONS From time to time, the Company evaluates the various components of its portfolio of products and may, as a result, buy or sell different properties. Such acquisitions or divestitures may affect the Company's costs, revenues and profitability. Acquisitions involve risks, including difficulties in integrating acquired operations, diversions of management resources, debt incurred in financing such acquisitions and unanticipated problems and liabilities. F-12 TELEVISION BROADCASTING The Company's television stations are subject to continuing technological and regulatory developments that may affect their future profitability. The advent of digital broadcasting is one such development. The Federal Communications Commission ("FCC") adopted rules in 1997 under which all television stations are required to change to a new system of digital broadcasting. The direct hardware cost of this change will be substantial and the new digital stations are unlikely to produce significant additional revenue until consumers have purchased a substantial number of digital television receivers or until other sources of revenue to be derived from the digital spectrum have been developed. Additionally, the new digital transmission systems to be used by television stations, cable systems and direct broadcast satellites could greatly increase the number of electronic video services with which the Company's stations compete. INTERNET BUSINESSES The Company expects to make substantial investments in its Internet businesses for the foreseeable future. These are highly risky businesses which are likely to incur losses. The Company's Internet businesses have a limited operating history, are dependent on advertising revenue and the continued growth and acceptance of the Internet and subject to all risks of Internet businesses, such as evolving regulation and technology, changes in consumer preferences and intense competition. ---------------------------- The foregoing list of factors should not be construed as exhaustive or as any admission regarding the adequacy of disclosure made by the Company. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. MARKET RISK The Company's qualitative and quantitative market risk is principally associated with market interest rate fluctuations related to its debt obligations and stock market price fluctuations with respect to marketable securities (see Note 7 and Note 15 to the Notes to the Consolidated Financial Statements). Any such market risks are not considered significant by the Company. F-13 CONSOLIDATED STATEMENTS OF INCOME
Years Ended --------------------------------------------- December 26, December 27, December 28, (In thousands, except per share data) 1999 1998 1997 - ------------------------------------------------------------------------------------------------ REVENUES Advertising $ 2,254,932 $ 2,073,540 $ 1,999,844 Circulation 686,478 677,703 670,258 Other 189,219 185,462 196,316 - ------------------------------------------------------------------------------------------------ Total 3,130,629 2,936,705 2,866,418 - ------------------------------------------------------------------------------------------------ COSTS AND EXPENSES Production costs Raw materials 321,397 354,872 324,654 Wages and benefits 621,260 608,152 584,016 Other 436,183 418,196 381,790 - ------------------------------------------------------------------------------------------------ Total 1,378,840 1,381,220 1,290,460 Selling, general and administrative expenses 1,180,507 1,040,265 1,120,856 - ------------------------------------------------------------------------------------------------ Total 2,559,347 2,421,485 2,411,316 - ------------------------------------------------------------------------------------------------ OPERATING PROFIT 571,282 515,220 455,102 Income from joint ventures 17,900 21,014 13,990 Interest expense, net 50,718 43,333 42,115 Net gain on dispositions of assets -- 12,619 10,388 - ------------------------------------------------------------------------------------------------ Income before income taxes and extraordinary item 538,464 505,520 437,365 Income taxes 228,287 218,890 175,064 - ------------------------------------------------------------------------------------------------ Income before extraordinary item 310,177 286,630 262,301 Extraordinary item, net of tax -- (7,716) -- - ------------------------------------------------------------------------------------------------ NET INCOME $ 310,177 $ 278,914 $ 262,301 - ------------------------------------------------------------------------------------------------ Average number of common shares outstanding Basic 175,587 188,762 193,040 Diluted 179,244 192,846 197,150 - ------------------------------------------------------------------------------------------------ Basic earnings per share Earnings before extraordinary item $ 1.77 $ 1.52 $ 1.36 Extraordinary item, net of tax -- (.04) -- - ------------------------------------------------------------------------------------------------ Net income $ 1.77 $ 1.48 $ 1.36 - ------------------------------------------------------------------------------------------------ Diluted earnings per share Earnings before extraordinary item $ 1.73 $ 1.49 $ 1.33 Extraordinary item, net of tax -- (.04) -- - ------------------------------------------------------------------------------------------------ Net income $ 1.73 $ 1.45 $ 1.33 - ------------------------------------------------------------------------------------------------ Dividends per share $ .41 $ .37 $ .32 - ------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. F-14 CONSOLIDATED BALANCE SHEETS
December 26, December 27, (In thousands) 1999 1998 - --------------------------------------------------------------------------------------------------------- ASSETS - --------------------------------------------------------------------------------------------------------- CURRENT ASSETS - --------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 63,861 $ 35,991 Accounts receivable (net of allowances: 1999 - $39,749; 1998 - $34,364) 366,754 331,933 Inventories 28,650 32,287 Deferred income taxes 53,611 40,612 Assets held for sale 37,796 -- Other current assets 64,236 71,994 - --------------------------------------------------------------------------------------------------------- Total current assets 614,908 512,817 - --------------------------------------------------------------------------------------------------------- INVESTMENT IN JOINT VENTURES 121,940 122,273 - --------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land 67,149 71,935 Buildings, building equipment and improvements 789,504 818,811 Equipment 1,307,365 1,307,869 Construction and equipment installations in progress 31,145 24,885 - --------------------------------------------------------------------------------------------------------- Total - at cost 2,195,163 2,223,500 Less accumulated depreciation 976,767 897,304 - --------------------------------------------------------------------------------------------------------- Property, plant and equipment - net 1,218,396 1,326,196 - --------------------------------------------------------------------------------------------------------- INTANGIBLE ASSETS ACQUIRED Costs in excess of net assets acquired 1,223,944 1,204,021 Other intangible assets acquired 436,674 428,974 - --------------------------------------------------------------------------------------------------------- Total 1,660,618 1,632,995 Less accumulated amortization 355,600 305,422 - --------------------------------------------------------------------------------------------------------- Intangible assets acquired - net 1,305,018 1,327,573 - --------------------------------------------------------------------------------------------------------- MISCELLANEOUS ASSETS 235,540 176,250 - --------------------------------------------------------------------------------------------------------- Total $3,495,802 $3,465,109 - ---------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. F-15
December 26, December 27, (In thousands, except share data) 1999 1998 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - --------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Commercial paper outstanding $ -- $ 124,100 Accounts payable 191,706 163,783 Accrued payroll and other related liabilities 105,257 87,265 Accrued expenses 193,553 166,761 Unexpired subscriptions 80,161 81,080 Current portion of long-term debt and capital lease obligations 102,837 1,867 - --------------------------------------------------------------------------------------------------------------------- Total current liabilities 673,514 624,856 - --------------------------------------------------------------------------------------------------------------------- OTHER LIABILITIES Long-term debt 512,627 513,695 Capital lease obligations 85,700 84,123 Deferred income taxes 141,033 165,268 Other 634,270 545,697 - --------------------------------------------------------------------------------------------------------------------- Total other liabilities 1,373,630 1,308,783 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 2,047,144 1,933,639 - --------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY Serial preferred stock of $1 par value - authorized 200,000 shares - none issued -- -- Common stock of $.10 par value Class A - authorized 300,000,000 shares; issued: 1999 - 177,971,194; 1998 - 185,763,418 (including treasury shares: 1999 - 5,000,000; 1998 - 5,000,000) 17,797 18,576 Class B - convertible - authorized 847,240 shares; issued: 1999 - 847,240; 1998 - 849,602 (including treasury shares: 1999 - none and 1998 - none) 85 85 Retained earnings 1,600,743 1,677,469 Common stock held in treasury, at cost (173,137) (162,051) - --------------------------------------------------------------------------------------------------------------------- 1,445,488 1,534,079 Accumulated other comprehensive income (loss): Unrealized gain on marketable securities 5,753 -- Foreign currency translation adjustments (2,583) (2,609) - --------------------------------------------------------------------------------------------------------------------- Total accumulated other comprehensive income (loss) 3,170 (2,609) - --------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 1,448,658 1,531,470 - --------------------------------------------------------------------------------------------------------------------- Total $ 3,495,802 $ 3,465,109 - ---------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. F-16 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended ------------------------------------------------ December 26, December 27, December 28, (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 310,177 $ 278,914 $ 262,301 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 197,493 188,237 173,897 Business process/technology reengineering charge -- -- 10,100 Undistributed earnings of affiliates (4,839) (2,822) (3,494) Net gain on dispositions -- (12,619) (10,388) Deferred income taxes (44,632) (2,010) (26,559) Long-term retirement benefit obligations 38,452 33,643 25,556 Other - net 13,108 (4,446) 10,913 Changes in operating assets and liabilities, net of acquisitions/dispositions Accounts receivable - net (38,743) (646) (29,216) Inventories 3,122 (153) 1,152 Other current assets 43,121 36,449 17,315 Accounts payable 29,263 (25,797) 7,064 Accrued payroll and accrued expenses 53,583 9,691 6,686 Unexpired subscriptions 990 (1,541) 4,359 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 601,095 496,900 449,686 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from dispositions 11,434 23,661 39,727 Additions to property, plant and equipment (73,407) (81,578) (160,168) Other investing proceeds 8,704 14,725 10,560 Other investing payments (29,589) (12,974) (6,782) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (82,858) (56,166) (116,663) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Commercial paper (repayments) borrowings - net (124,100) 124,100 (45,500) Long-term obligations Increase 103,861 98,433 -- Reduction (2,358) (190,847) (3,847) Capital shares Issuance 27,961 7,208 9,930 Repurchase (423,715) (480,857) (162,615) Dividends paid to stockholders (72,016) (69,600) (61,865) Preferred stock redemption -- -- (1,753) Other financing proceeds -- -- 344 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (490,367) (511,563) (265,306) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and short-term investments 27,870 (70,829) 67,717 Cash and cash equivalents at the beginning of the year 35,991 106,820 39,103 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at the end of the year $ 63,861 $ 35,991 $ 106,820 - ------------------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements and Supplemental Disclosures to Consolidated Statements of Cash Flows. F-17 SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS CASH FLOW INFORMATION
Years Ended ------------------------------------------ December 26, December 27, December 28, (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------- Cash payments during the year for - ------------------------------------------------------------------------------------- Interest (net of amount capitalized) $ 50,050 $ 49,025 $ 39,122 - ------------------------------------------------------------------------------------- Income taxes $210,951 $177,261 $169,115 - -------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING TRANSACTIONS 1. In February 1999 the Company purchased a minority interest in TheStreet.com for $15.6 million, of which $3.6 million was in cash and $12.0 million represents an irrevocable credit for future advertising to be used by TheStreet.com through February 2003. Investment and deferred revenue accounts were increased by $12.0 million accordingly. A total of $1.7 million of advertising credits were utilized in 1999. 2. The Company renegotiated its lease agreement in 1998 for its Edison newspaper printing facility, extending the capitalized lease commitment for an additional 10 years. Accordingly, the capitalized lease value was increased to $78.0 million, with a corresponding increase to $78.0 million of the capital lease obligation (see Note 14 of the Notes to Consolidated Financial Statements). 3. The Company acquired Abuzz Technologies, Inc. on July 22, 1999, for $5.1 million in cash and $25.0 million in the stock of a subsidiary of the Company (see Note 2 of the Notes to Consolidated Financial Statements). OTHER Amounts in these Consolidated Statements of Cash Flows are presented on a cash basis and may differ from those shown in other sections of the financial statements. F-18 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital Stock ------------------------------------------- Additional 5 1/2 % Class A Class B Paid-in (In thousands, except share and per share data) Preference Common Common Capital - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 30, 1996 $1,753 $22,124 $113 $651,888 - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net income Foreign currency translation adjustments (net of tax of $1,411) - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Dividends, preference - $4.125 per share Dividends, common - $.32 per share Issuance of shares Retirement units - 17,190 Class A shares 202 Employee stock purchase plan - 1,598,570 Class A shares 8,335 Stock options - 2,161,926 Class A shares 532 101,304 Other stock issuances - 7,700 Class A shares (91) Stock conversions - 7,030 Repurchase of stock - 5,932,000 Class A shares Preferred stock redemption (1,753) Proceeds from the sale of put options 344 - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 28, 1997 -- 22,656 113 761,982 - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net income Foreign currency translation adjustments (net of tax of $926) - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Dividends, common - $.37 per share Issuance of shares Retirement units - 152,866 Class A shares (1,088) Employee stock purchase plan - 1,427,273 Class A shares (3,764) Stock options - 1,559,185 Class A shares 339 76,295 Repurchase of stock - 14,784,000 Class A shares Treasury stock retirement - 44,477,000 shares (4,420) (28) (833,425) - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 27, 1998 -- 18,576 85 -- - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net income Foreign currency translation adjustments (net of tax of $55) Change in unrealized gains on marketable securities (net of tax of $4,708) - ---------------------------------------------------------------------------------------------------------------------------- Comprehensive income Dividends, common - $.41 per share Issuance of shares Retirement units - 16,407 Class A shares (615) Employee stock purchase plan - 1,523,292 Class A shares 1 (15,261) Stock options - 2,529,597 Class A shares 361 87,134 Stock conversions - 2,362 shares Repurchase of stock - 11,864,000 Class A shares Treasury stock retirement - 11,407,000 shares (1,141) (71,258) - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 26, 1999 $ -- $17,797 $ 85 $ -- - ---------------------------------------------------------------------------------------------------------------------------- Common Stock Accumulated Held in Other Retained Treasury, Comprehensive (In thousands, except share and per share data) Earnings at cost Income (Loss) Total - -------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 30, 1996 $1,291,219 $(341,645) $ (176) $1,625,276 - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net income 262,301 262,301 Foreign currency translation adjustments (net of tax of $1,411) (1,334) (1,334) - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income 260,967 Dividends, preference - $4.125 per share (72) (72) Dividends, common - $.32 per share (61,793) (61,793) Issuance of shares Retirement units - 17,190 Class A shares 202 404 Employee stock purchase plan - 1,598,570 Class A shares 18,730 27,065 Stock options - 2,161,926 Class A shares (77,423) 24,413 Other stock issuances - 7,700 Class A shares 91 -- Stock conversions - 7,030 Repurchase of stock - 5,932,000 Class A shares (145,554) (145,554) Preferred stock redemption (1,753) Proceeds from the sale of put options 344 - -------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 28, 1997 1,491,655 (545,599) (1,510) 1,729,297 - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net income 278,914 278,914 Foreign currency translation adjustments (net of tax of $926) (1,099) (1,099) - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income 277,815 Dividends, common - $.37 per share (69,600) (69,600) Issuance of shares Retirement units - 152,866 Class A shares 1,897 809 Employee stock purchase plan - 1,427,273 Class A shares 35,803 32,039 Stock options - 1,559,185 Class A shares (61,433) 15,201 Repurchase of stock - 14,784,000 Class A shares (454,091) (454,091) Treasury stock retirement - 44,477,000 shares (23,500) 861,373 -- - -------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 27, 1998 1,677,469 (162,051) (2,609) 1,531,470 - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income Net income 310,177 310,177 Foreign currency translation adjustments (net of tax of $55) 26 26 Change in unrealized gains on marketable securities (net of tax of $4,708) 5,753 5,753 - -------------------------------------------------------------------------------------------------------------------------- Comprehensive income 315,956 Dividends, common - $.41 per share (72,016) (72,016) Issuance of shares Retirement units - 16,407 Class A shares 532 (83) Employee stock purchase plan - 1,523,292 Class A shares 49,101 33,841 Stock options - 2,529,597 Class A shares (37,152) 50,343 Stock conversions - 2,362 shares Repurchase of stock - 11,864,000 Class A shares (410,853) (410,853) Treasury stock retirement - 11,407,000 shares (314,887) 387,286 -- - -------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 26, 1999 $1,600,743 $(173,137) $ 3,170 $1,448,658 - --------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. F-19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The New York Times Company (the "Company") is engaged in diversified activities in media. The Company's principal businesses are newspapers, magazines and broadcasting. The Company also has equity interests in a Canadian newsprint mill and a "supercalendered" (glossy paper used in magazines) paper mill. The Company's major source of revenue is advertising from its newspaper business. The newspapers generally operate in the Northeast, Southeast and California markets. PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include the accounts of the Company after elimination of intercompany items. FISCAL YEAR The Company's fiscal year-end is the last Sunday in December. Fiscal years 1999, 1998 and 1997 each comprise 52 weeks. INVENTORIES Inventories are stated at the lower of cost or current market value. Inventory cost is generally based on the last-in, first-out ("LIFO") method for newsprint and magazine paper and the first-in, first-out ("FIFO") method for other inventories. INVESTMENTS Investments in which the Company has at least a 20%, but not more than 50%, interest are accounted for under the equity method. Investment interests below 20% are accounted for under the cost method. MARKETABLE SECURITIES The Company determines the appropriate classification of marketable securities at the time of purchase and re-evaluates such designation at each balance sheet date. Marketable securities have been classified as available-for-sale and are carried at fair value, with unrealized holding gains and losses reported as a separate component of the Consolidated Statements of Stockholders' Equity and in the Consolidated Balance Sheets, in the caption "Accumulated other comprehensive income (loss)". PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost; and depreciation is computed by the straight-line method over the shorter of estimated asset service lives or lease terms. The Company capitalizes interest costs as part of the cost of constructing major facilities and equipment. INTANGIBLE ASSETS ACQUIRED Cost in excess of net assets acquired is primarily the excess of cost over the fair market value of tangible net assets acquired. Each quarter the Company evaluates whether there has been a permanent impairment in any of its intangible assets, including goodwill. An impairment in value is considered to have occurred when the undiscounted future operating cash flows generated by the acquired businesses are not sufficient to recover the carrying values of the intangible assets. If it is determined that an impairment in value has occurred, the excess of the purchase price over the net assets acquired and intangible assets will be written down to the present value of the future operating cash flows to be generated by the acquired businesses. The excess costs that arose from acquisitions after October 31, 1970, are being amortized by the straight-line method mainly over 40 years. The remaining portion ($13.0 million), which arose from acquisitions before November 1, 1970, is not being amortized since management believes there has been no decrease in value. Other intangible assets acquired consist primarily of advertiser and subscriber relationships and mastheads, which are being amortized over their remaining lives, ranging from three to 40 years for various software licenses and a life of 40 years for mastheads on various acquired properties. SUBSCRIPTION REVENUES AND COSTS Proceeds from subscriptions and related costs, principally agency commissions, are deferred at the time of sale and are included in the Consolidated Statements of Income on a pro rata basis over the terms of the subscriptions. FOREIGN CURRENCY TRANSLATION The assets and liabilities of foreign companies are translated at year-end exchange rates. Results of operations are translated at average rates of exchange in effect during the year. The resulting translation adjustment is included as a separate component of the Consolidated Statements of Stockholders' Equity and in the Stockholders' Equity section of the Consolidated Balance Sheets, in the caption "Accumulated other comprehensive income (loss)." EARNINGS PER SHARE The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share (see Note 5). Basic earnings per share is calculated by dividing net earnings available to common shares by average common shares outstanding. Diluted earnings per share is calculated similarly, except that it includes the dilutive effect of the assumed exercise of securities, including the effect of shares issuable under the Company's incentive plans (see Note 12). All per share amounts included in the footnotes are the same for basic and diluted earnings per share unless otherwise noted. F-20 CASH AND CASH EQUIVALENTS The Company considers all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents. INVESTMENT TAX CREDITS The Company uses the deferred method of accounting for investment tax credits. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from these estimates. RECLASSIFICATIONS For comparability, certain 1998 and 1997 amounts have been reclassified to conform with the 1999 presentation. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998 the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"), which is effective for all quarters of fiscal years beginning after June 15, 1999. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Unless the entity can treat the derivative as a hedge according to certain criteria, the entity may be required to reflect any changes in the derivative's fair value from its operating income. In June 1999 the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of Statement of Financial Accounting Standards Statement No. 133 ("SFAS No. 137"). SFAS No. 137 amended the effective date for SFAS No. 133 from June 15, 1999 to June 15, 2000. The Company is currently determining the effect of SFAS No. 133 and SFAS No. 137 on the Company's Consolidated Financial Statements. - -------------------------------------------------------------------------------- 2. ACQUISITIONS/DISPOSITIONS ACQUISITIONS On July 22, 1999, a subsidiary of the Company ("Acquisition Subsidiary") acquired Abuzz Technologies, Inc. ("Abuzz"), an Internet knowledge management concern. The principal business of Abuzz involves a software solution that facilitates connecting people with questions to people with answers. The purchase price of Abuzz amounted to $30.1 million and resulted in an increase to goodwill of $23.8 million and other intangible assets of $7.7 million, all of which will be amortized over five years. The purchase price included $5.1 million in cash and $25.0 million in the stock of Acquisition Subsidiary. After the acquisition, the Company owned 95.8% and the former stockholders of Abuzz and certain optionees of Acquisition Subsidiary owned 4.2% of Acquisition Subsidiary. The operating results of Abuzz are not material to the Company's Consolidated Financial Statements. In the event that the Company has not issued a certain new class of stock ("Class C Stock") to the public by December 31, 2000 (see Note 18), the former stockholders of Abuzz and certain optionees of Acquisition Subsidiary shall have the right to require Acquisition Subsidiary to redeem their shares for an amount no less than $25.0 million in aggregate. After the Class C Stock is issued, the Company may be required to issue additional shares of Class C Stock, if Acquisition Subsidiary's shares held by former shareholders of Abuzz and certain optionees of Acquisition Subsidiary are exchangeable into Class C Stock at or below a value of $25.0 million. The Company has reflected this $25.0 million in "Accrued expenses" on the Company's Consolidated Balance Sheets. Upon completion of the issuance of Class C Stock to the public, shares of Acquisition Subsidiary stock may be exchanged for Class C Stock at an exchange ratio intended to maintain the same percentage of ownership in the TCD group immediately prior to the public issuance as the exchanged shares held in Acquisition Subsidiary. If this exchange had occurred at December 26, 1999, the former stockholders of Abuzz would have been entitled to exchange their shares in Acquisition Subsidiary for 4.2% of Class C Stock. See Note 18 on Subsequent Events relating to the acquisition of the Worcester Telegram & Gazette on January 7, 2000. DISPOSITIONS During the second quarter of 1998 the Company recorded an $8.0 million pre-tax gain from the satisfaction of a post-closing requirement related to the 1997 sale of assets of the Company's tennis, sailing and ski magazines (see below). This gain increased earnings per share by $.02. During the first quarter of 1998, the Company recorded a $4.6 million pre-tax gain resulting from the sale of equipment. The gain increased earnings per share by $.01. In November 1997 the Company sold the assets of its tennis, sailing and ski magazines and certain small properties, and exited a golf tee-time reservation operation. These transactions resulted in a $10.4 million net pre-tax gain. This gain increased earnings per share by $.03. See Note 18 on Subsequent Events relating to the Company's decision to sell certain newspaper properties. F-21 - -------------------------------------------------------------------------------- 3. BUSINESS PROCESS/TECHNOLOGY REENGINEERING CHARGE In 1997 the Company recorded a pre-tax noncash accounting charge of $10.1 million ($5.7 million after-tax, or $.03 per share) as a result of adopting the provisions of Emerging Issues Task Force No. 97-13, Accounting for Costs Incurred in Connection with a Consulting Contract or an Internal Project That Combines Business Process Reengineering and Information Technology Transformation ("EITF No. 97-13"). This charge related to certain expenses associated with the Company's business process/technology reengineering program. This charge had no impact on the Company's 1997 cash flow. - -------------------------------------------------------------------------------- 4. INVESTMENT IN JOINT VENTURES Investment in Joint Ventures consists of equity ownership interests in two paper mills ("Forest Products Investments") and the International Herald Tribune S.A.S. ("IHT"). The results of the IHT are not material to the operations of the Company. The Forest Products Investments consist of a Canadian newsprint company, Donohue Malbaie Inc. ("Malbaie"), and a partnership operating a supercalendered paper mill in Maine, Madison Paper Industries ("Madison") (with Malbaie, the "Paper Mills"). The equity interest in Malbaie represents a 49% ownership interest. The Company and Myllykoski Oy, a Finnish paper manufacturing company, are partners through subsidiary companies in Madison. The partners' interests in the net assets of Madison at any time will depend on their capital accounts, as defined, at such time. Through an 80%-owned subsidiary, the Company's share of Madison's profits and losses is 40%. The Company received distributions from Madison of $7.2 million in 1999, $8.3 million in 1998 and $9.7 million in 1997. Loan repayments were $7.0 million in 1999, $14.7 million in 1998 and $2.5 million in 1997. No contributions were made to Madison in 1999, 1998 or 1997. The Company received distributions from Malbaie of $5.9 million in 1999, $9.9 million in 1998 and $5.3 million in 1997. No loans or contributions were made to Malbaie in 1999, 1998 or 1997. There was no current portion of debt of the Paper Mills included in current liabilities in the table below at December 26, 1999, and $5.6 million was outstanding at December 27, 1998. The debt of the Paper Mills is not guaranteed by the Company. Condensed combined balance sheets of the Paper Mills were as follows: - -------------------------------------------------------------------------------- Condensed Combined Balance Sheets Of Paper Mills - -------------------------------------------------------------------------------- December 26, December 27, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Current assets $ 66,606 $ 64,703 Less current liabilities 32,912 42,544 - -------------------------------------------------------------------------------- Working capital 33,694 22,159 Fixed assets, net 200,307 203,114 Deferred income taxes and other (53,637) (60,403) - -------------------------------------------------------------------------------- Net assets $180,364 $164,870 - -------------------------------------------------------------------------------- During 1999, 1998 and 1997 the Company's Newspaper Group purchased newsprint and supercalendered paper from the Paper Mills at competitive prices. Such purchases aggregated approximately $67.6 million for 1999, $79.1 for 1998 and $74.0 million for 1997. Condensed combined income statements of the Paper Mills were as follows: - -------------------------------------------------------------------------------- Condensed Combined Income Statements of Paper Mills - -------------------------------------------------------------------------------- (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Net sales and other income $237,519 $248,611 $234,290 Costs and expenses 192,941 188,665 196,415 - -------------------------------------------------------------------------------- Income before taxes 44,578 59,946 37,875 Income tax expense 5,525 8,826 5,577 - -------------------------------------------------------------------------------- Net income $ 39,053 $ 51,120 $ 32,298 - -------------------------------------------------------------------------------- The condensed combined financial information of the Paper Mills excludes the income tax effects attributable to Madison, since it is a partnership. Such tax effects (see Note 8) have been included in the Company's Consolidated Financial Statements. F-22 - -------------------------------------------------------------------------------- 5. EARNINGS PER SHARE Basic and diluted earnings per share for the years ended December 26, 1999, December 27, 1998, and December 28, 1997, were as follows:
- ------------------------------------------------------------------------------------------- (In thousands, except per share data) 1999 1998 1997 - ------------------------------------------------------------------------------------------- Basic earnings per share computation Numerator Net income $310,177 $278,914 $262,301 Less cumulative preference stock dividends -- -- 72 - ------------------------------------------------------------------------------------------- Income available to common stockholders $310,177 $278,914 $262,229 Denominator Average number of common shares outstanding 175,587 188,762 193,040 - ------------------------------------------------------------------------------------------- Basic earnings per share $ 1.77 $ 1.48 $ 1.36 - ------------------------------------------------------------------------------------------- Diluted earnings per share computation Numerator Net income $310,177 $278,914 $262,301 Less cumulative preference stock dividends -- -- 72 - ------------------------------------------------------------------------------------------- Income available to common stockholders $310,177 $278,914 $262,229 Denominator Average number of common shares outstanding 175,587 188,762 193,040 Incremental shares for assumed exercise of securities 3,657 4,084 4,110 - ------------------------------------------------------------------------------------------- Total shares 179,244 192,846 197,150 - ------------------------------------------------------------------------------------------- Diluted earnings per share $ 1.73 $ 1.45 $ 1.33 - -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 6. INVENTORIES Inventories as shown in the accompanying Consolidated Balance Sheets were as follows: - -------------------------------------------------------------------------------- December 26, December 27, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Newsprint and magazine paper $23,666 $27,705 Work-in-process and other inventory 4,984 4,582 - -------------------------------------------------------------------------------- Total $28,650 $32,287 - -------------------------------------------------------------------------------- Inventories are stated at the lower of cost or current market value. Cost was determined utilizing the LIFO method for 84% of inventory in 1999 and 88% for 1998. The replacement cost of inventory was approximately $32.1 million at December 26, 1999, and $38.1 million at December 27, 1998. F-23 - -------------------------------------------------------------------------------- 7. DEBT Long-term debt consists of the following: - -------------------------------------------------------------------------------- December 26, December 27, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- 5.77% Senior Notes due 2000(a) $100,000 $100,000 7.625% Notes due 2005, net of 246,116 245,599 unamortized debt costs of $3,884 in 1999, and $4,401 in 1998, effective interest rate 7.996%(b) 8.25% Debentures due 2025 (due 69,675 69,647 2005 at option of Company), net of unamortized debt costs of $2,225 in 1999 and $2,253 in 1998, effective interest rate 8.553%(b) 5.0%-7.125% Medium-Term Notes 196,836 98,449 due 2003 and 2008, net of unamortized debt costs of $1,164 in 1999 and $551 in 1998(c) - -------------------------------------------------------------------------------- Total notes and debentures 612,627 513,695 - -------------------------------------------------------------------------------- Less current portion 100,000 -- - -------------------------------------------------------------------------------- Total long-term debt $512,627 $513,695 - -------------------------------------------------------------------------------- (a) In October 1993 the Company issued senior notes totaling $200.0 million with interest payable semi-annually. Five-year notes totaling $100.0 million were issued at an annual rate of 5.50%, and the remaining $100.0 million were issued as six and one-half year notes at an annual rate of 5.77%. In October 1998 $100.0 million due on the five-year notes was paid. On April 28, 2000, $100.0 million of the five-year senior notes will be due. (b) In March 1995 the Company completed a public offering of $400.0 million of unsecured notes and debentures. The offering consisted of 10-year notes aggregating $250.0 million maturing March 15, 2005, at an annual rate of 7.625% and 30-year debentures aggregating $150.0 million maturing March 15, 2025, at an annual rate of 8.25%. The debentures are callable after ten years. Interest is payable semi-annually on March 15 and September 15 on both the notes and the debentures. In 1998, the Company made a tender offer for any and all of its $150.0 million of outstanding publicly-held 8.25% debentures due March 15, 2025. The debenture holders tendered $78.1 million of the outstanding debentures. The Company financed the purchase of the debentures with available cash and through its existing commercial paper facility. By replacing higher rate long-term borrowings with lower-rate short-term alternatives, the Company reduced interest expense and generated a positive return on a net present value basis. Total cash paid in connection with the tender offer was $89.3 million. The Company recorded an extraordinary charge in 1998 of $13.7 million ($7.7 million net of tax or $.04 per share) in connection with this debt extinguishment. (c) On August 21, 1998, the Company filed a $300.0 million shelf registration on Form S-3 with the Securities and Exchange Commission ("SEC") for unsecured debt securities that may be issued by the Company from time to time. The registration statement became effective August 28, 1998. On September 24, 1998, the Company filed a prospectus supplement to allow the issuance of up to $300.0 million in medium-term notes. As of December 26, 1999, the Company had issued a total of $198.0 million, excluding unamortized debt costs under the medium-term note program. The notes have maturity dates ranging from October 8, 2003, through November 18, 2009, and pay interest semi-annually with rates ranging from 5.0% to 7.125%. ---------------------------- Based on borrowing rates currently available for debt with similar terms and average maturities, the fair value of long-term debt, excluding the current portion, was $552.6 million at December 26, 1999, and $555.8 million at December 27, 1998. In July 1999 the Company increased its borrowing capacity under a revolving credit agreement to $200.0 million from $100.0 million. That agreement expires in June 2000. An additional $200.0 million revolving credit agreement remains unchanged and expires in July 2002. The Company has a total of $400.0 million in revolving credit agreements. The revolving credit agreements permit borrowings, which bear interest at the Company's option (i) for domestic borrowings: based on a certificates of deposit rate, a Federal Funds rate, a base rate or a quoted rate; or (ii) for Eurodollar borrowings: based on the LIBOR rate, plus various margins based on the Company's credit rating. The revolving credit agreements include provisions that require, among other matters, specified levels of stockholders' equity. The amount of stockholders' equity in excess of the required levels was $509.2 million at December 26, 1999. In July 1999 the Company increased its ability to issue commercial paper from $300.0 million to $400.0 million, which is supported by the Company's revolving credit agreements. Borrowings are in the form of unsecured notes sold at a discount with maturities ranging up to 270 days. At December 26, 1999, the Company had no commercial paper outstanding. At December 27, 1998, the Company had $124.1 million in commercial paper outstanding with an annual weighted average interest rate of 5.3% and an average of 41 days to maturity. Total debt as of December 26, 1999, including capital leases (see Note 14), amounted to $701.2 million. See Note 18 on Subsequent Events relating to the increase in debt associated with the acquisition of the Worcester Telegram & Gazette on January 7, 2000. Total additional borrowings available under all F-24 financing arrangements amounted to $502.0 million as of December 26, 1999. The aggregate face amount of maturities of long-term debt over the next five years are as follows: 2000, $100.0 million; 2001, none; 2002, none; 2003, $49.5 million; 2004, none; and $470.4 million, thereafter. Interest expense, net as shown in the accompanying Consolidated Statements of Income were as follows: - -------------------------------------------------------------------------------- (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Interest expense $52,503 $47,100 $50,433 Capitalized interest -- (173) (5,394) Interest income (1,785) (3,594) (2,924) - -------------------------------------------------------------------------------- Interest expense, net $50,718 $43,333 $42,115 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 8. INCOME TAXES Income tax expense for each of the years presented is determined in accordance with SFAS No. 109, Accounting for Income Taxes. Reconciliations between the effective tax rate on income before income taxes and the federal statutory rate (exclusive of a favorable tax adjustment of $18.0 million in fiscal 1997 resulting from the completion of the Company's federal income tax audits for periods through 1992 and gains on dispositions in each period) are presented below. The components of income tax expense as shown in the Consolidated Statements of Income were as follows: - -------------------------------------------------------------------------------- (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Current tax expense Federal $194,535 $180,583 $146,550 State, local, foreign 78,384 40,317 55,073 - -------------------------------------------------------------------------------- Total current expense 272,919 220,900 201,623 - -------------------------------------------------------------------------------- Deferred tax (benefit) expense Federal (16,157) (10,529) (24,102) State, local, foreign (28,475) 8,519 (2,457) - -------------------------------------------------------------------------------- Total deferred benefit (44,632) (2,010) (26,559) - -------------------------------------------------------------------------------- Income tax expense $228,287 $218,890 $175,064 - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ % of % of % of Amount Pretax Amount Pretax Amount Pretax - ------------------------------------------------------------------------------------------------------------------------------------ Tax at federal statutory rate $188,463 35.0% $172,515 35.0% $149,442 35.0% Increase (decrease) State and local taxes - net 32,440 6.0 35,289 7.2 32,837 7.7 Amortization of nondeductible intangible assets acquired 10,090 1.9 9,510 1.9 9,892 2.3 Other - net (2,706) (.5) (3,889) (.8) (3,832) (.9) - ------------------------------------------------------------------------------------------------------------------------------------ Subtotal 228,287 42.4% 213,425 43.3% 188,339 44.1% - ------------------------------------------------------------------------------------------------------------------------------------ Favorable tax adjustment -- -- (18,000) - ------------------------------------------------------------------------------------------------------------------------------------ Dispositions -- 5,465 4,725 - ------------------------------------------------------------------------------------------------------------------------------------ Income tax expense $228,287 $218,890 $175,064 - ------------------------------------------------------------------------------------------------------------------------------------
F-25 Income tax benefits, which related to the exercise of options and the employee stock purchase plan, reduced current taxes payable and increased additional paid-in capital by $35.5 million in 1999, $32.0 million in 1998 and $38.6 million in 1997. The benefits are attributable to federal and state tax operating loss carryforwards totaling $7.2 million at December 26, 1999. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives ranging from one to 15 years. The principal portion of these tax loss carryforwards are likely to expire unused. Accordingly, the Company has valuation allowances amounting to $3.3 million as of December 26, 1999. Tax expense in 1998 was reduced by $1.5 million ($2.3 million before federal tax effect) due to a reduction in the valuation allowance attributable to state net operating loss tax benefits. The Company generated $16.0 million in investment tax credits in the state of New York in connection with the construction of its College Point facility in 1997. The Company has fully utilized the investment tax credit for state income tax purposes through December 26, 1999. For financial statement purposes, the Company has selected the deferred method of accounting for investment tax credits, and therefore will amortize the $16.0 million tax benefit over the average useful life of the assets which ranges from 10 to 20 years. In 1999 the Internal Revenue Service completed its examination of federal income tax returns for 1993 through 1995. The examination resulted in a favorable tax settlement which did not have a material effect on the Consolidated Financial Statements. The audits for the years 1996 and 1997 are currently in process and are not expected to have a material effect on the Consolidated Financial Statements. The components of the net deferred tax liabilities recognized on the respective Consolidated Balance Sheets were as follows: - -------------------------------------------------------------------------------- December 26, December 27, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Deferred Tax Assets Retirement, postemployment and deferred compensation plans $211,131 $184,359 Accruals for other employee benefits, compensation, insurance and other 62,587 51,499 Accounts receivable allowances 11,803 25,278 Other 45,530 43,727 - -------------------------------------------------------------------------------- Total deferred tax assets 331,051 304,863 Valuation allowance (3,303) (3,749) - -------------------------------------------------------------------------------- Net deferred tax assets 327,748 301,114 - -------------------------------------------------------------------------------- Deferred Tax Liabilities Property, plant and equipment 257,502 261,176 Intangible assets 102,315 105,204 Investments in Joint Ventures 39,592 42,644 Other 15,761 16,746 - -------------------------------------------------------------------------------- Total deferred tax liabilities 415,170 425,770 - -------------------------------------------------------------------------------- Net deferred tax liability 87,422 124,656 - -------------------------------------------------------------------------------- Amounts included in Other current assets 53,611 40,612 - -------------------------------------------------------------------------------- Deferred income tax liability $141,033 $165,268 - -------------------------------------------------------------------------------- As of December 26, 1999, "Accumulated other comprehensive income (loss)" in the Company's Consolidated Balance Sheets and Consolidated Statements of Stockholders' Equity was net of a deferred income tax liability of $2.6 million, and net of a deferred income tax asset of $2.1 million as of December 27, 1998. F-26 - -------------------------------------------------------------------------------- 9. WORK FORCE REDUCTION CHARGES In 1999 the Company recorded pre-tax charges of $15.5 million related to work force reduction charges ("Buyouts"). This charge reduced earnings per share by $.05 in 1999. In 1998 and 1997, the Company recorded pre-tax charges of $5.4 million and $8.5 million. These charges reduced earnings per share by $.02 in 1998 and 1997. At December 26, 1999, $20.0 million and at December 27, 1998, $22.2 million of these charges were unpaid. This balance will be principally paid within one year. - -------------------------------------------------------------------------------- 10. PENSION PLANS The Company sponsors several pension plans and makes contributions to several others in connection with collective bargaining agreements, including a joint Company-union plan and a number of joint industry-union plans. These plans cover substantially all employees. The Company-sponsored pension plans provide participating employees with retirement benefits in accordance with benefit provision formulas, which are based on years of service and final average or career pay and, where applicable, employee contributions. Retirement benefits are also provided under supplemental unfunded pension plans. In accordance with SFAS No. 132, Employer's Disclosures about Pensions and Other Postretirement Benefits, the components of net periodic pension cost for all Company-sponsored pension plans were as follows: - -------------------------------------------------------------------------------- (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Service cost $ 25,248 $ 22,093 $ 19,645 Interest cost 54,781 51,367 48,734 Expected return on plan assets (48,190) (44,521) (40,164) Recognized actuarial loss 1,655 958 1,006 Amortization of prior service cost 576 433 433 Amortization of transition obligation 609 637 637 - -------------------------------------------------------------------------------- Net periodic pension cost $ 34,679 $ 30,967 $ 30,291 - -------------------------------------------------------------------------------- Assumptions used in the actuarial computations were as follows: - -------------------------------------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------- Discount rate 7.75% 6.75% 7.25% Rate of increase in compensation levels 5.00% 5.00% 5.50% Expected long-term rate of return on assets 9.00% 8.75% 8.75% - -------------------------------------------------------------------------------- In connection with collective bargaining agreements, the Company contributes to several other pension plans, including a joint Company-union plan and a number of joint industry-union plans. Contributions are determined as a function of hours worked or period earnings. Pension cost for these plans was $29.6 million in 1999, $23.2 million in 1998, and $22.4 million in 1997. The changes in benefit obligation and plan assets at September 30, 1999, and 1998 were as follows: - -------------------------------------------------------------------------------- (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at prior measurement date $ 813,224 $ 723,497 Service cost 25,248 22,093 Interest cost 54,781 51,367 Plan participants' contribution 86 226 Amendments 8,077 -- Actuarial (gain)/loss (114,015) 44,665 Special termination benefits -- 824 Benefits paid (32,016) (29,448) - -------------------------------------------------------------------------------- Benefit obligation at current measurement date 755,385 813,224 - -------------------------------------------------------------------------------- Change in plan assets Fair value of plan assets at prior measurement date 578,155 620,562 Actual return on plan assets 94,793 (18,939) Employer contribution 6,126 5,754 Plan participants' contributions 86 226 Benefits paid (32,016) (29,448) - -------------------------------------------------------------------------------- Fair value of plan assets at current measurement date 647,144 578,155 - -------------------------------------------------------------------------------- Funded status (108,241) (235,069) Unrecognized actuarial (gain)/loss (110,971) 50,904 Unrecognized transition obligation 393 1,009 Unrecognized prior service cost 10,008 2,515 Contribution paid after measurement date 1,618 1,461 - -------------------------------------------------------------------------------- Net amount recognized $ (207,193) $(179,180) - -------------------------------------------------------------------------------- As of December 26, 1999, the projected benefit obligation was $115.3 million and the accumulated benefit obligation was $88.1 million. As of December 27, 1998, the projected benefit obligation was $711.0 million and the accumulated benefit obligation was $576.5 million. The fair value of plan assets for funded plans was in excess of the accumulated benefit obligation as of December 26, 1999. The fair value of plan assets for funded plans with accumulated benefit obligations in excess of plan assets amounted to $482.0 million as of December 27, 1998. F-27 Additional termination benefits were provided to certain Globe mechanical union employees who retired during 1998. The offer gave rise to a special charge to earnings of $0.8 million under SFAS No. 88, Employers Accounting for Settlements and Curtailments of Deferred Benefit Plans and for Termination Benefits. The financial statement effects of the Company's Supplemental Employee Retirement Plans were included in the tables above. The primary portion of the Company's net obligation under these plans is included in "Other Liabilities - Other" on the Company's Consolidated Balance Sheets. The amount of cost recognized for employer sponsored defined contribution pension plans for the year ended December 26, 1999, was $11.9 million, $12.0 million for the year ended December 27, 1998, and $9.8 million for the year ended December 28, 1997. - -------------------------------------------------------------------------------- 11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS The Company provides health and life insurance benefits to retired employees (and their eligible dependents) who are not covered by any collective bargaining agreements if the employee meets specified age and service requirements. In accordance with SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, the Company accrues the costs of such benefits during the employee's active years of service. Net periodic postretirement cost was as follows: - -------------------------------------------------------------------------------- (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------- Components of net periodic benefit cost Service cost $ 4,363 $ 4,129 $ 3,680 Interest cost 8,499 8,822 8,581 Recognized actuarial gain (1,167) (852) (1,535) Amortization of prior service cost (2,231) (2,132) (1,659) - -------------------------------------------------------------------------------- Net periodic postretirement benefit cost $ 9,464 $ 9,967 $ 9,067 - -------------------------------------------------------------------------------- The Company's policy is to fund the above-mentioned plans as claims and premiums are paid. The accumulated postretirement benefit obligation assumptions were as follows: - -------------------------------------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------- Discount rate 7.75% 6.75% 7.25% Estimated increase in compensation level 5.00% 5.00% 5.50% Healthcare cost trend rate range 7.75%-7.25% 8.50%-7.50% 9.25%-8.00% Grading down to percent in the year 2000 5.00% 5.00% 5.00% - -------------------------------------------------------------------------------- A one-percentage point change in assumed health care cost trend rates would have the following effects in 1999: - -------------------------------------------------------------------------------- One-Percentage Point One-Percentage Point (In thousands) Increase Decrease - -------------------------------------------------------------------------------- Effect on total service and interest cost for 1999 $ 2,314 $ (1,918) Effect on accumulated postretirement benefit obligation as of December 26, 1999 $19,665 $(16,624) - -------------------------------------------------------------------------------- The accrued postretirement benefit liability and the change in benefit obligation at September 30 in each year were as follows: - -------------------------------------------------------------------------------- (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at prior measurement date $ 140,149 $ 127,420 Service cost 4,363 4,129 Interest cost 8,499 8,822 Actuarial (gain)/loss (29,598) 9,195 Amendments (3,189) (6,050) Benefits paid (4,597) (3,367) - -------------------------------------------------------------------------------- Benefit obligation at current measurement date 115,627 140,149 - -------------------------------------------------------------------------------- Change in plan assets Fair value of plan assets at prior measurement date -- -- Employer contribution 4,597 3,367 Benefits paid (4,597) (3,367) - -------------------------------------------------------------------------------- Fair value of plan assets at current measurement date -- -- - -------------------------------------------------------------------------------- Funded status (115,627) (140,149) Unrecognized actuarial gain (44,965) (16,253) Unrecognized prior service cost (15,674) (14,577) Contribution paid after measurement date 1,303 609 - -------------------------------------------------------------------------------- Net amount recognized $(174,963) $(170,370) - -------------------------------------------------------------------------------- F-28 In connection with collective bargaining agreements, the Company contributes to several welfare plans, including a joint Company-union plan and a number of joint industry-union plans. Contributions are determined as a function of hours worked or period earnings. Portions of these contributions, which cannot be disaggregated, related to postretirement benefits for plan participants. Total contributions to these welfare funds were $25.5 million in 1999, $27.0 million in 1998, and $26.9 million in 1997. The primary portion of the Company's net obligation under these plans is included in "Other Liabilities - Other" on the Company's Consolidated Balance Sheets. In accordance with SFAS No. 112, Employers' Accounting for Postemployment Benefits, the Company accrues the cost of certain benefits provided to former or inactive employees after employment but before retirement (such as workers' compensation, disability benefits and health care continuation coverage) during the employee's active years of service. - -------------------------------------------------------------------------------- 12. EXECUTIVE AND NON-EMPLOYEE DIRECTORS' INCENTIVE PLANS Under the Company's 1991 Executive Stock Incentive Plan and the 1991 Executive Cash Bonus Plan (together, the "1991 Executive Plans"), the Board of Directors may authorize incentive compensation awards and grant stock options to key employees of the Company. Awards may be granted in cash, restricted and unrestricted shares of the Company's Class A Common Stock, retirement units (stock equivalents) or such other forms as the Board of Directors deems appropriate. Under the 1991 Executive Plans, stock options of up to 40 million shares of Class A Common Stock may be granted and stock awards of up to two million shares of Class A Common Stock may be made. In adopting the 1991 Executive Plans, shares previously available for issuance of retirement units and stock options under prior plans are no longer available for future awards. Retirement units are payable in Class A Common Stock generally over a period of 10 years following retirement. Stock options currently outstanding were granted under the Company's Executive Incentive Compensation Plan and the 1991 Executive Plans. The Plans provide for granting of both incentive and non-qualified stock options principally at an option price per share of 100% of the fair market value of the Class A Common Stock on the date of grant. These options have a term of 10 years, and become exercisable in annual periods ranging from one year to four years from the date of grant. Payment upon exercise of an option may be made in cash, or with previously-acquired shares. Under the Company's Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), non-qualified options with 10-year terms are granted annually to each non-employee director of the Company. The 1997 annual grant increased the number of shares of Class A Common Stock a director may purchase from the Company from 2,000 to 4,000 shares at the fair market value of such shares at the date of grant. Options for an aggregate of 0.5 million shares of Class A Common Stock may be granted under the Directors' Plan. Changes in the Company's stock options for the three-year period ended December 26, 1999, were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 ------------------------------ ---------------------------- ------------------------------- Weighted Weighted Weighted Number of Average Number of Average Number of Average (Shares in thousands) Options Exercise Price Options Exercise Price Options Exercise Price - ----------------------------------------------------------------------------------------------------------------------------------- Options outstanding, beginning of year 20,317 $23 19,585 $18 20,738 $14 Granted 5,271 47 4,505 34 4,436 32 Exercised (3,574) 15 (3,513) 13 (5,316) 12 Forfeited (311) 26 (260) 18 (273) 8 - ----------------------------------------------------------------------------------------------------------------------------------- Options outstanding, end of year 21,703 $30 20,317 $23 19,585 $18 - ----------------------------------------------------------------------------------------------------------------------------------- Options exercisable, end of year 10,343 $22 10,045 $16 9,278 $13 - -----------------------------------------------------------------------------------------------------------------------------------
F-29 The Company's stock options outstanding at December 26, 1999, were as follows:
- --------------------------------------------------------------------------------------------------------------------- (In thousands) Options Outstanding Options Exercisable ------------------------------------------------------ ---------------------------------- Weighted Average Number Remaining Weighted Remaining Number Weighted Average Exercise Price Ranges of Options Contractual Life Exercise Price of Options Exercise Price - --------------------------------------------------------------------------------------------------------------------- $ 5-10 99 3 years $8 99 $ 8 $10-15 2,967 4 years 12 2,967 12 $15-20 4,998 7 years 17 4,161 21 $20-47 13,639 9 years 39 3,116 33 - --------------------------------------------------------------------------------------------------------------------- 21,703 $30 10,343 $22 - ---------------------------------------------------------------------------------------------------------------------
In 1999 Acquisition Subsidiary (see Note 2) adopted a stock option plan (the "Subsidiary Plan") that provides for the grant of options in Acquisition Subsidiary's common stock to employees of and service providers to Acquisition Subsidiary and its affiliates. Acquisition Subsidiary has reserved 15.0 million shares of its common stock for issuance under the Subsidiary Plan. With certain exceptions, such options generally vest over four years as follows: 25% on the first anniversary of the grant date and 12.5% every six months thereafter. During 1999 Acquisition Subsidiary granted options for 8.2 million shares at an exercise price range of $5.86 to $7.03 per share. Outstanding options under the Subsidiary Plan as of December 26, 1999, were for 8.8 million shares at a weighted average exercise price of $5.17 per share of which 0.7 million options were exercisable (see below) at a weighted average exercise price of $0.17 per share. In connection with the acquisition of Abuzz in July 1999, unvested options to acquire 0.4 million shares of Abuzz were exchanged into unvested options of Acquisition Subsidiary's common stock with similar terms and conditions ("Abuzz Rollover Options"). The average exercise price of these options is $0.19. These options vest ratably over a two-year period. In addition, also in connection with the acquisition of Abuzz, Acquisition Subsidiary exchanged vested options in Abuzz for vested options of 0.7 million common shares in Acquisition Subsidiary. The average exercise price of these options is $0.17 per share. After Class C Stock is issued (see Note 18), each option for shares of Acquisition Subsidiary's common stock will automatically be converted into an option to purchase shares of Class C Stock at the same exchange ratio used to convert Acquisition Subsidiary's common stock into Class C Stock. The exchange ratio used to convert Acquisition Subsidiary's common stock into shares of Class C stock is intended to give holders of Acquisition Subsidiary common stock the same percentage of ownership in the TCD group immediately prior to the public issuance, as they held in Acquisition Subsidiary. In 1999 the Company recorded compensation expense of $2.0 million for 3.0 million Acquisition Subsidiary options granted in 1999 for the difference between the exercise price and the fair market value at the date of grant. Except for options under the Subsidiary Plan noted above, no compensation expense has been recorded by the Company. The Company expects to recognize future noncash compensation for accounting purposes as follows: 2000 - $2.3 million; 2001- $0.5 million and 2002 - $0.1 million, as the options vest over their respective vesting periods. The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to accounting for its stock option and employee stock purchase plans (see Note 13) ("Employee Stock-Based Plans"). The weighted average fair values for stock option grants were $15.84 in 1999, $9.35 in 1998 and $9.26 in 1997. The weighted average values for the Company's Employee Stock Purchase Plan ("ESPP") rights were $8.62 in 1999, $6.67 in 1998 and $4.41 in 1997. The weighted average value for stock options under the Subsidiary Plan was $2.16. The weighted average values were estimated at the date of grant using the Black Scholes Option Valuation model and the assumptions presented in the table below. There was no expected volatility assumed for the Subsidiary Plan as such assumption is not required for non-public companies.
- -------------------------------------------------------------------------------------------------------------------------------- The Subsidiary Plan Stock Options ESPP Rights ---------- ----------------------------------- ------------------------------------ 1999 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- Risk-free interest rate 6.19% 6.20% 4.34% 5.72% 4.15% 5.15% 5.45% Expected life 4 years 5 years 5 years 5 years 1.1 years 1.1 years 1.1 years Expected volatility -- 28.08% 24.90% 22.62% 28.08% 24.90% 22.62% Expected dividend yield -- 0.87% 1.08% 1.05% 1.89% 1.39% 1.66% - --------------------------------------------------------------------------------------------------------------------------------
F-30 Had compensation cost for the Employee Stock-Based Plans and the Subsidiary Plan been determined over the vesting period based on the fair value at the grant date for awards under those plans, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below. The pro forma effect for 1999, 1998 and 1997 on the amounts presented below is not representative of the pro forma effect in future years because it does not take into account pro forma compensation expense related to grants made prior to 1995.
- --------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 ----------------------- ----------------------- ------------------------ (In thousands, except per share data) As reported Pro forma As reported Pro forma As reported Pro forma - --------------------------------------------------------------------------------------------------------------------------- Net Income $310,177 $275,953 $278,914 $257,803 $262,301 $249,582 Basic earnings per share $ 1.77 $ 1.57 $ 1.48 $ 1.37 $ 1.36 $ 1.29 Diluted earnings per share $ 1.73 $ 1.54 $ 1.45 $ 1.34 $ 1.33 $ 1.27 - ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 13. CAPITAL STOCK The Company's 5 1/2% cumulative prior preference stock was redeemable at the option of the Company on 30-days' notice at par plus accrued dividends and was entitled to an annual dividend of $5.50 payable quarterly. The Company redeemed all outstanding shares of its 5 1/2% cumulative prior preference stock on October 1, 1997, at par value at a cost of $1.8 million. The Company's serial preferred stock was subordinate to the 5 1/2% cumulative prior preference stock. The Board of Directors is authorized to set the distinguishing characteristics of each series prior to issuance, including the granting of limited or full voting rights; however, the consideration received must be at least $100 per share. No shares of serial preferred stock have been issued. The Company's Class A and Class B Common Stock are entitled to equal participation in the event of liquidation and in dividend declarations. The Class B Common Stock is convertible at the holders' option on a share-for-share basis into Class A shares. As provided for in the Certificate of Incorporation, the Class A Common Stock has limited voting rights, including the right to elect 30% of the directors of the Board, and the Class A and Class B Common Stock have the right to vote together on reservation of Company stock for stock options and other stock-related plans, on the ratification of the selection of independent certified public accountants and, in certain circumstances, on acquisitions of the stock or assets of other companies. Otherwise, except as provided by the laws of the State of New York, all voting power is vested solely and exclusively in the holders of the Class B Common Stock. The Company paid $410.9 million in 1999 and $454.1 million in 1998 to repurchase shares of Class A Common Stock. The Company repurchased 11.9 million shares in 1999 at an average cost of $34.63 per share and 14.8 million shares in 1998 at an average cost of $30.72 per share. On June 17, 1999, the Board of Directors authorized additional repurchase expenditures under the Company's stock repurchase program for up to $500.0 million. During the period from December 26, 1999, through January 28, 2000, the Company paid $26.1 million to repurchase 0.6 million shares of Class A Common Stock at an average price of $46.04 per share. As of January 28, 2000, the remaining amount of repurchase authorizations from the Company's Board of Directors is $409.9 million. Under the authorizations, purchases may be made from time to time either in the open market or through private transactions. Purchases may be suspended from time to time or discontinued. The effect of repurchases on diluted earnings per share was an increase to earnings per share of $.07 in 1999 and $.05 in 1998. Stock repurchases under the repurchase program exclude shares reacquired in connection with taxes due from optionees on certain exercises under the Company's stock option plans at a cost of $12.9 million in 1999 and $26.8 million in 1998. Also excluded from the repurchase program were repurchases of common stock in connection with noncash exercises under the Company's stock option plans at a cost of $24.3 million in 1999 and $34.7 million in 1998. In 1999 the Company retired from treasury 11.4 million Class A shares. This retirement resulted in a reduction of $387.3 million in treasury stock, $71.3 million in Additional Paid-In Capital and $314.9 million in Retained Earnings. In 1998 the Company retired from treasury 44.2 million Class A shares and 0.3 million Class B shares. This retirement resulted in a reduction of $861.4 million in treasury stock, $833.4 million in Additional Paid-In Capital and $23.5 million in Retained Earnings. F-31 Under the 2000 Offering of the ESPP, eligible employees may purchase Class A Common Stock through payroll deductions during the 2000 plan year at the lower of $32.91 per share (85% of the average market price on October 1, 1999) or 85% of the average market price on November 27, 2000. Between 38% to 53% of eligible employees have participated in the ESPP in the last three years. Under the ESPP, the Company issued 1.5 million shares in 1999, 1.4 million shares in 1998 and 1.6 million shares in 1997. Shares of Class A Common Stock reserved for issuance were as follows: - -------------------------------------------------------------------------------- December 26, December 27, (Shares in thousands) 1999 1998 - -------------------------------------------------------------------------------- Stock Options Outstanding 21,667 20,317 Available 6,296 11,256 - -------------------------------------------------------------------------------- Employee Stock Purchase Plan Available 2,921 4,444 - -------------------------------------------------------------------------------- Voluntary Conversion of Class B Common Stock Available 847 849 - -------------------------------------------------------------------------------- Retirement Units and Other Awards Outstanding 125 150 Available 1,933 1,933 - -------------------------------------------------------------------------------- Total Outstanding 21,792 20,467 Available 11,997 18,482 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 14. COMMITMENTS AND CONTINGENT LIABILITIES OPERATING LEASES Such lease commitments are primarily for office space and equipment. Certain office space leases provide for rent adjustments relating to changes in real estate taxes and other operating expenses. Rental expense amounted to $32.8 million in 1999, $29.0 million in 1998 and $30.4 million in 1997. The approximate minimum rental commitments under noncancelable leases at December 26, 1999, were as follows: 2000, $11.2 million; 2001, $7.5 million; 2002, $6.1 million; 2003, $5.0 million; 2004, $3.4 million and $9.5 million thereafter. CAPITAL LEASES In 1994 the Company recorded $5.0 million in a capital lease for 31 acres of city-owned land in College Point, New York, on which the Company has completed building a printing and distribution facility. The Company has the option to purchase the property at any time prior to the end of the lease in 2019. Under the terms of the lease agreement with the City of New York, the Company receives various tax and energy cost reductions. The Company also has a long-term lease for a building and site in Edison, N.J. The lease provides the Company with certain early cancellation rights, as well as renewal and purchase options. For financial reporting purposes, the Edison lease has been classified as a capital lease; accordingly, an asset of $57.0 million (included in buildings, building equipment and improvements) was recorded at December 28, 1997. In May 1998 the Company renegotiated its lease for this property to extend its commitment for an additional 10 years through 2018. Accordingly, the Company increased its capitalized asset and corresponding liability to $78.0 million. Future minimum lease payments for all capital leases, and the present value of the minimum lease payments at December 26, 1999, are as follows: - -------------------------------------------------------------------------------- (In thousands) Amount - -------------------------------------------------------------------------------- 2000 $ 8,990 2001 8,805 2002 8,195 2003 7,309 2004 7,189 Later years 133,141 - -------------------------------------------------------------------------------- Total minimum lease payments 173,629 Less imputed interest (85,092) - -------------------------------------------------------------------------------- Present value of net minimum lease payments including current maturities $ 88,537 - -------------------------------------------------------------------------------- OTHER There are various legal actions that have arisen in the ordinary course of business and are now pending against the Company. These actions are generally 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 these actions with legal counsel to the Company that the ultimate liability that might result from these actions would not have a material adverse effect on the consolidated financial statements. F-32 - -------------------------------------------------------------------------------- 15. MARKETABLE SECURITIES In 1999 the Company acquired a total of 1.6 million shares or approximately 6% in TheStreet.com for $15.6 million, of which $3.6 million was in cash and $12.0 million represents an irrevocable credit for future advertising to be used by TheStreet.com through February 2003. These marketable securities are classified as available-for-sale as defined under Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities. These securities are reported at fair market value, and are included in the caption "Miscellaneous Assets" in the Company's Consolidated Balance Sheets and amounted to $26.1 million at December 26, 1999. An unrealized gain of $5.8 million, net of income tax, is reported as a separate component of the Consolidated Statements of Stockholders' Equity and in the Consolidated Balance Sheets in the caption "Accumulated other comprehensive income (loss)." There are no realized gains or losses on available-for-sale securities. - -------------------------------------------------------------------------------- 16. OTHER LIABILITIES The components of the "Other Liabilities-Other" balance on the Company's Consolidated Balance Sheets were as follows: - -------------------------------------------------------------------------------- December 26, December 27, (In thousands) 1999 1998 - -------------------------------------------------------------------------------- Pension plan obligation $207,193 $179,180 Obligation for postretirement benefits other than pensions and postemployment benefits 174,963 170,370 Deferred compensation obligation 84,497 63,493 Other 167,617 132,654 - -------------------------------------------------------------------------------- Total $634,270 $545,697 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 17. SEGMENT INFORMATION Operating segments represent components of the Company's business that are evaluated regularly by key management in assessing performance and resource allocation. The Company has determined that its reportable segments consist of its Newspaper, Broadcast and Magazine Groups. For the years presented herein, the Newspaper Group is comprised of the following operating segments, each of which has its own management: The New York Times, The Boston Globe, and 21 other newspapers. The economic characteristics, products, services, production process, customer type and distribution methods for the operating segments of the Newspaper Group are substantially similar and have therefore been aggregated as a reportable segment. The Broadcast and Magazine Groups are managed separately and have different economic characteristics from those of the Newspaper Group, and are therefore shown as separate reportable segments. Revenues from individual customers, revenues between business segments, and revenues, operating profit and identifiable assets of foreign operations are not significant. For the years presented herein, the following are the Company's reportable operating segments: NEWSPAPER GROUP The New York Times, The Boston Globe, the Company's 21 regional newspapers, newspaper distributors, a news service, a features syndicate, TimesFax, licensing operations of The New York Times databases and microfilm and Internet-related operations. See Note 18 on Subsequent Events relating to the Internet Operations and the Company's decision to sell certain newspaper properties. Beginning in 2000 the Worcester Telegram & Gazette, acquired on January 7, 2000 (see Note 18), and The Globe will be presented as the New England Newspaper Group. BROADCAST GROUP Eight network-affiliated television stations and two radio stations. MAGAZINE GROUP Three golf publications and related activities in the golf field. F-33 The Company's Statements of Income on a segment basis were as follows:
Years Ended -------------------------------------------------- December 26, December 27, December 28, (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------ REVENUES Newspapers $ 2,869,908 $ 2,664,396 $ 2,557,080 Broadcast 150,131 151,175 144,506 Magazines 110,590 121,134 164,832 - ------------------------------------------------------------------------------------------------------------ Total $ 3,130,629 $ 2,936,705 $ 2,866,418 - ------------------------------------------------------------------------------------------------------------ OPERATING PROFIT (LOSS) Newspapers $ 556,279 $ 477,782 $ 434,057 Broadcast 45,833 45,120 39,368 Magazines 18,038 22,110 28,332 Unallocated corporate expenses (48,868) (29,792) (46,655) - ------------------------------------------------------------------------------------------------------------ Total 571,282 515,220 455,102 - ------------------------------------------------------------------------------------------------------------ Income from Joint Ventures 17,900 21,014 13,990 Interest expense, net 50,718 43,333 42,115 Net gain on dispositions of assets -- 12,619 10,388 - ------------------------------------------------------------------------------------------------------------ Income before income taxes and extraordinary item 538,464 505,520 437,365 Income taxes 228,287 218,890 175,064 - ------------------------------------------------------------------------------------------------------------ Income before extraordinary item 310,177 286,630 262,301 Extraordinary item, net of tax - debt extinguishment -- (7,716) -- - ------------------------------------------------------------------------------------------------------------ NET INCOME $ 310,177 $ 278,914 $ 262,301 - ------------------------------------------------------------------------------------------------------------
Newspaper Group operating profit includes Buyouts of $15.4 million for 1999, $2.5 million for 1998 and $7.5 million for 1997. Internet-related operations included in the Newspaper Group included losses of $21.6 million in 1999, $13.0 in 1998 and $7.3 in 1997. The Broadcast Group operating profit includes Buyouts of $0.1 million for 1999; and $1.9 million for 1998. Magazine Group amounts include the amortization of the income relating to a non-compete agreement associated with the disposition of the Women's Magazines Division. The benefit under this agreement, amounting to $40.0 million, was recognized on a straight-line basis over four years ending in July 1998. Amortization of this income was $5.8 million in 1998 and $10.0 million in 1997. In 1998 the Magazine Group operating profit includes a charge of $3.0 million for Buyouts. Magazine Group results were affected by the sale of the assets of its tennis, sailing and ski magazines and an exit of a golf tee-time reservation operation in 1997 (see Note 2). In 1998 unallocated corporate expenses included a benefit of $2.0 million from the reversal of a Buyout accrual. Unallocated corporate expenses include a charge for Buyouts of $1.0 million for 1997. Unallocated corporate expenses for 1997 also include a $10.1 million noncash charge related to the adoption of EITF 97-13 (see Note 3). Revenues from individual customers, revenues between business segments, and revenues, operating profit and identifiable assets of foreign operations are not significant. Advertising, circulation and other revenue, by major product of the Newspaper Group, were as follows: - -------------------------------------------------------------------------------- % Change ---------------- (In millions) 1999 1998 1997 99-98 98-97 - -------------------------------------------------------------------------------- The New York Times Advertising $1,192.0 $1,058.9 $ 989.5 12.6 7.0 Circulation 452.6 440.6 426.0 2.7 3.4 Other 144.4 142.1 144.2 1.6 (1.4) - -------------------------------------------------------------------------------- Total $1,789.0 $1,641.6 $1,559.7 9.0 5.3 - -------------------------------------------------------------------------------- The Boston Globe Advertising $ 477.5 $ 448.2 $ 440.3 6.5 1.8 Circulation 133.7 133.4 134.5 0.2 (0.8) Other 14.0 8.2 7.8 70.7 5.3 - -------------------------------------------------------------------------------- Total $ 625.2 $ 589.8 $ 582.6 6.0 1.2 - -------------------------------------------------------------------------------- Regional Newspapers Advertising $ 362.7 $ 341.7 $ 323.2 6.1 5.7 Circulation 76.9 77.3 77.6 (0.5) (0.4) Other 16.1 14.0 14.0 15.6 -- - -------------------------------------------------------------------------------- Total $ 455.7 $ 433.0 $ 414.8 5.3 4.4 - -------------------------------------------------------------------------------- Total Newspaper Group Advertising $2,032.2 $1,848.8 $1,753.0 9.9 5.5 Circulation 663.2 651.3 638.1 1.8 2.1 Other 174.5 164.3 166.0 6.2 (1.0) - -------------------------------------------------------------------------------- Total $2,869.9 $2,664.4 $2,557.1 7.7 4.2 - -------------------------------------------------------------------------------- F-34 The Company's segment depreciation and amortization, capital expenditures and identifiable assets reconciled to consolidated amounts were as follows:
- ------------------------------------------------------------------------------------ Years Ended ------------------------------------------------- December 26, December 27, December 28, (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------ DEPRECIATION AND AMORTIZATION Newspapers $ 168,656 $ 166,485 $ 160,192 Broadcast 17,369 17,662 17,919 Magazines 1,372 (4,361) (7,330) Corporate 9,744 8,099 2,764 Investment in Joint Ventures 352 352 352 - ------------------------------------------------------------------------------------ Total $ 197,493 $ 188,237 $ 173,897 - ------------------------------------------------------------------------------------ CAPITAL EXPENDITURES(1) Newspapers $ 49,886 $ 54,178 $ 117,346 Broadcast 10,475 4,331 7,225 Magazines 465 631 3,205 Corporate 12,581 22,438 32,392 - ------------------------------------------------------------------------------------ Total $ 73,407 $ 81,578 $ 160,168 - ------------------------------------------------------------------------------------ IDENTIFIABLE ASSETS Newspapers $ 2,614,891 $ 2,669,290 $ 2,711,180 Broadcast 377,303 387,764 409,742 Magazines 60,524 62,147 56,236 Corporate 321,144 223,635 312,971 Investment in Joint Ventures 121,940 122,273 133,054 - ------------------------------------------------------------------------------------ Total $ 3,495,802 $ 3,465,109 $ 3,623,183 - ------------------------------------------------------------------------------------
(1) Capital expenditures exclude additions to capitalized leases for the Edison Facility in 1998 (see Note 14) - -------------------------------------------------------------------------------- 18. SUBSEQUENT EVENTS On January 7, 2000, the Company acquired certain assets and liabilities of a newspaper, the Worcester Telegram & Gazette, in Worcester, Mass., for approximately $295.0 million in cash. The cost of this acquisition was funded through the Company's commercial paper and medium-term note program. The Company is currently in the process of determining the allocation of the purchase price. The Worcester Telegram & Gazette had total revenues and operating profit of $76.7 million and $16.8 million for 1999 and total assets were $243.2 million as of December 31, 1999. Total debt, including commercial paper and capital leases, as of January 28, 2000, increased to $931.2 million. Total additional borrowings available under all financing arrangements decreased to $272.0 million as of January 28, 2000. These changes from December 26, 1999, resulted primarily from the acquisition of the Worcester Telegram & Gazette. On January 20, 2000, the Board of Directors of the Company authorized, subject to shareholder approval, the issuance of Class C Stock. On January 28, 2000, the Company filed a registration statement with the SEC on Form S-3 (the "Form S-3") related to a proposed initial public offering of Class C Stock, which is intended to track the performance of the Company's Internet business division, Times Company Digital (the "TCD group"). Upon completion of the issuance of Class C Stock, the holders of Class C Stock will vote with the holders of Class A Common Stock on all matters on which the Class A holders vote. After shareholder approval and the completion of the proposed stock offering, the Company intends to separate for financial reporting purposes the TCD group and the "NYT group" (the Company excluding the TCD group except for a retained interest in the TCD group) (See Note 19). The NYT group includes all of the other business segments: Newspaper, Broadcast and Magazines, except for the businesses that comprise the TCD group. The NYT group also includes a retained interest in the TCD group which is currently 100%. This retained interest will decline to reflect the issuance of Class C Stock to the public. The Company currently provides financial data on its Internet operations which are included in the Newspaper Group (the "Internet Operations"). The Internet Operations principally include all Internet-related operations of the Company. However, the operating results of Internet Operations are not indicative of the operating results of TCD group's operations. The TCD group includes NYTimes.com, NYToday.com, Boston.com, WineToday.com, GolfDigest.com and Abuzz.com. The Internet Operations include various Internet operations of The Regionals and exclude GolfDigest.com. On February 17, 2000, the Company made a decision to offer for sale the Santa Barbara News-Press in Santa Barbara, Calif., Daily World in Opelousas, La., Daily News in Palatka, Fla., Lake City Reporter in Lake City, Fla., The News-Sun in Sebring/Avon Park, Fla., The News-Leader in Fernandina Beach, Fla., and Marco Island Eagle in Marco Island, Fla. The net assets of these newspapers have been included in the caption "Assets held for sale" in the Company's Consolidated Balance Sheets as of December 26, 1999, at their carrying value. The sale is expected to be completed by December 31, 2000. The results of operations for these newspapers are not material to the Company. F-35 - -------------------------------------------------------------------------------- 19. CONSOLIDATING INFORMATION After shareholder approval and the proposed offering discussed in Note 18, the Company intends to separate for financial reporting purposes the TCD group and the NYT group. Below is the consolidating financial information of the NYT group and the TCD group. The financial information reflects the businesses of the TCD group and the NYT group including the allocation of revenues and expenses between the TCD group and the NYT group in accordance with the Company's allocation policies. The NYT group presented below excludes its retained interest in the TCD group. The allocations are comprised as follows: a) classified advertising revenues from the NYT group to the TCD Group for displaying classified advertising from NYT Group publications on the TCD Group's Web sites, b) Internet license fees charged by the NYT group to the TCD group for the use of the trademarks and copyrights owned by the NYT group, and c) an allocation of Corporate expenses for general and administrative services and shared processing services. Additionally, the income tax benefit relating to the operations of the TCD group, which could be utilized on a consolidated basis, were allocated. The Company believes that the aforementioned allocations were made on a reasonable basis. CONSOLIDATING STATEMENTS OF INCOME
Year Ended December 26, 1999 Year Ended December 27, 1998 ---------------------------------------------------- --------------------------------------------------- The New The New The NYT The TCD Elimina- York Times The NYT The TCD Elimina- York Times (In thousands) Group Group tions Company Group Group tions Company - ----------------------------------------------------------------------------- --------------------------------------------------- REVENUES External non-internet revenues $ 3,100,118 $ -- $ -- $ 3,100,118 $ 2,919,237 $ -- $ -- $ 2,919,237 External internet revenues 3,712 26,799 -- 30,511 3,294 14,174 -- 17,468 Inter-group license fee revenue 5,000 -- (5,000) -- 5,000 -- (5,000) -- - ----------------------------------------------------------------------------- --------------------------------------------------- Total 3,108,830 26,799 (5,000) 3,130,629 2,927,531 14,174 (5,000) 2,936,705 - ----------------------------------------------------------------------------- --------------------------------------------------- COSTS AND EXPENSES Production costs: External expenses 1,363,515 15,325 -- 1,378,840 1,372,862 8,358 -- 1,381,220 Inter-group license fee expense -- 5,000 (5,000) -- -- 5,000 (5,000) -- Selling, general and administrative expenses: External expenses 1,146,300 34,207 -- 1,180,507 1,019,758 20,507 -- 1,040,265 Inter-group allocated expenses (2,313) 2,313 -- -- (1,476) 1,476 -- -- - ----------------------------------------------------------------------------- --------------------------------------------------- Total 2,507,502 56,845 (5,000) 2,559,347 2,391,144 35,341 (5,000) 2,421,485 - ----------------------------------------------------------------------------- --------------------------------------------------- OPERATING PROFIT (LOSS) 601,328 (30,046) -- 571,282 536,387 (21,167) -- 515,220 Income from joint ventures 17,900 -- -- 17,900 21,014 -- -- 21,014 Interest expense, net 50,704 14 -- 50,718 43,333 -- -- 43,333 Net gain on disposition of assets -- -- -- -- 12,619 -- -- 12,619 - ----------------------------------------------------------------------------- --------------------------------------------------- Income (loss) before income taxes and extraordinary item 568,524 (30,060) -- 538,464 526,687 (21,167) -- 505,520 Income taxes (benefit) 240,972 (12,685) -- 228,287 228,733 (9,843) -- 218,890 - ----------------------------------------------------------------------------- --------------------------------------------------- Income (loss) before extraordinary item 327,552 (17,375) -- 310,177 297,954 (11,324) -- 286,630 Extraordinary item, net of tax -- -- -- -- (7,716) -- -- (7,716) - ----------------------------------------------------------------------------- --------------------------------------------------- NET INCOME/(LOSS) $ 327,552 $ (17,375) $ -- $ 310,177 $ 290,238 $ (11,324) $ -- $ 278,914 - ----------------------------------------------------------------------------- --------------------------------------------------- Year Ended December 28, 1997 -------------------------------------------------------- The New The NYT The TCD Elimina- York Times (In thousands) Group Group tions Company - --------------------------------------------------------------------------------- REVENUES External non-internet revenues $ 2,855,319 $ -- $ -- $ 2,855,319 External internet revenues 973 10,126 -- 11,099 Inter-group license fee revenue 5,000 -- (5,000) -- - --------------------------------------------------------------------------------- Total 2,861,292 10,126 (5,000) 2,866,418 - --------------------------------------------------------------------------------- COSTS AND EXPENSES Production costs: External expenses 1,283,614 6,846 -- 1,290,460 Inter-group license fee expense -- 5,000 (5,000) -- Selling, general and administrative expenses: External expenses 1,112,510 8,346 -- 1,120,856 Inter-group allocated expenses (1,003) 1,003 -- -- - --------------------------------------------------------------------------------- Total 2,395,121 21,195 (5,000) 2,411,316 - --------------------------------------------------------------------------------- OPERATING PROFIT (LOSS) 466,171 (11,069) -- 455,102 Income from joint ventures 13,990 -- -- 13,990 Interest expense, net 42,115 -- -- 42,115 Net gain on disposition of assets 10,388 -- -- 10,388 - --------------------------------------------------------------------------------- Income (loss) before income taxes and extraordinary item 448,434 (11,069) -- 437,365 - --------------------------------------------------------------------------------- Income taxes (benefit) 180,255 (5,191) -- 175,064 Income (loss) before extraordinary item 268,179 (5,878) -- 262,301 - --------------------------------------------------------------------------------- Extraordinary item, net of tax -- -- -- -- - --------------------------------------------------------------------------------- NET INCOME/(LOSS) $ 268,179 $ (5,878) $ -- $ 262,301 - ---------------------------------------------------------------------------------
F-36 CONSOLIDATING BALANCE SHEETS
December 26, 1999 ----------------------------------------------------------------- Reclassifi- The New The NYT The TCD cations/ York Times (In thousands) Group Group Eliminations Company - --------------------------------------------------------------------------------------------- ASSETS Current assets $ 605,350 $ 9,558 $ -- $ 614,908 Investment in joint ventures 121,940 -- -- 121,940 Funds allocated to the TCD group 80,440 -- (80,440) -- Property plant & equipment, net 1,208,601 9,795 -- 1,218,396 Intangible assets acquired, net 1,276,134 28,884 -- 1,305,018 Miscellaneous assets 235,052 488 -- 235,540 - --------------------------------------------------------------------------------------------- Total $ 3,527,517 $ 48,725 $ (80,440) $ 3,495,802 - --------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 660,978 $ 12,536 $ -- $ 673,514 Other liabilities 1,371,873 1,757 -- 1,373,630 Funds allocated from the NYT group -- 80,440 (80,440) -- Common stock 17,882 -- -- 17,882 Retained earnings (accumulated losses) 1,646,751 (46,008) -- 1,600,743 Common stock held in treasury, at cost, and other (169,967) -- -- (169,967) - --------------------------------------------------------------------------------------------- Total $ 3,527,517 $ 48,725 $ (80,440) $ 3,495,802 - --------------------------------------------------------------------------------------------- December 27, 1998 ----------------------------------------------------------------- Reclassifi- The New The NYT The TCD cations/ York Times (In thousands) Group Group Eliminations Company - --------------------------------------------------------------------------------------------- ASSETS Current assets $ 510,025 $ 2,792 $ -- $ 512,817 Investment in joint ventures 122,273 -- -- 122,273 Funds allocated to the TCD group 29,880 -- (29,880) -- Property plant & equipment, net 1,323,523 2,673 -- 1,326,196 Intangible assets acquired, net 1,327,573 -- -- 1,327,573 Miscellaneous assets 175,797 453 -- 176,250 - --------------------------------------------------------------------------------------------- Total $ 3,489,071 $ 5,918 $ (29,880) $ 3,465,109 - --------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 620,185 $ 4,671 $ -- $ 624,856 Other liabilities 1,308,783 -- -- 1,308,783 Funds allocated from the NYT group -- 29,880 (29,880) -- Common stock 18,661 -- -- 18,661 Retained earnings (accumulated losses) 1,706,102 (28,633) -- 1,677,469 Common stock held in treasury, at cost, and other (164,660) -- -- (164,660) - --------------------------------------------------------------------------------------------- Total $ 3,489,071 $ 5,918 $ (29,880) $ 3,465,109 - ---------------------------------------------------------------------------------------------
F-37 CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended December 26, 1999 Year Ended December 27, 1998 ------------------------------------------------ ------------------------------------------------ The New The New The NYT The TCD Elimina- York Times The NYT The TCD Elimina- York Times (In thousands) Group Group tions Company Group Group tions Company - --------------------------------------------------------------------------------- ------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income/(loss) $ 327,552 $ (17,375) $ -- $ 310,177 $ 290,238 $ (11,324) $ -- $ 278,914 Adjustments to reconcile net income to net cash provided by operating activities 288,630 2,288 -- 290,918 215,269 2,717 -- 217,986 - --------------------------------------------------------------------------------- ------------------------------------------------ Net cash provided by operating activities 616,182 (15,087) -- 601,095 505,507 (8,607) -- 496,900 - --------------------------------------------------------------------------------- ------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from dispositions 11,434 -- -- 11,434 23,661 -- -- 23,661 Additions to property, plant and equipment (67,933) (5,474) -- (73,407) (78,782) (2,796) -- (81,578) Other investing proceeds 8,704 -- -- 8,704 14,725 -- -- 14,725 Other investing payments (29,714) 125 -- (29,589) (12,974) -- -- (12,974) - --------------------------------------------------------------------------------- ------------------------------------------------ Net cash used in investing activities (77,509) (5,349) -- (82,858) (53,370) (2,796) -- (56,166) - --------------------------------------------------------------------------------- ------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Commercial paper (repayment) borrowings-net (124,100) -- -- (124,100) 124,100 -- -- 124,100 Long-term obligations, net of payments 101,503 -- -- 101,503 (92,414) -- -- (92,414) Capital shares repurchases, net of issuances (395,754) -- -- (395,754) (473,649) -- -- (473,649) Dividends paid to stockholders (72,016) -- -- (72,016) (69,600) -- -- (69,600) Funds allocated to/from the NYT group to the TCD group (21,016) 21,016 -- -- (11,405) 11,405 -- -- Other financing proceeds (payments) 437 (437) -- -- -- -- -- -- - --------------------------------------------------------------------------------- ------------------------------------------------ Net cash (used in) provided by financing activities (510,946) 20,579 -- (490,367) (522,968) 11,405 -- (511,563) - --------------------------------------------------------------------------------- ------------------------------------------------ Net increase (decrease) in cash and short-term investments 27,727 143 -- 27,870 (70,831) 2 -- (70,829) Cash and cash equivalents at the beginning of the year 35,950 41 -- 35,991 106,781 39 -- 106,820 - --------------------------------------------------------------------------------- ------------------------------------------------ Cash and cash equivalents at the end of the year $ 63,677 $ 184 $ -- $ 63,861 $ 35,950 $ 41 $ -- $ 35,991 - --------------------------------------------------------------------------------- ------------------------------------------------ Year Ended December 28, 1997 -------------------------------------------- The New The NYT The TCD Elimina- York Times (In thousands) Group Group tions Company - ----------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income/(loss) $ 268,179 $ (5,878) $ -- $ 262,301 Adjustments to reconcile net income to net cash provided by operating activities 188,252 (867) -- 187,385 - ----------------------------------------------------------------------------- Net cash provided by operating activities 456,431 (6,745) -- 449,686 - ----------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from dispositions 39,727 -- -- 39,727 Additions to property, plant and equipment (159,238) (930) -- (160,168) Other investing proceeds 10,560 -- -- 10,560 Other investing payments (6,782) -- -- (6,782) - ----------------------------------------------------------------------------- Net cash used in investing activities (115,733) (930) -- (116,663) - ----------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Commercial paper (repayment) borrowings-net (45,500) -- -- (45,500) Long-term obligations, net of payments (3,847) -- -- (3,847) Capital shares repurchases, net of issuances (152,685) -- -- (152,685) Dividends paid to stockholders (61,865) -- -- (61,865) Funds allocated to/from the NYT group to the TCD group (6,644) 6,644 -- -- Other financing proceeds (payments) (1,409) -- -- (1,409) - ----------------------------------------------------------------------------- Net cash (used in) provided by financing activities (271,950) 6,644 -- (265,306) - ----------------------------------------------------------------------------- Net increase (decrease) in cash and short-term investments 68,748 (1,031) -- 67,717 Cash and cash equivalents at the beginning of the year 38,033 1,070 -- 39,103 - ----------------------------------------------------------------------------- Cash and cash equivalents at the end of the year $ 106,781 $ 39 $ -- $ 106,820 - -----------------------------------------------------------------------------
F-38 INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS AND STOCKHOLDERS OF THE NEW YORK TIMES COMPANY We have audited the accompanying consolidated balance sheets of The New York Times Company as of December 26, 1999 and December 27, 1998, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 26, 1999. Our audits also include the financial statement schedule listed in the Index at Item 14a. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The New York Times Company as of December 26, 1999 and December 27, 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 26, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP New York, New York January 28, 2000 (February 17, 2000 as to Note 18) MANAGEMENT'S RESPONSIBILITIES REPORT The Company's consolidated financial statements were prepared by management, who is responsible for their integrity and objectivity. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and, as such, include amounts based on management's best estimates and judgments. Management is further responsible for maintaining a system of internal accounting control, designed to provide reasonable assurance that the Company's assets are adequately safeguarded and that the accounting records reflect transactions executed in accordance with management's authorization. The system of internal control is continually reviewed for its effectiveness and is augmented by written policies and procedures, the careful selection and training of qualified personnel and a program of internal audit. The consolidated financial statements were audited by Deloitte & Touche LLP, independent auditors. Their audit was conducted in accordance with generally accepted auditing standards and their report is shown on this page. The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with the independent auditors, internal auditors and management to discuss specific accounting, financial reporting and internal control matters. Both the independent auditors and the internal auditors have full and free access to the Audit Committee. Each year the Audit Committee selects, subject to ratification by stockholders, the firm which is to perform audit and other related work for the Company. /s/ Russell T. Lewis Russell T. Lewis President and Chief Executive Officer The New York Times Company /s/ John M. O'Brien John M. O'Brien Senior Vice President and Chief Financial Officer The New York Times Company F-39 QUARTERLY INFORMATION (Unaudited)
First Quarter Second Quarter Third Quarter -------------------------------------------------------------------------- (In millions, except per share data) 1999 1998 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------------------------- Revenues $ 739.1 $ 722.6 $ 779.4 $ 749.2 $ 729.6 $ 682.7 - ----------------------------------------------------------------------------------------------------------------- Costs and expenses Production costs Raw materials 87.4 88.0 82.5 89.0 67.3 83.7 Wages and benefits 150.0 150.1 160.4 158.1 150.9 145.8 Other 103.4 104.2 105.9 102.4 107.1 102.1 - ----------------------------------------------------------------------------------------------------------------- Total production costs 340.8 342.3 348.8 349.5 325.3 331.6 Selling, general and administrative expenses 283.1 263.9 275.7 254.6 291.5 250.7 - ----------------------------------------------------------------------------------------------------------------- Operating profit 115.2 116.4 154.9 145.1 112.8 100.4 Income from Joint Ventures 4.2 4.3 3.3 3.9 4.9 6.3 Interest expense, net 11.9 10.1 12.9 10.5 12.9 10.3 Net gain on dispositions of assets -- 4.6 -- 8.0 -- -- - ----------------------------------------------------------------------------------------------------------------- Income before taxes and extraordinary item 107.5 115.2 145.3 146.5 104.8 96.4 Income taxes 46.1 50.6 61.8 63.8 44.8 41.4 - ----------------------------------------------------------------------------------------------------------------- Income before extraordinary item 61.4 64.6 83.5 82.7 60.0 55.0 Extraordinary item, net of tax(1) -- -- -- (7.7) -- -- - ----------------------------------------------------------------------------------------------------------------- Net income $ 61.4 $ 64.6 $ 83.5 $ 75.0 $ 60.0 $ 55.0 - ----------------------------------------------------------------------------------------------------------------- Average number of common shares outstanding Basic 179.7 192.6 176.1 191.5 173.8 188.5 Diluted 183.1 197.2 179.3 196.1 177.7 192.3 - ----------------------------------------------------------------------------------------------------------------- Basic earnings per share Earnings before extraordinary item $ .34 $ .34 $ .47 $ .43 $ .35 $ .29 Extraordinary item, net of tax(1) -- -- -- (.04) -- -- - ----------------------------------------------------------------------------------------------------------------- Net income $ .34 $ .34 $ .47 $ .39 $ .35 $ .29 - ----------------------------------------------------------------------------------------------------------------- Diluted earnings per share Earnings per share before extraordinary item $ .34 $ .33 $ .47 $ .42 $ .34 $ .29 Extraordinary item, net of tax(1) -- -- -- (.04) -- -- - ----------------------------------------------------------------------------------------------------------------- Net income $ .34 $ .33 $ .47 $ .38 $ .34 $ .29 - ----------------------------------------------------------------------------------------------------------------- Dividends per share $ .095 $ .085 $ .105 $ .095 $ .105 $ .095 - ----------------------------------------------------------------------------------------------------------------- Fourth Quarter Year ----------------------------------------------- (In millions, except per share data) 1999 1998 1999 1998 - -------------------------------------------------------------------------------------- Revenues $ 882.5 $ 782.2 $ 3,130.6 $ 2,936.7 - -------------------------------------------------------------------------------------- Costs and expenses Production costs Raw materials 84.2 94.2 321.4 354.9 Wages and benefits 160.0 154.2 621.3 608.2 Other 119.7 109.4 436.1 418.1 - -------------------------------------------------------------------------------------- Total production costs 363.9 357.8 1,378.8 1,381.2 Selling, general and administrative expenses 330.2 271.1 1,180.5 1,040.3 - -------------------------------------------------------------------------------------- Operating profit 188.4 153.3 571.3 515.2 Income from Joint Ventures 5.5 6.5 17.9 21.0 Interest expense, net 13.0 12.4 50.7 43.3 Net gain on dispositions of assets -- -- -- 12.6 - -------------------------------------------------------------------------------------- Income before taxes and extraordinary item 180.9 147.4 538.5 505.5 Income taxes 75.6 63.1 228.3 218.9 - -------------------------------------------------------------------------------------- Income before extraordinary item 105.3 84.3 310.2 286.6 Extraordinary item, net of tax(1) -- -- -- (7.7) - -------------------------------------------------------------------------------------- Net income $ 105.3 $ 84.3 $ 310.2 $ 278.9 - -------------------------------------------------------------------------------------- Average number of common shares outstanding Basic 172.6 182.4 175.6 188.8 Diluted 177.0 185.8 179.2 192.8 - -------------------------------------------------------------------------------------- Basic earnings per share Earnings before extraordinary item $ .61 $ .46 $ 1.77 $ 1.52 Extraordinary item, net of tax(1) -- -- -- (.04) - -------------------------------------------------------------------------------------- Net income $ .61 $ .46 $ 1.77 $ 1.48 - -------------------------------------------------------------------------------------- Diluted earnings per share Earnings per share before extraordinary item $ .59 $ .45 $ 1.73 $ 1.49 Extraordinary item, net of tax(1) -- -- -- (.04) - -------------------------------------------------------------------------------------- Net income $ .59 $ .45 $ 1.73 $ 1.45 - -------------------------------------------------------------------------------------- Dividends per share $ .105 $ .095 $ .41 $ .37 - --------------------------------------------------------------------------------------
All earnings per share amounts for special items below are the same for basic and diluted earnings per share unless otherwise noted. (1) See Note 7 of the Notes to the Consolidated Financial Statements. F-40 The 1999 and 1998 quarters do not equal the respective year-end amounts for earnings per share due to the weighted average number of shares outstanding used in the computations for the respective periods. Per share amounts for the respective quarters and years have been computed using the average number of common shares outstanding as presented in the table on the proceeding page. The Company's largest source of revenue is advertising, which influences the pattern of the Company's quarterly consolidated revenues and is seasonal in nature. Traditionally, second-quarter and fourth-quarter advertising volume is higher than that which occurs in the first- and third-quarters. Advertising volume tends to be lower in these quarters primarily because economic activity is lower in the post holiday season and summer periods. Quarterly trends are also affected by the overall economy and economic conditions that may exist in specific markets served by each of the Company's business segments. Special items for 1999 and 1998 by quarter were as follows: o Second-quarter 1999 results included a $4.0 million pre-tax charge ($.01 per share) for Buyouts. o Third-quarter 1999 results included a $6.1 million pre-tax charge ($.02 per share) for Buyouts. o Fourth-quarter 1999 results included a $5.3 million pre-tax charge ($0.2 per share) principally for Buyouts at The Boston Globe. o First-quarter 1998 results included a $4.6 million pre-tax gain ($.01 per share) from the sale of equipment. o Second-quarter 1998 results included a $7.7 million after-tax extraordinary item ($.04 per share) in connection with a debt extinguishment (see Note 7). In addition, 1998 results included a $8.0 million pre-tax gain ($.02 per share) on the sale of assets of the Company's tennis, sailing and ski magazines. o Fourth-quarter 1998 results included a $5.4 million pre-tax charge ($.02 per share) for Buyouts. - -------------------------------------------------------------------------------- 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 January 28, 2000, was as follows: Class A Common Stock: 11,104; Class B Common Stock: 37. The market price range of Class A Common Stock was as follows: - -------------------------------------------------------------------------------- Quarter Ended 1999 1998 - -------------------------------------------------------------------------------- High Low High Low March $35.94 $28.94 $34.13 $31.13 June 38.50 26.94 38.72 33.25 September 40.75 36.56 40.69 26.25 December 48.75 37.50 35.81 20.50 Year 48.75 26.94 40.69 20.50 - -------------------------------------------------------------------------------- F-41 TEN-YEAR SUPPLEMENTAL FINANCIAL DATA
Years Ended December -------------------------------------------------------------------------------------- (In millions, except per share data) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues and Income Revenues $3,131 $ 2,937 $2,866 $2,628 $2,428 $2,397 $2,057 $1,810 $1,737 $1,808 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Profit 571 515 455 173 233 211 126 88 93 129 - ------------------------------------------------------------------------------------------------------------------------------------ Income (Loss) from Joint Ventures 18 21 14 18 15 5 (53) (9) 9 8 - ------------------------------------------------------------------------------------------------------------------------------------ Income (Loss) before extraordinary item and cumulative effect of accounting change 310 287 262 85 136 213 6 (11) 47 65 Extraordinary item (1) -- (8) -- -- -- -- -- -- -- -- Net cumulative effect of accounting change -- -- -- -- -- -- -- (34) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 310 $ 279 $ 262 $ 85 $ 136 $ 213 $ 6 $ (45) $ 47 $ 65 - ------------------------------------------------------------------------------------------------------------------------------------ Financial Position Total assets $3,496 $ 3,465 $3,623 $3,540 $3,390 $3,138 $3,215 $1,995 $2,128 $2,150 Long-term debt and capital lease obligations 598 598 535 637 638 523 460 207 213 319 Common stockholders' equity 1,449 1,531 1,729 1,623 1,610 1,544 1,599 1,000 1,073 1,056 - ------------------------------------------------------------------------------------------------------------------------------------ Basic earnings per share Income (Loss) before extraordinary item and cumulative effect of accounting change $ 1.77 $ 1.52 $ 1.36 $ .43 $ .70 $ 1.02 $ .04 $ (.07) $ .30 $ .42 Extraordinary item (1) -- (.04) -- -- -- -- -- -- -- -- Net cumulative effect of accounting change -- -- -- -- -- -- -- (.22) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 1.77 $ 1.48 $ 1.36 $ .43 $ .70 $ 1.02 $ .04 $ (.29) $ .30 $ .42 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share Income (Loss) before extraordinary item and cumulative effect of accounting change $ 1.73 $ 1.49 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.06) $ .30 $ .42 Extraordinary item (1) -- (.04) -- -- -- -- -- -- -- -- Net cumulative effect of accounting change -- -- -- -- -- -- -- (.22) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 1.73 $ 1.45 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.28) $ .30 $ .42 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends $ .41 $ .37 $ .32 $ .29 $ .28 $ .28 $ .28 $ .28 $ .28 $ .27 Common stockholders' equity $ 8.08 $ 7.94 $ 8.77 $ 8.25 $ 8.27 $ 7.39 $ 9.42 $ 6.33 $ 6.93 $ 6.90 - ------------------------------------------------------------------------------------------------------------------------------------ Shares Outstanding Class A and Class B Common 174 182 193 195 195 196 214 159 157 154 - ------------------------------------------------------------------------------------------------------------------------------------ Market Price (end of year) $46.88 $ 35.31 $32.03 $19.25 $14.81 $11.06 $13.13 $13.19 $11.81 $10.31 - ------------------------------------------------------------------------------------------------------------------------------------
All references to earnings per share are the same for basic and diluted unless noted otherwise. (1) See Note 7 of the Notes to the Consolidated Financial Statements. F-42 All earnings per share amounts for special items below are the same for basic and diluted earnings per share unless otherwise noted. 1999 o $15.5 million pre-tax charge ($.05 per share) principally for Buyouts at The Globe 1998 o $4.6 million pre-tax gain ($.01 per share) from the sale of equipment o $7.7 million after-tax extraordinary charge ($.04 per share) in connection with the Company's repurchase of $78.1 million of its $150.0 million, 8.25% notes due in 2025 o $8.0 million pre-tax gain ($.02 per share) from the satisfaction of a post-closing requirement related to the 1997 sale of assets of the Company's tennis, sailing and ski magazines o $5.4 million pre-tax charge ($.02 per share) for Buyouts 1997 o $10.4 million pre-tax gain ($.03 per share) resulting from the sale of assets of the Company's tennis, sailing and ski magazines and certain small properties, net of costs associated with the exit of a golf tee-time reservation operation o $10.1 million pre-tax noncash accounting charge ($.03 per share) related to EITF 97-13 o $8.5 million pre-tax charge ($.02 per share) for Buyouts o $18.0 million ($.09 per share) favorable tax adjustment 1996 o $126.8 million pre-tax noncash accounting charge ($.49 basic earnings per share, $.48 diluted earnings per share) related to SFAS 121 o $44.1 million pre-tax charge ($.13 basic earnings per share, $.12 diluted earnings per share) for Buyouts o $32.9 million pre-tax gain ($.09 per share) from the sale of a building and the realization of a gain contingency from the disposition of a paper mill in a prior year. 1995 o $11.3 million pre-tax gain ($.03 per share) from the sales of several small newspapers o $10.1 million pre-tax charge ($.03 per share) for Buyouts 1994 o $200.9 million pre-tax gain ($.50 basic earnings per share, $.49 diluted earnings per share) from the sales of the Women's Magazines Division and U.K. golf publications, and the disposition of a minority interest in a newsprint mill 1993 o $3.7 million pre-tax charge ($.01 per share) for rate adjustments due to a severe snowstorm o $4.4 million ($.02 per share) of additional tax expense for remeasurement of deferred tax balances due to the enactment of the Revenue Reconciliation Act of 1993 o $1.2 million ($.01 per share) of additional tax expense due to the Revenue Reconciliation Act of 1993 which increased the federal corporate income tax rate o $2.6 million pre-tax gain ($.01 per share) from the sale of assets o $35.4 million of pre-tax charges ($.12 per share) for Buyouts o $47.0 million pre-tax noncash charge ($.28 per share) to write down a joint venture investment 1992 o $53.8 million pre-tax loss ($.24 per share) on the closing of The Gwinnett Daily News (GA) o $3.1 million pre-tax gain ($.01 per share) from the sale of assets o $28.0 million pre-tax charge ($.10 per share) for Buyouts o $21.4 million pre-tax charge ($.08 per share) for labor disruptions, training and start-up costs at Edison o $34.0 million after-tax net cumulative effect of accounting changes ($.22 per share) includes the change in methods of accounting for income taxes, postretirement benefits other than pensions and postemployment benefits 1991 o $20.0 million pre-tax charge ($.08 per share) for Buyouts at The Times o $10.0 million reversal of a provision ($.06 per share) for income taxes related to a favorable tax settlement S-1 THE NEW YORK TIMES COMPANY VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended December 26, 1999
(In thousands) - ------------------------------------------------------------------------------------------------------------------------------------ Column A Column B Column C Column D Column E - ------------------------------------------------------------------------------------------------------------------------------------ Additions charged Deductions for to costs and purposes for which Balance at expenses or accounts were set Balance at end of Description beginning of period revenues up* period - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 26, 1999 Deducted from assets to which they apply Uncollectible accounts $28,146 $43,055 $37,605 $33,596 Returns and allowances, etc 6,218 6,754 6,819 6,153 - ------------------------------------------------------------------------------------------------------------------------------------ Total $34,364 $49,809 $44,424 $39,749 - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 27, 1998 Deducted from assets to which they apply Uncollectible accounts $20,889 $36,221 $28,964 $28,146 Returns and allowances, etc 4,998 6,242 5,022 6,218 - ------------------------------------------------------------------------------------------------------------------------------------ Total $25,887 $42,463 $33,986 $34,364 - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 28, 1997 Deducted from assets to which they apply Uncollectible accounts $24,359 $22,423 $25,893 $20,889 Returns and allowances, etc 6,953 8,997 10,952 4,998 - ------------------------------------------------------------------------------------------------------------------------------------ Total $31,312 $31,420 $36,845 $25,887 - ------------------------------------------------------------------------------------------------------------------------------------
* Uncollectible account balances of $0.4 million were reclassified as assets held for sale in 1999. EX-10.2 2 1991 EXECUTIVE STOCK INCENTIVE PLAN THE NEW YORK TIMES COMPANY 1991 Executive Stock Incentive Plan As Amended 1. NAME AND GENERAL PURPOSE The name of this plan is The New York Times Company 1991 Executive Stock Incentive Plan (hereinafter called the "Plan"). The purpose of the Plan is to enable the Company (as hereinafter defined) to retain and attract executives who enhance its tradition and contribute to its success by their ability, ingenuity and industry, and to enable them to participate in the long-term success and growth of the Company. 2. DEFINITIONS (a) "Awards" has the meaning specified in Section 12 hereof. (b) "Board" means the Board of Directors of the Company. (c) "Cash Plan" means the Company's 1991 Executive Cash Bonus Plan. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means the Committee referred to in Section 3 of the Plan. If at any time no Committee shall be in office then the functions of the Committee specified in the Plan shall be exercised by those members of the Board who are Non-Employee Directors. (f) "Common Stock" means shares of the Class A Common Stock of the Company. (g) "Company" means The New York Times Company, a corporation organized under the laws of the State of New York (or any successor corporation), and, unless the context otherwise requires, its subsidiaries (as hereinafter defined) and other non-corporate entities in which it owns directly or indirectly 20% or more of the equity interests. A "subsidiary" means any corporation in which the Company possesses directly or indirectly 50% or more of the combined voting power of all classes of stock. (h) "Consolidated Statement of Income" means the consolidated statement of income (or any comparable statement, however designated) of the Company, audited by the independent certified public accountants of the Company and contained in the Company's annual report to stockholders or proxy statement. (i) "Disability" means total disability as defined under the Company's long-term disability plan, whether or not the Participant is covered by such plan, as determined by the Committee. (j) "Fair Market Value" means the arithmetic mean of the highest and lowest sales prices of the Common Stock as reported in the Consolidated Transactions of the American Stock Exchange ("AMSE") (or such other national securities exchange on which the Common Stock may be listed at the time of determination, and if the Common Stock is listed on more than one exchange, then on the one located in New York or if the Common Stock is listed only on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), then on such system) on the date of the grant or other date on which the Common Stock is to be valued hereunder. If no sale shall have been made on the AMSE, such other exchange or the NASDAQ on such date or if the Common Stock is not then listed on any exchange or on the NASDAQ, Fair Market Value shall be determined by the Committee in accordance with Treasury Regulations applicable to incentive stock options. (k) "Income Before Income Taxes" means the amount designated as Income Before Income Taxes for the applicable year and shown separately on the Consolidated Statement of Income for such year. (l) "Non-Employee Director" means any Director of the Company who at the time of acting is a "Non-Employee Director" under Rule 16b-3 or any successor rule ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (m) "Participant" means a key employee of the Company who is selected by the Committee to participate in any one or more parts of the Plan from among persons who in the judgment of the Committee are key employees of the Company. In general, key employees are those employees who have principal responsibility for, or who contribute substantially to, the management efficiency, editorial achievement or financial success of the Company. Only employees of The New York Times Company, its subsidiaries and other non-corporate entities in which it owns directly or indirectly 40% or more of the equity interests are eligible to participate in the Plan. (n) "Retirement" means retirement as defined by the terms of "The New York Times Companies Pension Plan" which became effective December 31, 1988, or any successor retirement plan, whether or not the Participant is a member of such retirement plan, and, in the case of employees of Affiliated Publications, Inc., or any subsidiary thereof, who retire under the terms of the Globe Newspaper Company Retirement Plan, which became effective January 1, 1994 (the "Globe Pension Plan") or any successor retirement plan, "Retirement" shall also mean retirement as defined by the terms of the Globe Pension Plan or any successor plan. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Board or the Committee appointed by it and composed of two or more directors all of whom shall be Non-Employee Directors. The membership of the Committee shall be constituted so as to comply at all times with the applicable requirements of Rule 16b-3, and with the administration requirements of Section 162(m)(4)(C) of the Code. The Committee shall serve at the pleasure of the Board and shall have such powers as the Board may from time to time confer upon it. 4. OPTIONS AND AWARDS UNDER THE PLAN Options, which include "Non-Qualified Options" and "Incentive Stock Options" or combinations thereof, are rights to purchase Common Stock. Non-Qualified Options and Incentive Stock Options are subject to the terms, conditions and restrictions provided in Part I of the Plan. Awards under the Plan may include one or more of the following types, either alone or in any combination thereof: (i) "Stock Awards," (ii) "Restricted Stock Awards," (iii) "Retirement Unit Awards," (iv) "Annual Performance Awards," (v) "Performance Awards" or "Other Awards" and (vi) "Long-Term Performance Awards." Stock Awards are granted under Part IIA of the Plan. Restricted Stock Awards are granted under Part IIB of the Plan. Retirement Unit Awards are granted under Part IIC of the Plan. Annual Performance Awards are granted under Part IID of the Plan. Performance Awards or Other Awards are granted under Part IIE of the Plan. Awards are subject to the terms, conditions and restrictions provided in the respective subparts of Part II of the Plan. Annual Performance Awards will be based exclusively on the criteria set forth in Section 27A. Long-Term Performance Awards are granted under Part IIF of the Plan. Long-Term Performance Awards will be based exclusively on the criteria set forth in Section 28A. PART I STOCK OPTIONS 5. PURPOSE The purpose of the Stock Option portion of the Plan is to provide an added incentive for effective service and high levels of performance to Participants by affording them an opportunity, under the terms of 2 the Plan, to acquire Common Stock and thereby to increase their proprietary interest in the continued progress and success of the Company. 6. DETERMINATION OF OPTIONEES; SHARES SUBJECT TO OPTIONS (a) The Committee may grant options to purchase Common Stock ("Options") to Participants in such amounts as the Committee may determine, subject to the conditions and limitations set forth in the Plan. Options may be granted in combination with Awards made under the Plan, and Options may be granted to any Participant whether or not he or she was eligible for, or received, an Award. (b) The number of shares of Common Stock with respect to which Options may be granted to any key employee during any calendar year shall not exceed 400,000 (subject to adjustment as provided in Sections 28 and 29 hereof). (c) There may be issued under the Plan pursuant to the exercise of Options, an aggregate of not more than 40,000,000 shares of Common Stock, subject to adjustment as provided in Sections 28 and 29 hereof. Shares of Common Stock issued pursuant to Options may be either authorized but unissued shares, treasury shares, reacquired shares, or any combination thereof. Any shares subject to an Option which expires without being exercised shall be available for issuance under new Options. 7. OPTION PRICE The exercise price of Common Stock subject to Options granted pursuant to the Plan shall be the Fair Market Value thereof at the time the Option is granted. If a Participant owns or is deemed to be the owner of, by reason of the attribution rules under Section 425(d) of the Code, more than 10% of the combined voting power of all classes of the stock of the Company or any subsidiary of the Company and an Option granted to such Participant is intended to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code, the option price shall be no less than 110% of the Fair Market Value of the Common Stock on the date the Option is granted. 8. PAYMENT OF OPTION PRICE The purchase price is to be paid in full when the Option is exercised and stock certificates will be delivered only against such payment. Payment of the option price may be made (i) in cash, (ii) by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price, (iii) by delivering to the Company shares of Common Stock previously owned, or (iv) any combination of the foregoing forms, all subject to the approval of the Committee and to such rules as the Committee may adopt. In determining the number of shares of Common Stock necessary to be delivered to or retained by the Company, such Common Stock shall be valued at Fair Market Value. 9. TYPES OF STOCK OPTIONS (a) Options granted under the Plan may be two types, an incentive stock option ("Incentive Stock Option") and a non-qualified stock option ("Non-Qualified Option"). It is intended that Incentive Stock Options granted hereunder shall constitute incentive stock options within the meaning of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, (i) no provision of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify either the Plan or any Incentive Stock Option granted under such provisions of the Code, and (ii) no Option designated by the Committee as a Non-Qualified Option shall constitute an Incentive Stock Option. In furtherance of the foregoing and not by way of limitation, no Incentive Stock 3 Option shall be granted to a Participant who is not an employee of The New York Times Company or one of its subsidiaries. (b) If the aggregate Fair Market Value of the Common Stock (determined as of the date of grant) for which any optionee may for the first time exercise Incentive Stock Options in any calendar year under the Plan and any other stock option plan of the Company, considered in the aggregate, exceeds $100,000, such excess Incentive Stock Options will be treated as Non-Qualified Options. 10. TERMS OF STOCK OPTIONS (a) Each Option will be for a term of not more than ten years from the date of grant, except that if a Participant owns or is deemed to be the owner of, by reason of the attribution rules of Section 425(d) of the Code, more than 10% of the combined voting power of all classes of stock of the Company or any subsidiary of the Company and an Incentive Stock Option is granted to such Participant, the term of such Option shall be no more than five years from the date of grant. (b) An Option may not be exercised within one year after the date of grant except in the case of the death of the optionee or upon termination of active employment with the Company by reason of the Disability or Retirement of the optionee during such period. Thereafter, an Option shall be exercisable in such installments, if any, as the Committee may specify, and shall be exercisable during the optionee's lifetime only by the optionee (or, if the optionee is disabled, by any guardian or other legal representative appointed to represent him or her) and, except as provided in subsections (c) and (d) below, shall not be exercisable by the optionee unless at the time of exercise such optionee is an employee of the Company. (c) Upon termination of active employment with the Company by reason of Disability or Retirement, an optionee (or, if the optionee is disabled, any guardian or legal representative appointed to represent him or her) may exercise all Options otherwise exercisable by him or her at the time of such termination of employment (subject to the provisions of subsection (e) below) until the expiration thereof. In the event an optionee dies while employed by the Company or after termination of employment by reason of Disability or Retirement, the person who acquired the right to exercise his or her Options by reason of the death of the optionee, as provided in Section 30 hereof, may exercise such Options otherwise exercisable at the time of death (subject to the provisions of subsection (e) below) at any time until the expiration thereof. (d) Upon termination of employment with the Company for any reason other than death, Retirement or Disability, the optionee may exercise all Options otherwise exercisable by him or her at the time of such termination of employment for an additional one year after such termination of employment. In the event such optionee dies within such one-year period, the person who acquired the right to exercise his or her Options by reason of the death of the optionee, as provided in Section 30 hereof, may exercise such Options at any time within the period of the greater of (i) the remainder of the one-year period described in the foregoing sentence, or (ii) three months from the date of the optionee's death. For purposes of this Section 10(d), in the event that any optionee is rehired by the Company within one year of such optionee's termination of employment with the Company, such optionee shall be deemed not to have terminated employment for purposes of determining the expiration date of all unexpired non-qualified stock options held by such individual on the date of rehire, with the effect that such options shall continue to be exercisable at any time until the expiration thereof (subject to the terms thereof and the provisions of this Section 10). (e) Notwithstanding any of the foregoing, no Option shall be exercisable in whole or in part after the expiration date provided in the Option. In the event of the death of the optionee while employed by the Company, or the Disability or Retirement of the optionee, the Committee shall have the discretion to provide for the acceleration of the exercisability of Options exercisable over a period 4 of time, or alternatively, to provide for all or any part of such Options to continue to become exercisable in such installments as originally specified by the Committee, or such revised installments as specified by the Committee at the time of termination of employment (but in no event beyond the original expiration date), in either case subject to such conditions as determined by the Committee in its discretion. (f) No Option shall be transferable otherwise than by will or by the laws of descent and distribution. Notwithstanding the foregoing sentence, the Committee may determine that Options granted to a Participant or a specified group of Participants may be transferred by the Participant to one or more members of the Participant's immediate family, to a partnership or limited liability company whose only partners or members are members of the Participant's immediate family, or to a trust established by the Participant for the benefit of one or more members of the Participant's immediate family; provided, however, that no Incentive Stock Options may become transferable if inconsistent with Section 422 of the Code, unless the Participant consents. For this purpose, "immediate family" means the Participant's spouse, parents, children (including adopted and step-children), grandchildren and the spouses of such parents, children (including adopted and step-children) and grandchildren. A transferee described in this subsection may not further transfer an Option. An Option transferred pursuant to this subsection shall remain subject to the provisions of the Plan and shall be subject to such other rules as the Committee shall determine. 11. OPTION AGREEMENTS In consideration of any Options granted to a Participant under the Plan, if requested by the Committee, such Participant shall enter into an Option Agreement with the Company providing, in addition to such other terms as the Committee may deem advisable, that the optionee must remain in the employ of the Company for one year before such optionee will be entitled to exercise the Option, except as provided in Section 10 hereof with respect to death, Disability and Retirement, and specifying the installments, if any, in which such Option shall become exercisable. PART II AWARDS 12. FORM OF AWARDS The Award portion of the Plan is designed to provide incentives for Participants by the making of awards of supplemental compensation ("Awards"). The Committee, subject to the terms and conditions hereof, may make Awards to a Participant in any one, or in any combination, of the following forms: (a) Common Stock as provided in Part IIA of the Plan ("Stock Awards"); (b) Restricted Stock as provided in Part IIB of the Plan ("Restricted Stock Awards"); (c) Retirement Units as provided in Part IIC of the Plan ("Retirement Unit Awards"); (d) Annual Performance Awards as provided in Part IID of the Plan ("Annual Performance Awards"); (e) Performance Awards ("Performance Awards") or other forms of Awards ("Other Awards"), as provided in Part IIE of the Plan; and (f) Long-Term Performance Awards as provided in Part IIF of the Plan ("Long-Term Performance Awards"). Awards may be made to a Participant whether or not he or she is receiving an Option grant under Part I of the Plan for the year and whether or not he or she receives an award under the Cash Plan. 5 Awards will be based on a Participant's performance in those areas for which the Participant is directly responsible. Performance for this purpose may be measured by the achievement of specific management goals such as, but not limited to, an increase in earnings or the operating cash flow of the Company, outstanding initiative or achievement in any department of the Company, or any other standards specified by the Committee. Annual Performance Awards will be based exclusively on the criteria set forth in Section 27A. Long-Term Performance Awards will be based exclusively on the criteria set forth in Section 28A. 13. MAXIMUM AMOUNT AVAILABLE FOR THE ACCRUAL OF AWARDS UNDER PART II OF THE PLAN FOR ANY YEAR (a) No accrual for Awards shall be made hereunder (or under the Cash Plan) for any year unless cash dividends of not less than ten cents ($.10) per share (subject to adjustment as provided in Sections 28 and 29 hereof) have been declared on the outstanding Class A and Class B Common Stock of the Company during such year. (b) In the event that the above condition is met for any year during the continuance of this Plan, the maximum aggregate amount that may be accrued for Awards under the Plan and the Cash Plan for such year shall be 4% of Income Before Income Taxes. The Committee, in its sole discretion, may make adjustments in Income Before Income Taxes to take account of extraordinary, unusual or infrequently occurring events and transactions, changes in accounting principles that substantially affect the foregoing, or such other circumstances as the Committee may determine warrant such adjustment. (c) As soon as feasible after the close of each year, the independent certified public accountants of the Company shall report the maximum amount that may be accrued for Awards for such year under the formula described in Section 13(b), subject to the second sentence of such Section. (d) If amounts are accrued in any year under the formula described in this Section 13 and are not awarded in full in such year under the Plan and the Cash Plan, such unawarded amounts may, in the discretion of the Committee, be carried forward and be available for Awards under the Plan and under the Cash Plan in any future year without regard to the provisions of Sections 13(a) or (b) of the Plan applicable to Awards made in such year. (e) Awards under the Plan for any year may not exceed the sum of (i) the amount accrued for such year under Section 13(b) above plus (ii) unawarded accrued amounts carried forward from previous years under Section 13(d) above plus (iii) amounts that may become available for Awards pursuant to the last sentence of Sections 15(c) and 27A hereof, minus (x) the amount of interest or dividend equivalents set aside during such year pursuant to Sections 15(c) and 27A hereof and the amount of dividend equivalents allocated to Retirement Unit Accounts during such year pursuant to Section 24 hereof, and minus (y) the amount of awards made for such year under the Cash Plan (and any interest equivalents allocated during such year pursuant to Section 10(b), 11(f) and 12(b) thereof). For this purpose, the amount of Awards of Common Stock under the Plan shall be based on the Fair Market Value of the Common Stock subject to Awards as of the date of grant of such Awards. (f) Subject to Sections 28 and 29 hereof, the aggregate number of shares of Common Stock for which Stock, Restricted Stock, Retirement Units, Annual Performance Awards, and Performance and Other Awards may be made under the Plan shall not exceed 2,000,000 shares, which shall be treasury shares reserved for issuance of Awards under the Plan. Shares of Common Stock subject to, but not issued under, any deferred Award which has been discontinued by the Committee pursuant to the provisions hereof or any Restricted Stock which is forfeited by any Participant shall again be available for Awards under the Plan. 6 14. DETERMINATION OF AWARDS AND PARTICIPANTS (a) As promptly as practicable after the end of each year, the Committee may make Awards (other than Annual Performance Awards and Long-Term Performance Awards, which are to be made exclusively as set forth in Sections 27A and 28A, respectively) for such year and determine the amounts to be carried forward for Awards in future years. The Committee may also, in its discretion, make Awards (other than Annual Performance Awards and Long-Term Performance Awards, which are to be made exclusively as set forth in Sections 27A and 28A, respectively) prior to the end of the year based on the amounts available under clauses (ii) and (iii) of Section 13(e) and reasonable estimates of the accrual for the year in question. (b) The Committee shall have absolute discretion to determine the key employees who are to receive Awards (other than Annual Performance Awards, which are to be made exclusively as set forth in Sections 27A and 28A, respectively) under the Plan for any year and to determine the amount of such Awards based on such criteria and factors as the Committee in its sole discretion may determine, such as the Company's operating cash flow and overall financial performance. Recommendations as to the key employees who are to receive Awards (including Annual Performance Awards and Long-Term Performance Awards) under the Plan for any year and as to the amount and form of such Awards shall, however, be made to the Committee by the chief executive officer of the Company. The fact that an employee is selected as eligible for an Award shall not mean, however, that such employee will necessarily receive an Award. (c) A person whose employment terminates during the year or who is granted a leave of absence during the year may, in the discretion of the Committee and under such rules as the Committee may from time to time prescribe, be given an Award with respect to the period of such person's service during such year. 15. METHOD AND TIME OF PAYMENT OF AWARDS (a) Awards shall be paid in full as soon as practicable after the Award is made; provided, however, that the payment of Annual Performance Awards and Long-Term Performance Awards shall be subject to the provisions of Sections 27A and 28A, respectively, and provided further, that the payment of any or all Awards may be deferred, divided into annual installments, or made subject to such other conditions as the Committee in its sole discretion may authorize under such rules and regulations as may be adopted from time to time by the Committee. (b) The Committee's rules and regulations may include procedures by which a Participant expresses a preference to the Committee as to the form of Award or method of payment of an Award but the final determination as to the form and the terms and conditions of any Award shall rest solely with the Committee. (c) Awards deferred under the Plan shall become payable to the Participant or, in the event of the Participant's death, as specified in Section 30 hereof, in such manner, at such time or times (which may be either before or after Retirement or other termination of service), and subject to such conditions as the Committee in its sole discretion shall determine. In any year the Committee shall have the discretion to set aside, for payment in such year or any future year, interest on any deferred Award payable partly in cash, and amounts equivalent to dividends on any deferred Award payable wholly or partly in stock; provided, however, that the total amount of such interest and dividend equivalents shall be deducted from the maximum amount available for Awards under Section 13(e) of the Plan. Any forfeited deferred Awards (including any forfeited stock at its Award value) shall be carried forward and be available for Awards in any future year without regard to the provisions of Sections 13(a) or (b) of the Plan. 7 16. INDIVIDUAL AGREEMENTS (a) The Committee may in its discretion require that each Participant receiving an Award enter into an agreement with the Company which shall contain such terms and conditions as the Committee in its discretion may require. (b) The Committee may cancel any unexpired, unpaid or deferred Award at any time if the Participant is not in compliance with all applicable provisions of the agreement referred to above, if any, and the Plan. 17. STATUS OF PARTICIPANTS No Participant in this Plan shall be deemed to be a stockholder of the Company, or to have any interest in any stock or any specific assets of the Company by reason of the fact that deferred Stock Awards, Retirement Unit Awards, Annual Performance Awards, Long-Term Performance Awards, Performance Awards, Other Awards or dollar credits are to be recorded as being held for such Participant's account to be paid in installments in the future. The interest of all Participants shall derive from and be determined solely by the terms and provisions of the Plan set forth herein. 18. [Intentionally Left Blank] PART IIA STOCK AWARDS 19. DETERMINATION OF STOCK AWARDS (a) Each year the Committee shall designate those Participants who shall receive Stock Awards under this part of the Plan. Stock Awards are made in the form of grants of Common Stock, which may be delivered immediately, in installments or on a deferred date, as the Committee, in its discretion, may provide. (b) If the Committee determines that some portion of a Stock Award to a Participant shall be treated as a deferred Stock Award and payable in annual or other periodic installments, then the Participant will be notified in writing when such deferred Stock Awards shall be paid and over what period of time. As soon as feasible after the granting of such a Stock Award, there shall be reserved out of the treasury shares of the Company, a number (which may include a fraction) of shares of Common Stock equal to the number of shares of Common Stock so awarded. In each year at the discretion of the Committee there may also be allocated or credited to each Participant a dollar amount equal to the cash dividends declared and paid by the Company on its Common Stock which the Participant would have received had such Participant been the owner of the number of shares of any Common Stock deferred for future payment. Any amounts provided for pursuant to the preceding sentence shall become payable in such manner, at such time or times, and subject to such conditions (which may include provision for an amount equivalent to interest on such dividend equivalents at rates fixed by the Committee) as the Committee in its sole discretion shall determine; provided, however, that the total value of such dividend equivalents (and any interest thereon) shall be deducted from the amount available for Awards under the provisions of Section 13(e) of the Plan. The Committee in its discretion may make appropriate equitable adjustments to such deferred Stock Award to account for any dividends of property (other than cash) declared and paid by the Company on its Common Stock, or to account for any other event described in Sections 28 and 29 hereof. 8 PART IIB RESTRICTED STOCK AWARDS 20. DETERMINATION OF RESTRICTED STOCK AWARDS Each year the Committee shall designate the Participants who shall receive Restricted Stock Awards. Shares awarded under this part of the Plan, while subject to the restrictions hereinafter set forth, are referred to as "Restricted Stock." 21. TERMS OF RESTRICTED STOCK AWARDS Any Award of Restricted Stock shall be subject to the following terms and conditions and to any other terms and conditions not inconsistent with the Plan as shall be prescribed by the Committee in its sole discretion and which may be contained in the agreement, if any, referred to in Section 16 above (or in any amendment thereto): (a) DELIVERY OF RESTRICTED STOCK. Unless otherwise determined by the Committee, the Company shall transfer treasury shares to each Participant to whom an Award of Restricted Stock has been made equal to the number of shares of Restricted Stock specified in the Award, and hold the certificates representing such shares of Restricted Stock for the Participant for the period of time during which such shares shall remain subject to the restrictions set forth in the Award (the "Restricted Period"). Shares of Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered by a Participant during the Restricted Period, except as hereinafter provided. Except for the restrictions set forth herein and unless otherwise determined by the Committee, a Participant shall have all the rights of a stockholder with respect to the shares of Restricted Stock comprising his or her Award, including, but not limited to, the right to vote and the right to receive dividends (which if in shares of Common Stock shall be Restricted Stock under the same terms and conditions). (b) LAPSE OF RESTRICTED PERIOD. The Restricted Period shall commence upon the date of the Award (which unless otherwise specified by the Committee shall be the date the Restricted Stock is transferred to the Participant) and, unless sooner terminated as otherwise provided herein, shall continue for such period of time as specified by the Committee in the Award, which shall in no event be less than one year, and thereafter shall lapse in such installments, if any, as provided by the Committee in the Award. (c) LEGEND. Each certificate issued in respect of shares of Restricted Stock transferred or issued to a Participant under an Award shall be registered in the name of the Participant and shall bear the following (or a similar) legend: "THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE NEW YORK TIMES COMPANY 1991 EXECUTIVE STOCK INCENTIVE PLAN (THE "PLAN") APPLICABLE TO RESTRICTED STOCK AND TO THE RESTRICTED STOCK AGREEMENT DATED (THE "AGREEMENT"), AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED, HYPOTHECATED, OR OTHERWISE DISPOSED OF OR ENCUMBERED IN ANY MANNER DURING THE RESTRICTED PERIOD SPECIFIED IN SUCH AGREEMENT. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE WITH THE SECRETARY OF THE COMPANY." (d) DEATH OR DISABILITY. Unless the Committee shall otherwise determine in the Award, if a Participant ceases to be employed by the Company by reason of death or Disability, the Restricted Period covering all shares of Restricted Stock transferred or issued to such Participant under the Plan shall immediately lapse. 9 (e) RETIREMENT. Unless the Committee shall otherwise determine in the Award, the Restricted Period covering all shares of Restricted Stock transferred to a Participant under the Plan shall immediately lapse upon such Participant's Retirement, whether early or not. (f) TERMINATION OF EMPLOYMENT. Unless the Committee shall otherwise determine in the Award or otherwise determine at or after the date of grant, if a Participant ceases to be employed by the Company other than due to a condition described in Sections 21(d) or (e) above, all shares of Restricted Stock owned by such Participant for which the Restricted Period has not lapsed shall revert back to the Company upon such termination. Authorized leave of absence or absence in military service shall constitute employment for the purposes of this Section 21(f). Whether absence in government service may constitute employment for the purposes of the Plan shall be conclusively determined by the Committee. (g) WAIVER OF FORFEITURE PROVISIONS. The Committee, in its sole and absolute discretion, may waive the forfeiture provisions in respect of all or some of the Restricted Stock awarded to a Participant. (h) ISSUANCE OF NEW CERTIFICATES. Upon the lapse of the Restricted Period with respect to any shares of Restricted Stock, such shares shall no longer be subject to the restrictions imposed in the Award and shall no longer be considered Restricted Stock for the purposes of the Award and the Plan, and the Company shall issue new share certificates respecting such shares registered in the name of the Participant without the legend described in Section 21(c) in exchange for those previously issued. PART IIC RETIREMENT UNIT AWARDS 22. DETERMINATION OF RETIREMENT UNIT AWARDS Each year the Committee shall designate those Participants who shall receive Retirement Unit Awards under the Plan. The Company shall create and maintain appropriate records of account for each Participant which shall be designated as the Participant's Retirement Unit Account. 23. CREDITS TO RETIREMENT UNIT ACCOUNTS The Committee shall allocate to each Participant selected to receive a Retirement Unit Award for that year such dollar amount as the Committee shall determine, taking into account the value of the Participant's services to the Company. Such dollar amount shall thereupon be converted into Retirement Units or fractions of Units and credited to each such Participant's Retirement Unit Account in a number equal to the quotient obtained by dividing such allocated dollar amount by the Fair Market Value of one share of Common Stock as of the date the allocation is made. 24. DIVIDEND CREDITS At the discretion of the Committee there may also be allocated in each year to each Participant a dollar amount equal to the cash dividends declared and paid by the Company on the Common Stock which the Participant would have received had such Participant been the owner of the number of shares of Common Stock equal to the number of the whole Retirement Units (but not fractional Units) credited to the Participant's Retirement Unit Account; provided, however, that the total value of such dividend equivalents shall be deducted from the amount available for Awards under Section 13 of the Plan. The dollar amounts allocated shall be converted into and credited to the Participant's Retirement Unit Account as Retirement Units or fractions thereof as set forth in Section 23 above as of the date on which such dividends were paid by the Company. No interest shall be paid on the dollar amount so allocated to the Retirement Unit Account of any Participant. The Committee in its discretion may make appropriate 10 equitable adjustments to such Retirement Unit Accounts to account for any dividends of property (other than cash) declared and paid by the Company on its Common Stock, or to account for any other event described in Sections 28 and 29 hereof. 25. RESERVATION OF STOCK AND ACCOUNTING RECORDS The Company shall keep records of the Participant's Retirement Unit Account. At the time of any allocation to a Participant's account under Sections 23 or 24 hereof, there shall be reserved out of treasury shares of the Company a number (which may include a fraction) of shares of Common Stock equal to the number of Units or fraction thereof so allocated. 26. MATURITY AND PAYMENT AFTER MATURITY (a) The Retirement Unit Account of each Participant shall mature upon such Participant's death, Retirement or other termination of employment. (b) After maturity, the Company shall deliver to the Participant (or in the event of the death of the Participant, as specified in Section 30 hereof) in ten approximately equal annual installments, shares of Common Stock equal in the aggregate to the number of Retirement Units credited to the Participant's Retirement Unit Account. Any fraction of a Unit credited to the Participant's account at maturity shall be paid in cash with the first installment, the fractional Unit being converted into cash at the Fair Market Value of the Common Stock on such first payment date. The first such installment shall be paid within 90 days after maturity. However, the Committee in its discretion at or any time after maturity may, with the consent of the Participant (or the beneficiary of a deceased Participant as specified in Section 30 hereof), (i) defer the commencement of such distribution or defer any installment, (ii) deliver full payment of the shares of Common Stock equal to the aggregate number of Retirement Units credited to the Participant's Retirement Unit Account and the dollar amount credited thereto, or (iii) reduce or increase the number of annual installments in which the payments are to be made. (c) So long as Retirement Units remain credited to the Retirement Unit Account of a Participant subsequent to maturity, such account shall be credited with the dollar amount allocated to the account as dividends as provided for in Section 24 hereof. Any dollar amount so credited may be paid in cash with the next succeeding annual installment made under Section 26(b) above, or in such manner, at such time or times, and subject to such conditions as the Committee in its sole discretion shall determine; provided, however, that in the case of any dollar amount credited to an account after maturity in respect of a dividend declared prior to maturity, such dollar amounts shall be converted to Retirement Units as of the date of payment and the remaining installments of Common Stock shall be increased accordingly. PART IID ANNUAL PERFORMANCE AWARDS 27A. DETERMINATION OF ANNUAL PERFORMANCE AWARDS (a) GENERAL. Each year the Committee may make Annual Performance Awards under this part of the Plan; provided that no Participant may be eligible to receive an Annual Performance Award hereunder and under the Cash Plan in the same year. (b) CERTAIN DEFINITIONS. For the purposes of this Section 27A, the following terms shall have the meanings specified: "Affected Officers" shall mean those executive officers of the Company whose compensation is required to be disclosed in the Company's annual proxy statement relating to the election of directors. 11 "Code Section 162(m)" shall mean Section 162(m) of the Code (or any successor provision), and "Regulations" shall mean the regulations promulgated thereunder, as from time to time in effect. "Eligible Participants" shall have the meaning set forth in subsection (c) below. "Performance Adjustment" means, for any year, a factor ranging from 0% to 200%, based upon the achievement of Performance Goal Targets established by the Committee, that, when multiplied by an Eligible Participant's Target Award, determines the amount of such Eligible Participant's Annual Performance Award for such year. "Performance Goal" means, for any year, the business criteria selected by the Committee to measure the performance during such year of the Company (or of a division, subsidiary or group thereof) from one or more of the following: (i) earnings per share of the Company for the year; (ii) net income of the Company for the year; (iii) return on assets of the Company for the year (net income of the Company for the year divided by average total assets during such year); (iv) return on stockholder's equity of the Company for the year (net income of the Company for the year divided by average stockholder's equity during such year); (v) operating profit or operating margins of the Company or of a division, subsidiary or group thereof for the year; (vi) cash flow of the Company or of a division, subsidiary or group thereof for the year; (vii) increase in shareholder value as determined at the end of each year; (viii) revenue growth of the Company or of a division, subsidiary or group thereof for the year; and (ix) improved use of capital and/or assets of the Company or of a division, subsidiary or group thereof for the year. "Performance Goal Target" means, for any Performance Goal, the levels of performance during a year under such Performance Goal established by the Committee to determine the Performance Adjustment to an Eligible Participant's Target Award for such year. "Target Award" means, for any year, with respect to an Eligible Participant, the dollar amount set by the Committee that, when multiplied by the applicable Performance Adjustment, determines the dollar amount of such Eligible Participant's Annual Performance Award. (c) ELIGIBILITY. Annual Performance Awards are available each year only to Plan Participants who are designated by the Committee, prior to March 31 of such year (or prior to such later date as permitted by Code Section 162(m) and the Regulations), as likely to be Affected Officers for such year, whose annual salary and bonus for such year are expected to exceed $1,000,000 and who are not designated by the Committee as eligible for an annual performance award under the Cash Plan for such year ("Eligible Participants"). (d) DETERMINATION OF ANNUAL PERFORMANCE AWARDS. Prior to March 31 of each year (or prior to such later date as permitted by Code Section 162(m) and the Regulations), the Committee will determine the Eligible Participants for such year, will designate those Eligible Participants who will be entitled to earn an Annual Performance Award for such year under this Plan, and will establish for each such Eligible Participant for such year: (i) a Target Award, (ii) one or more Performance Goals, and (iii) for each such Performance Goal, a Performance Goal Target, the method by which achievement thereof will be measured and a schedule of Performance Adjustment factors corresponding to varying levels of Performance Goal Target 12 achievement. In the event more than one Performance Goal is established for any Eligible Participant, the Committee shall at the same time establish the weighting of each such Performance Goal in determining such Eligible Participant's Annual Performance Award. Notwithstanding anything in this Section 27A to the contrary, the Annual Performance Award payable to any Eligible Participant in any year may not exceed $1.5 million. (e) PAYMENT OF ANNUAL PERFORMANCE AWARDS. Subject to subsection (f) below, Annual Performance Awards will be paid as soon as practicable after the end of the year to which it relates and after the Committee certifies the extent to which the Performance Goal Target or Targets under the Performance Goal or Goals have been met or exceeded. In the discretion of the Committee, an Annual Performance Award may be paid in cash, shares of Common Stock, shares of Restricted Stock (subject to the provisions of Section 21 hereof), Retirement Units (subject to the provisions of Sections 23-26 hereof) or any combination thereof. For this purpose, shares of Common Stock shall be valued at Fair Market Value, and Restricted Stock and Retirement Units shall be deemed to have a value equal to the Fair Market Value of the underlying Common Stock, in each case as of the date of the Committee's determination to pay such Annual Performance Award in such form or forms. If permitted by the Regulations and Code Section 162(m), the Committee may determine to pay a portion of an Annual Performance Award in December of the year to which it relates. The Committee may not increase the amount of an Annual Performance Award that would otherwise be payable upon achievement of the Performance Target or Targets, but it may reduce any Eligible Participant's Annual Performance Award in its discretion. Subject to Section 14(c) above, no Annual Performance Award will be payable to any Eligible Participant who is not an employee of the Company on the last day of the year to which such Annual Performance Award relates. (f) DEFERRAL OF ANNUAL PERFORMANCE AWARDS. If the Committee determines that some portion of an Annual Performance Award to an Eligible Participant shall be treated as a deferred Annual Performance Award and be payable in annual or other periodic installments, the Eligible Participant will be notified in writing when such deferred Annual Performance Award shall be paid and over what period of time. A deferred Award in the form of shares of Common Stock shall be subject to the provisions of Section 19(b) hereof. In the case of a deferred Award in the form of cash, in each year the Committee shall have the discretion to provide for the payment of an amount equivalent to interest, at such rate or rates fixed by the Committee, on such deferred cash Annual Performance Award. Any amounts provided for pursuant to the preceding sentence shall become payable in such a manner, at such time or times, and subject to such conditions as the Committee shall in its sole discretion determine; provided, however, that the total amount of such interest shall be deducted from the maximum amount available for Awards under the formula described in Section 13 of the Plan. (g) CODE SECTION 162(m). It is the intent of the Company that Annual Performance Awards satisfy, and this Section 27A be interpreted in a manner that satisfies, the applicable requirements of Code Section 162(m) and the Regulations so that the Company's tax deduction for Annual Performance Awards to Affected Officers is not disallowed in whole or in part by operation of Code Section 162(m). If any provision of this Plan or of any Annual Performance Award would otherwise frustrate or conflict with such intent, that provision shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any irreconcilable conflict with such intent, such provision shall be deemed void as applicable to Eligible Participants. 13 PART IIE PERFORMANCE OR OTHER AWARDS 27. DETERMINATION OF PERFORMANCE AND OTHER AWARDS (a) Each year the Committee in its sole discretion may authorize other forms of Awards such as, but not limited to, Performance Awards, if the Committee deems it appropriate to do so in order to further the purposes of the Plan. (b) A "Performance Award" shall mean an Award which entitles the Participant to receive Common Stock, Restricted Stock, Retirement Units, Options under Part I of the Plan or other compensation (which may include cash), or any combination thereof, in an amount which depends upon the financial performance of the Company during a stated period of more than one year. Performance for this purpose may be measured by the growth in book value of the Common Stock, an increase in per share earnings of the Company, an increase in operating cash flow, or any other indicators specified by the Committee. The Committee shall also fix the period during which such performance is to be measured, the value of a Performance Award for purposes of providing for the accrual pursuant to Section 13 of the Plan and the form of payment to be made in respect of the Performance Award. PART IIF LONG-TERM PERFORMANCE AWARDS 28A. DETERMINATION OF LONG-TERM PERFORMANCE AWARDS (a) GENERAL. Each year the Committee shall designate those Participants who shall be eligible to receive Long-Term Performance Awards under this part of the Plan. (b) CERTAIN DEFINITIONS. For purposes of this Section 28A, the following terms shall have the meanings specified: "Code Section 162(m)" shall mean Section 162(m) of the Internal Revenue Code of 1986, as amended (or any successor provision), and "Regulations" shall mean the regulations promulgated thereunder, as from time to time in effect. "Eligible Participants" shall mean certain key business leaders and senior management of the Company as determined in the discretion of the Committee. "Long-Term Performance Goal" means, for any Performance Period, the business criteria selected by the Committee to measure the performance during such Performance Period of the Company (or of a division, subsidiary or group thereof) from one or more of the following: (i) earnings per share of the Company for the Performance Period; (ii) net income of the Company for the Performance Period; (iii) return on assets of the Company for the Performance Period (net income of the Company for the Performance Period divided by average total assets for such Performance Period); (iv) return on stockholder's equity of the Company for the Performance Period (net income of the Company for the Performance Period divided by average stockholder's equity for such Performance Period); (v) operating profit or operating margins of the Company or of a division, subsidiary or group thereof for the Performance Period; (vi) cash flow of the Company or of a division, subsidiary or group thereof for the Performance Period; 14 (vii) increase in shareholder value as determined at the end of the Performance Period; (viii) revenue growth of the Company or of a division, subsidiary or group thereof for the Performance Period; and (ix) improved use of capital and/or assets of the Company or of a division, subsidiary or group thereof for the Performance Period. "Long-Term Performance Goal Target" means, for any Long-Term Performance Goal, the levels of performance during a Performance Period under such Long-Term Performance Goal established by the Committee to determine an Eligible Participant's maximum Long-Term Performance Award. "Performance Period" means the period in excess of one year commencing on January 1 of the year in which the Committee makes the Long-Term Performance Award to an Eligible Participant. (c) ELIGIBILITY. Long-Term Performance Awards are available each year to Eligible Participants who are designated by the Committee, prior to March 31 of such year (or prior to such later date as permitted by Code Section 162(m) and the Regulations). (d) DETERMINATION OF LONG-TERM PERFORMANCE AWARDS. Prior to March 31 of each year (or prior to such later date as permitted by Code Section 162(m) and the Regulations), the Committee will designate the Eligible Participants who will be entitled to earn a Long-Term Performance Award for such Performance Period under this Plan, and will establish for each such Eligible Participant for such Performance Period (i) one or more Long-Term Performance Goals, and (ii) for each such Long-Term Performance Goal, a Long-Term Performance Goal Target and the method by which achievement thereof will be measured. In the event that more than one Long-Term Performance Goal is established for any Eligible Participant, the Committee shall at the same time establish the weighting of each such Long-Term Performance Goal in determining such Eligible Participant's Long-Term Performance Award. Notwithstanding anything in this Section 28A to the contrary, the Long-Term Performance Award payable to any Eligible Participant in any Performance Period may not exceed $1.5 million. (e) PAYMENT OF LONG TERM PERFORMANCE AWARDS. Subject to subsection (g) below, Long-Term Performance Awards will be paid in cash as soon as practicable after the end of the Performance Period to which it relates and after the Committee certifies the extent to which the Long-Term Performance Goal Target or Targets under the Long-Term Performance Goal or Goals have been met or exceeded. If permitted by the Regulations and Code Section 162(m), the Committee may determine to pay a portion of a Long-Term Performance Award in December of the last year of the Performance Period to which it relates. The Committee may not increase the amount of a Long-Term Performance Award that would otherwise be payable upon the achievement of the Long-Term Performance Goal Target or Targets, but it may reduce any Eligible Participant's Long-Term Performance Award in its discretion. Subject to Sections 14(c) and 28A(g), no Long-Term Performance Award will be payable to any Eligible Participant who is not an employee of the Company on the last day of the Performance Period to which such Long-Term Performance Award relates. (f) TERMINATION OF EMPLOYMENT BECAUSE OF DEATH, DISABILITY OR RETIREMENT. In the event that an Eligible Participant terminates employment because of death, Disability or Retirement, such Eligible Participant, or in the event of death such person as determined in accordance with Section 30, shall be paid a pro rata portion of such Eligible Participant's Long-Term Performance Award that would otherwise be payable upon the achievement of the Long-Term Performance Goal Target or Targets had the Participant continued employment until the end of the Performance Period. Such pro rata Long-Term Performance Award shall not be paid until the end of the Performance Period to which such Long-Term Award relates. 15 (g) DEFERRAL AND ALTERNATIVE FORM OF PAYMENT OF LONG-TERM PERFORMANCE AWARDS. If the Committee determines that some portion of a Long-Term Performance Award to an Eligible Participant shall be treated as a deferred Long-Term Performance Award and payable in annual or other periodic installments, the Eligible Participant will be notified in writing when such deferred Long-Term Performance Award shall be paid and over what period of time. In each year the Committee shall have the discretion to provide for the payment of an amount equivalent to interest, at such rate or rates fixed by the Committee, on any deferred Long-Term Performance Award. Any amounts provided for pursuant to the preceding sentence shall become payable in such manner, at such time or times, and subject to such conditions as the Committee shall in its sole discretion determine; provided, however, that the total amount of such interest shall be deducted from the maximum amount available for Awards under the formula described in Section 5 of the Plan. Furthermore, the Committee may, in its sole discretion, determine that such Long-Term Performance Award shall be paid in shares of Common Stock or in the form of Retirement Units (subject to the provisions of Sections 23-26 hereof). For this purpose, shares of Common Stock shall be valued at Fair Market Value, and Retirement Units shall be deemed to have a value equal to the Fair Market Value of the underlying Common Stock, in each case as of the date of the Committee's determination to pay such Long-Term Performance Award in such form. (h) CODE SECTION 162(m). It is the intent of the Company that Long-Term Performance Awards satisfy, and this Section 28A be interpreted in a manner that satisfies, the applicable requirement of Code Section 162(m) and the Regulations so that the Company's tax deduction for Long-Term Performance Awards to Eligible Participants is not disallowed in whole or in part by operation of Code Section 162(m). If any provision of this Plan or of any Long-Term Performance Award would otherwise frustrate or conflict with such intent, that provision shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any irreconcilable conflict with such intent, such provision shall be deemed void as applicable to any Participant whose compensation is subject to Code Section 162(m). PART III GENERAL PROVISIONS 28. STOCK DIVIDEND OR STOCK SPLIT If at any time the Company shall take any action whether by stock dividend, stock split, combination of shares, or otherwise, which results in a proportionate increase or decrease in the number of shares of Common Stock theretofore issued and outstanding, (i) the number of shares of Common Stock then subject to deferred Awards, credited to Retirement Unit Accounts (matured or unmatured) or set aside for Performance or Other Awards, (ii) the number of outstanding Options, the number of shares of Common Stock for which such Options are exercisable and the exercise price thereof, (iii) the number of shares of Common Stock reserved for Awards, (iv) the number of shares of Common Stock reserved for Options, and (v) the maximum number of shares with respect to which Options may be granted to any key employee in any calendar year under Section 6(b), shall be increased or decreased in the same proportion. The Committee shall make an appropriate equitable adjustment to the provisions of Section 13(a) to take account of such increase or decrease in issued and outstanding shares. The Committee in its discretion may make appropriate equitable adjustments respecting deferred Stock Awards, Retirement Units, Annual Performance Awards, Long-Term Performance Awards, Performance or Other Awards and outstanding Options to take account of a dividend by the Company of property other than cash. All such adjustments shall be made by the Committee whose determination shall be conclusive and binding upon all Participants and any person claiming under or through any Participant. 16 29. RECLASSIFICATION OR MERGER If at any time the Company reclassifies or otherwise changes its issued and outstanding Common Stock (other than in par value) or the Company and one or more corporations merge and the Company is the surviving corporation of such merger, then each Stock Award, Retirement Unit (matured or unmatured), Annual Performance Award, Performance or Other Award which at the time of such reclassification or merger is credited as a Stock Award, Retirement Unit, Annual Performance Award, Long-Term Performance Award, Performance or Other Award shall thereafter be deemed to be the equivalent of (and all Units thereafter credited to a Retirement Unit Account shall be computed with reference to), and outstanding Options shall be exercisable for, the shares of stock or other securities of the Company which pursuant to the terms of such reclassification or merger are issued with respect to each share of Common Stock. The Committee shall also make an appropriate equitable adjustment to the provisions of Sections 6(b) and 13(a) to take account of such event. All such adjustments shall be made by the Committee whose determination shall be conclusive and binding upon all Participants and any person claiming under or through any Participant. 30. NON-ALIENATION OF BENEFITS Except as herein specifically provided, no right or unpaid benefit under this Plan shall be subject to alienation, assignment, pledge or charge and any attempt to alienate, assign, pledge or charge the same shall be void. If any Participant or person entitled to the benefits hereunder should attempt to alienate, assign, pledge or charge any benefit hereunder, then such benefit shall, in the discretion of the Committee, cease. Notwithstanding the foregoing, rights and benefits hereunder shall pass by will or the laws of descent and distribution in the following order: (i) to beneficiaries so designated by the Participant; if none, then (ii) to a legal representative of the Participant; if none, then (iii) to the persons entitled thereto as determined by a court of competent jurisdiction. Awards so passing shall be made at such times and in such manner as if the Participant were living. 31. WITHHOLDING OR DEDUCTION FOR TAXES If at any time specified herein for the making of any payment or delivery of any Common Stock to any Participant or beneficiary, any law or regulation of any governmental authority having jurisdiction in the premises shall require the Company to withhold, or to make any deduction for, any taxes or take any other action in connection with the payment or delivery then to be made, such payment or delivery shall be deferred until such withholding or deduction shall have been provided for by the Participant or beneficiary, or other appropriate action shall have been taken. The Participant or beneficiary may satisfy the obligation for such withholding or deduction in whole or in part by electing to deliver shares of Common Stock already owned and having a Fair Market Value equal to the amount to be withheld or deducted. 32. ADMINISTRATION EXPENSES The entire expense of administering this Plan shall be borne by the Company. 33. GENERAL CONDITIONS (a) The Board in its discretion may from time to time amend, suspend or terminate any or all of the provisions of this Plan, provided that no change may be made which would prevent Incentive Stock Options granted under the Plan from being Incentive Stock Options as described therein without the consent of the optionees concerned, and further provided that the Board may not make any amendment which (1) changes the class of persons eligible for Incentive Stock Options, or (2) increases the total number of shares for which Options may be granted under Section 6(b), or (3) materially affects the provisions of Sections 13(a) or (b) of the Plan, or (4) increases the total number of shares authorized under Section 13(f) for which Awards may be granted, without 17 the consent and approval of the holders of a majority of the outstanding shares of Class A and Class B Common Stock of the Company entitled to vote thereon, voting together as one class. The foregoing provisions shall not be construed to prevent the Committee from exercising its discretion, or to limit such discretion, to increase the total number of shares for which Options may be granted under Section 6(b) or the total number of shares authorized under Section 13(f) for which Awards may be granted, as expressly permitted by Sections 28 and 29 hereof, or to adjust the provisions of Sections 13(a) and (b) hereof as expressly permitted by Sections 13(b), 28 and 29 hereof, or otherwise to exercise any discretion to the extent expressly authorized hereunder. (b) Nothing contained in the Plan shall prohibit the Company from establishing incentive compensation arrangements in addition to this Plan and the Cash Plan. Payments made under any such separate arrangements shall not be included in or considered a part of the maximum dollar amount available for Awards under the Plan and Cash Plan, or number of shares available for Awards or Options under the Plan, and shall not be charged against the dollar or share amounts available for Awards under the Plan and Cash Plan or Options under the Plan. In the discretion of the Committee, employees shall be eligible to participate in such other arrangements, as well as the Plan and Cash Plan, in the same year. (c) Nothing in this Plan shall be deemed to limit in any way the right of the Company to terminate a Participant's employment with the Company at any time. (d) The Committee may promulgate rules and regulations relating to the administration and interpretation of, and procedures under, the Plan. Any decision or action taken by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be conclusive and binding upon all Participants and any person claiming under or through any Participant. (e) No member of the Board or of the Committee shall be liable for any act or action, whether of commission or omission, taken by any other member or by any officer, agent or employee, nor for anything done or omitted to be done by such Director except in circumstances involving actual bad faith. (f) Notwithstanding any other provision of this Plan, the Company shall not be obligated to make any Award, issue any shares of Common Stock, or grant any Option with respect thereto, unless it is advised by counsel of its selection that it may do so without violation of the applicable Federal and State laws pertaining to the issuance of securities, and may require any stock so issued to bear a legend, may give its transfer agent instructions, and may take such other steps, as in its judgment are reasonably required to prevent any such violation. (g) It is the intent of the Company that transactions involving Options or Awards granted under the Plan be entitled to the exemption from Section 16 of the Exchange Act provided by Rule 16b-3, that any ambiguities or inconsistencies in construction of the Plan be interpreted to give effect to such intention and that if any provision of the Plan is found not to be in compliance with Rule 16b-3, such provision shall be deemed null and void to the extent required to permit any such transaction to comply with Rule 16b-3. The Committee may adopt rules and regulations under, and amend, the Plan in furtherance of the intent of the foregoing. 34. TRANSITION Upon the effectiveness of this Plan, as provided below, and the Cash Plan, such plans replaced the Company's Executive Incentive Compensation Plan ("EICP"), except that the EICP shall continue to govern options and awards of restricted stock outstanding under the EICP. No further awards will be made under the EICP, and all amounts accrued for awards under the EICP and unawarded were carried forward 18 and made available for Awards under the Plan and awards under the Cash Plan. All unmatured and matured but undistributed retirement units and all performance awards respecting current performance cycles awarded under the EICP became Retirement Units and Performance Awards hereunder and any payments or distributions in respect thereof shall be made hereunder; provided, however, that the number of shares of Common Stock available for Awards pursuant to Section 13(f) hereof shall not be reduced by the number of such retirement units previously awarded under the EICP and paid subsequently under the Plan. 35. EFFECTIVE DATES The Plan became effective for periods beginning after January 1, 1991 upon approval by the holders of a majority of the outstanding shares of Class A and Class B Common Stock of the Company entitled to vote thereon at the 1991 Annual Meeting of Stockholders, in person or by proxy, voting together as a single class. No Options may be granted or Awards made under the Plan after December 31, 2000, or such earlier expiration date as may be designated by resolution of the Board. 19 EX-10.4 3 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN THE NEW YORK TIMES COMPANY NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN AS AMENDED 1. PURPOSE The purpose of The New York Times Company Non-Employee Directors' Stock Option Plan (the "Plan") is to secure for The New York Times Company (the "Company") and its stockholders the benefits of the incentive inherent in increased common stock ownership by the members of the Board of Directors (the "Board") of the Company who are not employees of the Company or any of its subsidiaries. 2. ADMINISTRATION The Plan shall be administered by the Board. The Board shall have all the powers vested in it by the terms of the Plan, such powers to include authority (within the limitations described herein) to prescribe the form of the agreement embodying awards of stock options made under the Plan ("Options"). The Board shall, subject to the provisions of the Plan, have the power to construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. Any decision of the Board in the administration of the Plan, as described herein, shall be final and conclusive. The Board may act only by a majority of its members in office, except that the members thereof may authorize any one or more of their number or the Secretary or any other officer of the Company to execute and deliver documents on behalf of the Board. No member of the Board shall be liable for anything done or omitted to be done by such member or by any other member of the Board in connection with the Plan, except in circumstances involving actual bad faith. 3. AMOUNT OF STOCK The stock which may be issued and sold under the Plan will be the Class A Common Stock of the Company ("Common Stock"), of a total number not exceeding 500,000 shares, subject to adjustment as provided in Section 6 below. The stock to be issued may be either authorized and unissued shares, treasury shares, issued shares acquired by the Company or its subsidiaries or any combination thereof. In the event that Options granted under the Plan shall terminate or expire without being exercised in whole or in part, new Options may be granted covering the shares not purchased under such lapsed Options. 4. ELIGIBILITY Each member of the Board who is not an employee of the Company or any of its subsidiaries (a "Non-Employee Director") shall be eligible to receive an Option in accordance with the specific provisions of Section 5 below. The adoption of this Plan shall be not deemed to give any director any right to be granted an Option to purchase Common Stock except to the extent and upon such terms and conditions consistent with the Plan as may be determined by the Board. 5. TERMS AND CONDITIONS OF OPTIONS Each Option granted under the Plan shall be evidenced by an agreement in such form as the Board shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions: (a) The Option exercise price shall be the Fair Market Value of the shares of Common Stock (as defined in Section 7(a) hereof) subject to such Option on the date the Option is granted. (b) Each year, as of the date of the Annual Meeting of Stockholders of the Company, each Non-Employee Director who has been elected or re-elected or who is continuing as a member of the Board as of the adjournment of the Annual Meeting shall automatically receive an Option for 4,000 shares of Common Stock. (c) No Option shall be transferable otherwise than by will or by the laws of descent and distribution. Notwithstanding the foregoing sentence, the Board may determine that Options granted to a Participant or a specified group of Participants may be transferred by the Participant to one or more members of the Participant's immediate family, to a partnership or limited liability company whose only partners or members are members of the Partcipant's immediate family, or to a trust established by the Participant for the benefit of one or more members of the Participant's immediate family. For this purpose, "immediate family" means the Participant's spouse, parents, children (including adopted and step-children), grandchildren and the spouses of such parents, children (including adopted and step-children) and grandchildren. A transferee described in this subsection may not further transfer an Option. An Option transferred pursuant to this subsection shall remain subject to the provisions of the Plan and shall be subject to such other rules as the Board shall determine. (d) No Option or any part of an Option shall be exercisable: (i) before the Non-Employee Director has served one term-year as a member of the Board since the date the Option was granted (as used herein, the term "term-year" means that period from one Annual Meeting to the subsequent Annual Meeting), except as provided in subsection 5(d)(iv)(B) below; (ii) after the expiration of ten years from the date the Option was granted; (iii) unless written notice of the exercise is delivered to the Company specifying the number of shares to be purchased and payment in full is made for the shares of Common Stock being acquired thereunder at the time of exercise; such payment shall be made (A) in United States dollars by certified check or bank draft, or (B) by tendering to the Company shares of Common Stock owned by the person exercising the Option and having a Fair Market Value on the date of exercise equal to the cash exercise price applicable to such Option, or (C) any combination of the foregoing forms; and (iv) unless the person exercising the Option has been, at all times during the period beginning with the date of grant of the Option and ending on the date of such exercise, a Non-Employee Director of the Company, except that (A) if such a person shall cease to be such a Non-Employee Director for reasons other than Retirement (as defined in Section 7(a) hereof) or death, while holding an Option then exercisable that has not expired, such person, at any time within one year after the date he ceases to be such a Non-Employee Director (but in no event after the Option has expired under the provisions of subsection 5(d)(ii) above), may exercise the Option with respect to any shares of Common Stock as to which such person could have but has not exercised the Option on the date the person ceased to be such a Non-Employee Director; (B) if such a person shall cease to be such a Non-Employee Director by reason of Retirement or death while holding an Option (whether or not then exercisable) that has not expired, notwithstanding the provisions of subsection 5(d)(i) above, such person, or in the case of death (either while a Non-Employee Director or after Retirement), his executors, administrators, heirs, legatees or distributees, as the case may be, may, at any time until the expiration of such Option as provided in subsection 5(d)(ii) above, exercise the Option with respect to any shares of Common Stock as to which such person has not exercised the Option on the date the person ceased to be such a Non-Employee Director; and 2 (C) if any person who has ceased to be such a Non-Employee Director for reasons other than death or Retirement shall die holding an Option, such person's executors, administrators, heirs, legatees or distributees, as the case may be, may, at any time within one year after the date of death (but in no event after the Option has expired under the provisions of subsection 5(d)(ii) above), exercise the Option with respect to any shares as to which the decedent could have exercised the Option at the time of death. In the event any Option is exercised by the executors, administrators, heirs, legatees or distributees of the estate of a deceased optionee or by the guardian or legal representative of a disabled optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the Option are the duly appointed legal representatives of the deceased optionee's estate or the proper legatees or distributees thereof or the duly appointed guardian or legal representative of the disabled optionee. 6. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK In the event of changes in the outstanding Common Stock of the Company by reason of dividends (other than cash dividends), recapitalizations, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, the aggregate number and class of shares available under the Plan, the number, class and the price of shares of Common Stock subject to outstanding Options and the number of shares constituting an Option grant under Section 5(b) hereof, shall be appropriately adjusted by the Board, whose determination shall be conclusive. 7. MISCELLANEOUS PROVISIONS (a) The following terms shall have the meanings specified below: (i) "Fair Market Value" means the arithmetic mean of the highest and lowest sales prices of the Common Stock as reported in the Consolidated Transactions of the American Stock Exchange ("AMSE") (or such other national securities exchange on which the Common Stock may be listed at the time of determination, and if the Common Stock is listed on more than one exchange, then on the one located in New York or if the Common Stock is listed only on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), then on such system) on the date of the grant or other date on which the Common Stock is to be valued hereunder. If no sale shall have been made on the AMSE, such other exchange or the NASDAQ on such date or if the Common Stock is not then listed on any exchange or on the NASDAQ, Fair Market Value shall be determined by the Board in accordance with Treasury Regulations applicable to incentive stock options. (ii) "Retirement" means retirement from the Board at the age of 65 or thereafter or resignation from the Board by reason of disability. (b) Except as expressly provided for in the Plan, no Non-Employee Director or other person shall have any claim or right to be granted an Option under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Non-Employee Director any right to be retained in the service of the Company. (c) An optionee's rights and interest under the Plan may not be assigned or transferred in whole or in part either directly or by operation of law or otherwise (except in the event of an optionee's death, by will or the laws of descent and distribution), including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner and no such right or interest of any participant in the Plan shall be subject to any obligation or liability of such participant. (d) No shares of Common Stock shall be issued hereunder unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable federal, state and other securities laws and regulations. 3 (e) It shall be a condition to the obligation of the Company to issue shares of Common Stock upon exercise of an Option, that the optionee (or any beneficiary or person entitled to act under subsection 5(d)(iv) above) pay to the Company, upon its demand, such amount as may be requested by the Company for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue shares of Common Stock. (f) The expenses of the Plan shall be borne by the Company. (g) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares upon exercise of any Option under the Plan and issuance of shares upon exercise of Options shall be subordinate to the claims of the Company's general creditors. (h) By accepting any Option or other benefit under the Plan, each optionee and each person claiming under or through such person shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, any action taken under the Plan by the Company or the Board. (i) It is the intent of the Company that the transactions involving options under the Plan comply in all respects with Rule 16b-3 or any successor rule ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended, that any ambiguities or inconsistencies in construction of the Plan be interpreted to give effect to such intention and that if any provision of the Plan is found not to be in compliance with Rule 16b-3, such provision shall be deemed null and void to the extent required to permit any such transaction to comply with Rule 16b-3. The Board may adopt rules and regulations under, and amend, the Plan in furtherance of the intent of the foregoing. 8. AMENDMENT The Plan may be amended at any time and from time to time by the Board as the Board shall deem advisable, including, but not limited to, amendments necessary to qualify for any exemption or to comply with applicable law or regulations; provided, however, that except as provided in Section 6 above, the Board may not, without further approval by the holders of a majority of the outstanding shares of Class A and Class B Common Stock of the Company entitled to vote thereon, voting together as one class, increase the maximum number of shares of Common Stock as to which Options may be granted under the Plan, increase the number of shares subject to an Option, change the Option exercise price described in subsection 5(a) above, extend the period during which Options may be granted or exercised under the Plan or change the class of persons eligible to receive Options under the Plan. Subject to the provision of Section 7(i) hereof relating to Rule 16b-3, no amendment of the Plan shall materially and adversely effect any right of any optionee with respect to any Option theretofore granted without such optionee's written consent. It is intended that the Plan be a "formula plan" under Rule 16b-3 and will comply with all applicable rules, regulations and staff interpretations of the Securities and Exchange Commission. 9. TERMINATION This Plan shall terminate upon the earlier of the following dates or events to occur: (a) upon the adoption of a resolution of the Board terminating the Plan; or (b) ten years from the date the Plan is initially approved and adopted by the stockholders of the Company in accordance with Section 10 below. 10. EFFECTIVE DATE OF PLAN The Plan shall become effective as of April 16, 1991 or such later date as the Board may determine, provided that the adoption of the Plan shall have been approved by the holders of a majority of the outstanding shares of Class A and Class B Common Stock of the Company entitled to vote thereon at the 1991 Annual Meeting of Stockholders, in person or by proxy, voting together as a single class. 4 EX-10.18 4 DEFERRED EXECUTIVE COMPENSATION PLAN THE NEW YORK TIMES COMPANY DEFERRED EXECUTIVE COMPENSATION PLAN Effective July 1, 1994 Amended January 1, 1999 Amended December 8, 1999 ARTICLE I Introduction 1.1 Purpose Of Plan The Employer has adopted the Plan set forth herein to provide a means by which certain employees may elect to defer receipt of designated percentages or amounts of their Compensation. 1.2 Status Of Plan The Plan is intended to be "a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), and shall be interpreted and administered to the extent possible in a manner consistent with that intent. 1.2 History Of Plan The Plan was first effective on July 1, 1994. Thereafter, the Plan was amended effective January 1, 1999, to change the deferral periods under the Plan and the method of distribution thereunder. Effective December 8, 1999, the Plan was amended to change the eligibility for participation in the Plan and the definition of Compensation thereunder for year following 1999. Effective December 8, 1999, The New York Times Designated Employees Deferred Earnings Plan was merged into the Plan, as amended. -1- ARTICLE II Definitions Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: 2.1 Account means, for each Participant, the account established for his or her benefit under Section 5.1. Such Account shall include both salary and bonus deferrals. 2.2 Change Of Control means: (a) any individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof (a "Person") (or two or more Persons acting in concert), other than any descendent (or any spouse thereof) of Iphigene Ochs Sulzberger (a "Family Member") or a beneficiary or trustee (as the same may change from time to time) of a trust over 50% of the individual beneficiaries of which are Family Members, acquiring the power to elect a majority of the directors of The New York Times Company (the "Company") in a transaction or series of transactions not approved in advance by a vote of at least three quarters of the Continuing Directors (as defined below); or (b) individuals who, as of the date hereof, constitute the Board of Directors of the Company (as of the date hereof the "Continuing Directors") ceasing for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or a nomination for election by the Company's shareholders, was approved in advance by a vote of at least three quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the directors of the Company, as such terms are used in Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a Continuing Director; or (c) approval by the stockholders of the Company of a reorganization, merger, consolidation, liquidation or dissolution of the Company or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by three quarters of the Continuing Directors. 2.3 Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. -2- 2.4 Compensation means the annual bonus, amounts paid under The Advertising and Circulation Sales Incentive Plan, the Long-Term Performance Awards under The New York Times Company 1991 Executive Cash Bonus Plan and the base salary of a Participant, as well as any discretionary cash bonus awarded to the Participant for a particular year. The ERISA Management Committee, in its sole discretion, shall designate from time to time the maximum percentage of each component of Compensation that can be deferred under the Plan. Such designation shall be listed in Appendix A. For purposes of the Plan, Compensation shall be determined before giving effect to Elective Deferrals and other salary reduction amounts which are not included in the Participant's gross income under Code Sections 125, 401(k), 402(h) or 403(b). 2.5 Effective Date means July 1, 1994. 2.6 Election Form means the participation election form as approved and prescribed by the Plan Administrator. 2.7 Elective Deferral means the portion of Compensation which is deferred by a Participant under Article IV. 2.8 Eligible Employee means, for the Plan Year 2000 and Plan Years thereafter, each employee of the Employer whose annual base salary on October 1 of the year prior to the year for which such employee defers any Compensation under the Plan is at least $110,000, who is not covered under a collective bargaining agreement, who is not eligible to participate in any other non-qualified deferred compensation plan sponsored by the Employer and/or its subsidiaries and affiliates while deferring Compensation under this Plan, and who consents to the purchase of Corporate Owned Life Insurance by the Employer. The $110,000 limit on annual base salary shall be adjusted by the ERISA Management Committee from time to time at its sole discretion and without the need for an amendment to the Plan. An employee who participated in this Plan or The New York Times Designated Employees Deferred Earnings Plan prior to 2000, and who no longer meets the definition of an Eligible Employee shall continue to be an Eligible Employee hereunder. 2.9 Employer means The New York Times Company, any successor to all or a major portion of the Employer's assets or business which assumes the obligations of the Employer, and each other entity that is affiliated with the Employer whose employees, with the consent of the Company, are eligible, as provided under Section 2.8, to participate in the Plan. 2.10 ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. -3- 2.11 ERISA Board Committee means a committee of the Board of Directors of The New York Times Company. 2.12 ERISA Management Committee means a committee appointed by the ERISA Board Committee. 2.13 Insolvency means either (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.14 Participant means any Eligible Employee who participates in the Plan in accordance with Article III. 2.15 Plan means The New York Times Company Deferred Executive Compensation Plan and all amendments thereto. 2.16 Plan Administrator means the person, persons or entity designated by the Employer under Article VIII to oversee the administration of the Plan. If no such person or entity is so serving at any time, the Employer shall be the Plan Administrator. 2.17 Plan Year means the 12-month period beginning on January 1 and ending on December 31 of each year, except for the first plan year which begins on July 1, 1994, and ends on December 31, 1994. 2.18 Recordkeeper means the person(s) or entity appointed or hired by the ERISA Management Committee under Section 8.1. 2.19 Total And Permanent Disability means the inability of a Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Plan Administrator. 2.20 Trust means the trust established by the Employer that identifies the Plan as a plan with respect to which assets are to be held by the Trustee. Plan assets in the trust are subject to the general creditors of The New York Times Company in the event of bankruptcy or Insolvency. 2.21 Trustee means the trustee or trustees under the Trust. 2.22 Valuation Option means the performance of the investment funds listed in Appendix B of the Plan. -4- ARTICLE III Participation 3.1 Commencement Of Participation Any Eligible Employee who elects to defer part of his or her Compensation in accordance with Article IV shall become a Participant in the Plan as of the date such deferrals commence in accordance with such Article. 3.2 Continued Participation A Participant in the Plan shall continue to be a Participant so long as any amount remains credited to his or her Account. However, future deferrals under the Plan may be made only if such Participant continues to be an Eligible Employee under the Plan. -5- ARTICLE IV Elective Deferrals 4.1 Elective Deferrals Except as provided in Appendix A, an individual who is an Eligible Employee on the Effective Date may, by completing an Election Form and filing it with the Plan Administrator by the end of the first month following the Effective Date, elect to defer the receipt of a portion of one or more payments of Compensation for a period of at least three Plan Years and on such terms as the ERISA Management Committee may permit. Thereafter, any Eligible Employee may elect to defer the receipt of a percentage or dollar amount of one or more payments of Compensation for a period of a least three Plan Years and on such terms as the ERISA Management Committee may permit, commencing with Compensation paid in the next succeeding Plan Year, by completing an Election Form during the annual enrollment period for the Plan as determined by the Plan Administrator. Except as Provided in Appendix A, effective January 1, 1999, with respect to Elective Deferrals made for the Plan Year 1999 and thereafter, deferrals will mature at the end of a three-year cycle. An individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the first year of the deferral cycle for a period of three Plan Years and on such terms as the ERISA Management Committee may permit; an individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the second year of the deferral cycle for a period of two Plan Years and on such terms as the ERISA Management Committee may permit; and an individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the last year of a deferral cycle for a period of one Plan Year and on such terms as the ERISA Management Committee may permit. All deferrals made during a three-year cycle will mature at the end of the third Plan Year in that cycle. A new three-year cycle will commence after the expiration of each three-year cycle. No Participant may defer more than the portion of his or her Compensation designated by the ERISA Management Committee in Appendix A. A Participant's Compensation shall be reduced in accordance with the Participant's election hereunder and amounts deferred hereunder shall be paid by the Employer to the Trust as soon as administratively feasible and credited to the Participant's Account as of the date the amounts are received by the Trustee. 4.2 Investment Election An individual who is an Eligible Employee and elects to defer Compensation under this Plan shall elect to have his or her Account valued based on the Valuation Option represented by the performance of one or more of the investment funds listed in Appendix B of the Plan. Such Appendix B may be amended at any time by an action of the ERISA -6- Management Committee. If a Participant does not elect a Valuation Option for his or her Account, the Account shall be valued based on the Valuation Option represented by the performance of Fund A. A participant may change his or her selection of Valuation Options on any date. -7- ARTICLE V Accounts 5.1 Accounts The Plan Administrator and/or the Recordkeeper shall establish an Account for each Participant reflecting his or her Elective Deferrals made for the Participant's benefit together with any adjustments for income, gain or loss and any payments from the Account. The Plan Administrator and/or the Recordkeeper shall establish sub-accounts for each Participant that has more than one election in effect under Section 7.1 and such other sub-accounts as are necessary for the proper administration of the Plan. As of the last business day of each calendar quarter, the Plan Administrator shall provide, or cause to be provided, the Participant with a statement of his or her Account reflecting the income, gains and losses (realized and unrealized), amounts of deferrals, fund transfers and distributions of such Account since the prior statement. 5.2 Investments The assets of the Trust shall be invested in such investments as the Trustee shall determine. The Trustee may (but is not required to) consider the Employer's or a Participant's investment preferences when investing the assets attributable to a Participant's Account. -8- ARTICLE VI Vesting 6.1 Vesting A Participant shall be immediately vested in, i.e., shall have a nonforfeitable right to, all Elective Deferrals, and all income and gain attributable thereto, credited to his or her Account. -9- ARTICLE VII Payments 7.1 Election As To Form Of Payment Payments to Participants shall be made in annual installments over a period of 10 years commencing between January 2 and March 15 immediately following the end of each deferral period. The amount of each installment payment will equal the balance of a Participant's Account immediately prior to the installment payment divided by the number of installment payments remaining to be made. The above notwithstanding, a Participant may elect in writing to receive the value of his or her Account in one lump sum, in annual installments over a period of five years, or in annual installments over a period of fifteen years, so long as such election is made at least 13 months prior to the end of the deferral period. Additionally, effective January 1, 1999, a Participant may elect in writing to receive the value of his or her account in a partial lump sum where the Participant may choose the percent of an expiring deferral to be paid in a lump sum with the balance in annual installments over the remainder of the 5, 10 or 15 year-installment period; provided, however, that such election is made at least 13 months prior to the end of the deferral period. Effective January 1, 1999, for (i) Elective Deferrals made for Plan Year 1999 and thereafter, and (ii) for Elective Deferrals made prior to January 1, 1999 which are subject to a Participant's election after January 1, 1999 to renew the deferral, a Participant's election as to the form of payment as set forth in this Section 7.1 shall apply to the Participant's entire Account. If the Participant begins to receive distributions of his or her Account pursuant to this Section 7.l, a subsequent election to defer additional Compensation shall be subject to a new election under this Section 7.1 and shall not affect the payment stream established by the prior distribution election. 7.2 Extension Of Deferral Periods A Participant may make an election in writing to extend any deferral period for three to ten additional Plan Years so long as such Participant makes an election therefor at least 13 months prior to the expiration of the deferral period. Effective January 1, 1999, elections to extend a deferral period must be made for a three-year cycle. A new three-year cycle will commence at the end of every third Plan Year. An election to extend a deferral period must be made by the Participant in writing at least 13 months prior to the end of a deferral period. If a deferral period will expire during the course of a three-year cycle, the Participant's election is limited to an election to extend the deferral period until the end of such three-year cycle. A Participant may elect to renew deferral periods for additional three year cycles an unlimited number of times. -10- Effective January 1, 1999, terminated Participants will not be permitted to renew their deferral elections. Payments to terminated Participants will begin at the expiration of their current deferral period in accordance with the method selected under Section 7.1 (unless the Participant retired under a Company pension plan, or had attained age 55 and completed at least ten years of service as of his or her date of termination, or is Totally and Permanently Disabled, in which case additional elections to defer are permitted). 7.3 Change Of Control As soon as possible following a Change Of Control of the Employer, each Participant shall be paid his or her entire Account balance in a single lump sum. 7.4 Termination Of Employment Upon termination of a Participant's employment for any reason other than death, the Participant's Account shall be paid to the Participant in the form of payment in effect at the time the termination of employment occurs and after the expiration of the deferral period. The above notwithstanding, the Plan Administrator, in its sole discretion, may: (a) pay out a Participant's Account balance in one lump sum at any time prior to the expiration of each deferral period; (b) accelerate the beginning of payments of deferrals to any time prior to the expiration of a deferral period; and (c) revoke the deferral elections of a Participant for the year of the termination of his/her employment. 7.5 Death If a Participant dies prior to the complete distribution of his or her Account, the balance of the Account shall be paid as soon as practicable to the Participant's designated beneficiary or beneficiaries, in the form elected by the Participant at the time of his or her death, provided, however, that the ERISA Management Committee and/or the Plan Administrator may, in their sole discretion, pay out the balance of such Participant's Account in one lump sum. Any designation of beneficiary shall be made by the Participant on a Beneficiary Designation Form filed with the Plan Administrator and may be changed by the Participant at any time by filing another Beneficiary Designation Form containing the revised instructions. If no beneficiary is designated or no designated beneficiary survives the Participant, payment shall be made to the Participant's surviving spouse or, if none, to his/her issue per stirpes, in a single payment. If no spouse or issue survives the Participant, payment shall be made in a single lump sum to the Participant's estate. The most recent Beneficiary Designation Form executed by the Participant prior to his/her death shall apply to all Election Deferrals credited to the Participant's Account at the date of his/her death. 7.6 Taxes -11- All federal, state or local taxes that the Plan Administrator determines are required to be withheld from any payments made pursuant to this Article VII shall be withheld. -12- ARTICLE VIII Plan Administration 8.1 Plan Administration And Interpretation. The ERISA Management Committee (the "Committee") shall oversee the administration of the Plan, shall serve as the agent of the Company with respect to the trust, and shall appoint a Plan Administrator and/or Recordkeeper for the day-to-day operations of the Plan. Such Plan Administrator and/or Recordkeeper shall be listed in Appendix C to this Plan. The Committee shall have complete control and authority to determine the rights and benefits under all claims, demands and actions arising out of the provisions of the Plan of any Participant, beneficiary, deceased Participant, or other person having or claiming to have any interest under the Plan. The Committee shall have complete discretion to interpret the Plan and to decide all matters under the Plan. Such interpretation and decision shall be final, conclusive and binding on all Participants and any person claiming under or through any Participant. Any individual(s) serving on the Committee who is a Participant will not vote or act on any matter relating solely to himself or herself. 8.2 Committee Powers, Duties, Procedures, Etc. The Committee shall have such powers and duties, may adopt such rules and regulations, may act in accordance with such procedures, may appoint such agents, may delegate such powers and duties, may receive such reimbursements and compensation, and shall follow such claims and appeal procedures with respect to the Plan as it may establish. 8.3 Plan Administrator's Duties The Plan Administrator shall be responsible for the day-to-day operations of the Plan. His or her duties shall include, but not be limited to, the following: (a) Keeping track of employees eligible to participate in the Plan and the date each employee becomes eligible to participate. (b) Maintaining, or causing to be maintained by the Recordkeeper, Participants' Accounts, including all sub-accounts required for different contribution types and payment elections made by Participants under the Plan and any other relevant information. (c) Transmitting, or causing to be transmitted by the Recordkeeper, various communications to Participants and obtaining information from Participants such as changes in investment selections. (d) Filing reports required by various governmental agencies. When making a determination or calculation, the Plan Administrator and the Recordkeeper shall be -13- entitled to rely on information furnished by a Participant, a beneficiary, the Employer or the Trustee. The Plan Administrator shall have the responsibility for complying with any reporting and disclosure requirements of ERISA. 8.4 Information To enable the Plan Administrator and/or Recordkeeper to perform their functions, the Employer shall supply full and timely information to the Plan Administrator and/or Recordkeeper on all matters relating to the compensation of Participants, their employment, retirement, death, termination of employment, and such other pertinent facts as the Plan Administrator and/or Recordkeeper may require. 8.5 Indemnification Of Committee And Plan Administrator The Employer agrees to indemnify and to defend to the fullest extent permitted by law any officer(s) or employee(s) who serve on the Committee or as Plan Administrator (including any such individual who formerly served on the Committee or as Plan Administrator) against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. -14- ARTICLE IX Amendment And Termination 9.1 Amendments The Employer shall have the right to amend the Plan from time to time, subject to Section 9.3, by an action of the ERISA Management Committee. 9.2 Termination Of Plan This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer and any Eligible Employee (or any other employee) or a consideration for, or an inducement or condition of employment for, the performance of the services by any Eligible Employee (or other employee). The Employer reserves the right to terminate the Plan at any time, subject to Section 9.3, by an action of the ERISA Management Committee. Upon termination, the Employer may (a) elect to continue to maintain the Trust to pay benefits hereunder as they become due as if the Plan had not terminated or (b) direct the Trustee to pay promptly to Participants (or their beneficiaries) the vested balance of their Accounts. 9.3 Existing Rights No amendment or termination of the Plan shall adversely affect the rights of any Participant with respect to amounts that have been credited to his or her Account prior to the date of such amendment or termination. -15- ARTICLE X Miscellaneous 10.1 No Funding The Plan constitutes a mere promise by the Employer to make payments in accordance with the terms of the Plan and Participants and beneficiaries shall have the status of general unsecured creditors of the Employer. Nothing in the Plan will be construed to give any employee or any other person rights to any specific assets of the Employer or of any other person. In all events, it is the intent of the Employer that the Plan be treated as unfunded for tax purposes and for purposes of Title I of ERISA. 10.2 Non-Assignability None of the benefits, payments, proceeds or claims of any Participant or beneficiary shall be subject to any claim of any creditor of any Participant or beneficiary and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor of such Participant or beneficiary, nor shall any Participant or beneficiary have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise, under the Plan. 10.3 Limitation Of Participants' Rights Nothing contained in the Plan shall confer upon any person a right to be employed or to continue in the employ of the Employer, or interfere in any way with the right of the Employer to terminate the employment of a Participant in the Plan at any time, with or without cause. 10.4 Participants Bound Any action with respect to the Plan taken by the Plan Administrator or the Employer or the Trustee or any action authorized by or taken at the direction of the Plan Administrator, the Employer or the Trustee shall be conclusive upon all Participants and beneficiaries entitled to benefits under the Plan. 10.5 Receipt And Release Any payment to any Participant or beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Employer, the Plan Administrator and the Trustee under the Plan, and the Plan Administrator may require such Participant or beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. If any Participant or beneficiary is determined by the Plan Administrator to be incompetent by reason of physical or mental disability -16- (including minority) to give a valid receipt and release, the Plan Administrator may cause the payment or payments becoming due to such person to be made to another person for his or her benefit without responsibility on the part of the Plan Administrator, the Employer or the Trustee to follow the application of such funds. 10.6 Governing Law The Plan shall be construed, administered, and governed in all respects under and by the laws of the State of New York. If any provision shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 10.7 Headings And Subheadings Heading and subheadings in this Plan are inserted for convenience only and are not to be considered in the construction of the provisions hereof. -17- APPENDIX A Limit on Elective Deferrals For the 1994 and 1995 Plan Years, a Participant may defer up to 100% of his/her annual bonus and no portion of his/her salary. For the 1996 Plan Year and until changed by the Committee, a Participant may defer up to 100% of his/her annual bonus and up to 33% of his/her base salary. For the 2000 Plan Year and until changed by the Committee, a Participant may defer up to 100% of his/her annual bonus, up to 100% of amounts paid under The Advertising and Circulation Sales Incentive Plan, up to 100% of his/her Long-Term Performance Awards under The New York Times Company 1991 Executive Cash Bonus Plan and up to 33% of his/her base salary. In addition, a Participant who is a "covered employee" within the meaning of Code Section 162(m) (a "Covered Employee") may defer his/her entire discretionary bonus, if any, payable in a Plan Year. Deferral of such discretionary bonus shall continue without further action by the Participant until such time as the ERISA Management Committee determines that the Participant is no longer a Covered Employee. The Participant shall be permitted to extend the deferral period beyond the time he/she ceases to be a Covered Employee for a three-year cycle (and for subsequent three-year cycles) in the manner provided in Section 7.2 of the Plan. -18- APPENDIX B Valuation Options For 1994 and until changed by the ERISA Management Committee, each Participant may elect to value his or her account based on the performance of one or more of the following funds: 1. Fund A: AIM Limited Maturity Treasury 2. Fund B: AIM Aggressive Growth 3. Fund C: AIM Value 4. Fund D: Merrill Lynch Federal Securities 5. Fund E: Merrill Lynch Capital 6. Fund F: Templeton Foreign 7. Fund G: Merrill Lynch Global Allocation For 1999 and until changed by the ERISA Management Committee, each Participant may elect to value his or her account based on the performance of one or more of the following funds: 1. Fund A: Vanguard Short Term Federal Fund 2. Fund B: Vanguard Total Bond Market Index Fund 3. Fund C: Vanguard Asset Allocation Fund 4. Fund D: Vanguard Growth and Income Fund 5. Fund E: Frank Russell Equity I Fund 6. Fund F: Frank Russell Equity II Fund 7. Fund G: AIM Aggressive Growth Fund 8. Fund H: Putnam International Growth Fund 9. Fund I: Putnam Asset Allocation Fund - Balanced Portfolio -19- APPENDIX C Plan Administrator And Record Keeper 1.1 Plan Administrator For the Plan Year 1995, and until removed, the Plan Administrator shall be Phil Ryan. For the Plan Year 1997, and until removed, the Plan Administrator shall be Diane Zubalsky. 1.2 Recordkeeper For the Plan Year 1994, and until removed, the Recordkeeper shall be Actuarial Information Management Systems. From June 1, 1996, and thereafter until removed, the Recordkeeper shall be Merrill Lynch. Effective December 28, 1998, and until removed by the ERISA Management Committee, the Recordkeeper shall be The Vanguard Group. Effective July 17, 1999, and until removed by the ERISA Management Committee, in addition to The Vanguard Group, TBG Financial shall be a Recordkeeper for the Plan. -20- EX-10.23 5 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THE NEW YORK TIMES COMPANY ("The Times"), and MARTIN NISENHOLTZ (the "Executive") agree, subject to the approval by Compensation Committee appointed by the Board of Directors of The Times (the "Compensation Committee"), which approval shall be a condition precedent to the enforceability of this Agreement, to enter into this EMPLOYMENT AGREEMENT dated as of September 1, 1999, as follows: 1. Employment. The Times hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by The Times, upon the terms and subject to the conditions set forth in this Agreement. 2. Term of Employment. The period of the Executive's employment under this Agreement shall begin as of September 1, 1999 and shall continue for three (3) years until September 1, 2002, unless earlier terminated in accordance with Section 6 below and shall continue thereafter from year to year unless either party gives notice no less than 90 days prior to the expiration date, or unless earlier terminated in accordance with Section 6 below (the "Employment Term"). 3. Duties and Responsibilities. (a) The Times shall employ the Executive as Chief Executive Officer of Times Company Digital (currently, the Internet business unit of the Times, or any successor thereto) ("TCD"). In such capacity, the Executive shall report directly to Arthur Sulzberger, Jr., Chairman of The Times, and Russell T. Lewis, President and Chief Executive Officer of The Times, or their successors, and shall perform the customary duties and have the customary responsibilities of such positions and such other duties as may be assigned to the Executive from time to time by the Chairman and/or President and Chief Executive Officer of The Times. (b) The Executive agrees to faithfully serve The Times and TCD and devote his full working time, attention and energies to the business of TCD and perform the duties under this Agreement to the best of his abilities. (c) The Executive agrees (i) to comply with all applicable laws, rules and regulations, and all requirements of all applicable regulatory, self-regulatory, and administrative bodies; (ii) to comply with The Times's and TCD's rules, procedures, policies, requirements, and directions; and (iii) not to engage in any other business or employment without the written consent of the Chairman or the President and Chief Executive Officer of The Times except as otherwise specifically provided herein. 4. Compensation and Benefits. (a) Base Salary. During the Employment Term, TCD shall pay to the Executive a base salary at the annual rate of $325,000 per year or such higher rate as may be determined from time to time by the Compensation Committee of the Board of Directors of The Times ("Base Salary"). Such Base Salary shall be paid in accordance with TCD's standard payroll practice for senior executives. (b) Annual Bonus. In addition to his Base Salary, the Executive shall be eligible to receive a target annual cash bonus of forty-five percent (45%) of his base salary under The New York Times Company 1991 Executive Cash Bonus Plan (the "Executive Cash Bonus Plan"), of which $125,000 is guaranteed. The annual cash bonus shall be payable to the Executive following the close of each calendar year, beginning with the 1999 calendar year, subject to the terms of the Executive Cash Bonus Plan. (c) Long-Term Performance Award. The Executive shall be eligible to receive a Long-Term Performance Award under the Executive Cash Bonus Plan, which award shall be granted in accordance with the terms and conditions set forth in such plan. Subject to the terms of the Executive Cash Bonus Plan, the Executive shall be eligible to earn a Long-Term Performance Award of $250,000, which could increase up to 175% of such amount based upon performance for each three-year performance cycle, the first such cycle to commence on January 1, 2000. Provided that the Executive meets the performance criteria set forth in the Long-Term Performance Award, each award shall be payable at the end of each such three-year cycle subject to the terms of the Executive Cash Bonus Plan. Reasonable performance criteria that the Executive must meet to qualify for the Long-Term Performance Award for each performance cycle will be determined under the terms of the Executive Cash Bonus Plan. (d) Expense Reimbursement. TCD shall promptly reimburse the Executive for the ordinary and necessary business expenses incurred by the Executive in the performance of the duties under this Agreement in accordance with The Times's customary practices applicable to senior executives of subsidiaries of The Times, provided that such expenses are incurred and accounted for in accordance with The Times's and/or TCD's policy. (e) Benefit Plans, Fringe Benefits and Vacations. The Executive shall be eligible to participate in or receive benefits under any employee benefit or fringe benefit plan made available to senior executives of TCD in accordance with the eligibility requirements of such plans and subject to the terms and conditions set forth in this Agreement. 5. Stock Options and TCD Shares. The Executive shall be granted 2 million options (the "Options") to purchase shares of TCD's Class A-2 Common Stock, par value $0.01 per share, (the "TCD Stock") under the Times Company Digital, Inc. 1999 Stock Option Plan (the "Stock Option Plan"). The Options shall be subject to the terms of the 2 Stock Option Plan and the Executive's Times Company Digital, Inc. Non-Qualified Stock Option Agreement (the "Grant Agreement"), attached hereto as Exhibit "A". Subject to the Grant Agreement (which shall finally govern the Options in the event of any conflict between this Agreement and the Grant Agreement), the Company and the Executive agree as follows: (a) Vesting. The Executive shall vest in 200,000 of the Options immediately on the day he is granted the Options. The Executive shall vest in the remaining 1.8 million Options over the following 3 years as follows: (i) 600,000 of the remaining 1.8 million Options shall vest on September 1, 2000; and (ii) 300,000 of the remaining 1.2 million Options shall vest every six months thereafter in four equal installments. (b) Termination of Employment. Notwithstanding the foregoing subparagraph, in the event that the Executive's employment is terminated without "Cause" under Section 6(d) of this Agreement or the Executive resigns his employment for "Good Reason" under Section 6(e) of this Agreement, (i) all of the Executive's unvested Options shall immediately be vested in the Executive, and (ii) the Executive's rights with regard to such vested Options shall be determined in accordance with Section 6(b)(vi) of the Stock Option Plan and, if in effect, the applicable provisions of Appendix A to the Grant Agreement. (c) Cashless Exercise. If and after the TCD Stock subject to the Options become publicly traded shares of The Times or of TCD, the Executive shall be permitted to exercise the Options on a cashless basis, subject to the Stock Option Plan, using applicable broker procedures, provided that the use of such procedures does not adversely affect the financial statements of either The Times or TCD. (d) Restrictions on Exercise. Notwithstanding anything in this Agreement, the Stock Option Plan or the Grant Agreement, the Executive agrees that his ability to exercise any Options or sell any TCD Stock shall be subject to any restrictions promulgated by any underwriters involved in any initial public offering involving TCD. 6. Termination of Employment. The Executive's employment under this Agreement may be terminated under any of the circumstances set forth in this Section 6. Upon termination, the Executive (or his beneficiary or estate, as the case may be) shall be entitled to receive the compensation and benefits described in Section 7 below, and, if applicable, Section 8 below. (a) Death. The Executive's employment shall terminate upon the Executive's death. (b) Total Disability. The Times may terminate the Executive's employment upon his becoming "Totally Disabled". For purposes of this Agreement, the Executive shall be "Totally Disabled" if the Executive is physically or mentally incapacitated so as to render the Executive incapable of performing his usual and customary duties under this Agreement. The Executive's receipt of disability benefits under any TCD long-term disability benefits plan (the "LTD Plan") or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided, however, that in the absence of the Executive's receipt of such long-term disability benefits or Social Security benefits, the Chairman or the President and/or Chief Executive Officer of The Times may in their reasonable discretion (but based upon 3 appropriate medical evidence) determine that the Executive is Totally Disabled. (c) Termination by The Times for Cause. The Times may terminate the Executive's employment for "Cause". Such termination shall be effective as of the date specified in the written Notice of Termination provided to the Executive. (i) For purposes of this Agreement, the term "Cause" shall mean any of the following: (A) conviction of a crime (including conviction on a nolo contendere plea) involving the commission by the Executive of a felony or of a criminal act involving, in the good faith judgment of the Chairman or the President and/or Chief Executive Officer of The Times, fraud, dishonesty, or moral turpitude but excluding any conviction that results solely from the Executive's title or position with TCD and is not based on his personal conduct; (B) the Executive's deliberate and continual refusal to perform employment duties reasonably requested by the Chairman or the President and/or Chief Executive Officer of The Times after receiving thirty (30) days' written notice by certified mail of such failure to perform, specifying that the failure constitutes cause (other than as a result of vacation, sickness, illness or injury), provided that if the Executive cures his nonperformance within the thirty (30) day period to The Times' satisfaction the Executive shall not be subject to termination for Cause; (C) fraud or embezzlement determined in accordance with The Time's normal, internal investigative procedures consistently applied in comparable circumstances; (D) gross misconduct or gross negligence in connection with the business of The Times, TCD, or any other affiliate of The Times that has a substantial adverse effect on The Times, TCD, or the affiliate; or (E) breach of any of the covenants set forth in Section 10 hereof. (ii) Regardless of whether the Executive's employment initially was considered to be terminated for any reason other than Cause, the Executive's employment shall be considered to have been terminated for Cause for purposes of this Agreement if the Chairman or the President and Chief Executive Officer of The Times subsequently reasonably determines in good faith that the Executive engaged in an act constituting Cause. (d) Termination by The Times without Cause. The Times may terminate the Executive's employment under this Agreement without Cause after providing Notice of Termination to the Executive. (e) Resignation by Executive. The Executive may terminate his employment under this Agreement after providing written Notice of Termination to The Times. Such Notice shall state whether the Executive is resigning for "Good Reason". Resignation by the Executive for Good Reason shall be deemed to have occurred, if the Executive provides the Notice of Termination within ninety (90) days after the occurrence of any of the following: (i) Without the Executive's express written consent, a change in the Executive's material duties and responsibilities. (ii) A reduction by The Times in the Executive's Base Salary. 4 (iii) The failure of The Times to maintain the Executive's level of coverage relative to other senior executives of TCD under TCD's employee benefit plans, policies, practices, or arrangements in which the Executive participates, both in terms of the amount of benefits provided and the relative level of the Executive's participation. For this purpose, TCD may eliminate and/or modify existing employee benefit plans and coverage levels on a consistent and non-discriminatory basis applicable to all such executives. (iv) The failure by The Times or TCD to pay to the Executive any material amount of his earned compensation, or any material amount of his compensation deferred under any plan, agreement or arrangement of or with The Times or TCD, within ten (10) days after the Executive makes written demand for such amount. (v) Without the Executive's express written consent, the change of the Executive's principal place of employment to a location more than 75 miles from his initial principal place of employment, except for required travel on TCD's or The Times's business to an extent substantially consistent with the Executive's business travel obligations. (vi) Any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination, and for purposes of this Agreement, no such purported termination shall be effective. (f) Notice of Termination. Any termination of the Executive's employment by The Times or by the Executive (other than by reason of the Executive's death) shall be communicated by written Notice of Termination to the other party in accordance with Section 19 below. For purposes of this Agreement, a "Notice of Termination" shall mean a notice in writing which shall indicate the specific termination provision in this Agreement relied upon to terminate the Executive's employment and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (g) Date of Termination. The effective date of the Executive's termination of employment shall be (i) in the event of his death, the date of death; (ii) in the event of termination for Total Disability, sixty (60) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such sixty (60) day period); or (iii) in the event of any other termination, the date specified in the Notice of Termination. 7. Compensation Following Termination of Employment. Upon termination of the Executive's employment under this Agreement, the Executive (or his 5 designated beneficiary or estate, as the case may be) shall be entitled to receive the following compensation: (a) Earned but Unpaid Compensation. The Times or TCD shall pay to the Executive any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, and any vacation accrued to the Termination Date. In addition, if The Times or TCD terminates the Executive's employment without Cause or the Executive resigns his employment for Good Reason after the Executive has earned his Annual Bonus for the year ending December 31 of each year of the Term but before such Annual Bonus is paid to the Executive, the Times or TCD shall pay to the Executive the earned, but unpaid Annual Bonus. Except as set forth above and in Section 8 below, following the Termination Date, neither The Times nor TCD shall have any further obligation to pay the Executive any further amounts, including, but not limited to, any amount for an Annual Bonus under Section 4(b) or any amount under the Long-Term Incentive Plan under Section 4(c). (b) The Times or TCD Separation Pay Policy. The Executive shall not be entitled to separation pay benefits under the The Times's or TCD's separation pay policy. (c) Other Compensation and Benefits. Except as may be provided under this Agreement, (i) any benefits to which the Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(e) above shall be determined and paid in accordance with the terms of such plans, policies and arrangements, and (ii) The Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation except as specifically provided by the Consolidated Omnibus Budget Reconciliation Act of 1987, as amended. 8. Additional Compensation Payable Following Termination Without Cause or Resignation for Good Reason. (a) Requirements for Additional Compensation. In addition to the compensation set forth in Section 7 above, the Executive shall receive the additional compensation and benefits set forth in paragraph (b) below, if the following requirements are met: (i) the Executive's employment is terminated by The Times pursuant to Section 6(d) above for reasons other than death, Total Disability or Cause or the Executive resigns for Good Reason pursuant to Section 6(e) above; and (ii) the Executive executes a Separation Agreement and Release in the form attached as Exhibit "B" to this Agreement on or after his Termination Date. (b) Additional Compensation. The Times or TCD shall provide the Executive with the following compensation and benefits: 6 (i) Base Salary. The Times or TCD shall pay to the Executive his full base salary as determined under Section 4(a) at the rate in effect on his Termination Date, as if his employment had continued until the end of the 18 month period beginning on the Termination Date. Such payment shall be made in a single lump sum on or before the twentieth day following the effective date of the Separation Agreement and Release. (ii) Medical and Dental Benefits. The Times or TCD shall provide for the Executive's continued coverage under all group medical and dental benefit plans, programs, or arrangements in which the Executive was entitled to participate immediately prior to the date of his termination, until the earliest to occur of: (A) the end of the 18 month period beginning on the Termination Date; (B) the Executive's death; or (C) the date the Executive becomes employed by a subsequent employer who offers a comparable benefit at a comparable cost to the Executive and the Executive becomes eligible to participate in such benefit. In the event that the Executive's participation in any such employee welfare benefit plan, program, or arrangement of The Times or TCD is prohibited, The Times shall arrange to provide the Executive with benefits substantially similar to those which the Executive would have been entitled to receive from The Times or TCD under such plan, program, or arrangement, for such period. 9. Restrictive Covenants. (a) Protected Information. The Executive recognizes and acknowledges that he shall have access to various confidential or proprietary information concerning The Times, TCD, and entities affiliated with The Times and TCD, of a special and unique value which may include, without limitation, (i) books and records relating to operation, finance, accounting, sales, personnel and management, (ii) policies and matters relating particularly to operations such as customer service requirements, costs of providing service and equipment, operating costs and pricing matters, and (iii) various trade or business secrets, including business opportunities, marketing or business diversification plans, business development and bidding techniques, methods and processes, financial data and the like (collectively, the "Protected Information"). The Executive therefore covenants and agrees that he shall not at any time, either while employed by The Times or afterwards, knowingly make any independent use of, or knowingly disclose to any other person or organization (except as authorized by the Chairman or the President and Chief Executive Officer of The Times, or their designee in writing) any of the Protected Information. (b) Competitive Activity. The Executive covenants and agrees that at all times (i) during his period of employment with The Times, and (ii) during the period beginning on the date of termination of his employment (whether such termination is voluntary or involuntary, or otherwise) and ending on the later of one (1) year following his Termination Date, he shall not, directly or indirectly, (a) engage in, assist, or have any active interest or involvement whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever) in any person, firm, or business entity that is engaged in the same business as that conducted and 7 carried on by TCD and that derives fifty (50) percent or more of its gross revenue from the sale of Internet based advertising supporting news content; or (b) in any way, encourage any person or entity that was a customer or vendee of The Times or TCD to do business with such an entity, without the specific written consent of the Chairman or the President and Chief Executive Officer of The Times (or their designee) to do so. (c) Non-Solicitation. The Executive covenants and agrees that during the period beginning on the date of termination of his employment (whether such termination is voluntary or involuntary, or otherwise) and ending one (1) year following his Termination Date, he shall not directly or indirectly recruit, solicit, hire, or cause to be hired, any individual who is then, or who has been within the preceding six (6) month period, an employee of The Times or TCD. (d) Non-Disparagement. The Executive covenants and agrees that during the course of his employment by The Times or at any time thereafter, the Executive shall not, directly or indirectly, in public or private, deprecate, impugn, disparage or defame The Times, TCD, or any of its employees, members of its board of directors or agents, nor shall the Executive assist any other person, firm or company in so doing. (e) Return of Documents and Other Materials. The Executive shall promptly deliver to The Times upon termination of his employment, or at any other time as The Times may so request, all documents (whether recorded on paper, electronically or otherwise) containing Protected Information, including but not limited to, all lists of customers, leads and customer pricing, data processing programs and documentation, employee information, memoranda, notes, records, reports, tapes, manuals, drawings, blueprints, programs, and any other documents and other materials (and all copies thereof) relating to TCD's business or that of its customers, and all property associated therewith, which the Executive may then possess or have under his control. 10. Enforcement of Covenants. (a) Termination of Employment and Forfeiture of Compensation. The Executive agrees that in the event that The Times reasonably determines in good faith that he has breached any of the covenants set forth in Section 9 above during his employment, The Times shall have the right to terminate his employment for Cause. In addition, the Executive agrees that if The Times reasonably determines in good faith that he has breached any of the covenants set forth in Section 9 at any time, The Times shall have the right to discontinue any or all remaining benefits payable pursuant to Section 8 above, as applicable. Such termination of employment or discontinuance of benefits shall be in addition to and shall not limit any and all other rights and remedies that The Times may have against the Executive. (b) Right to Injunction. The Executive acknowledges that a breach of the covenants set forth in Section 9 above shall cause irreparable damage to The Times and TCD with respect to which The Times's remedy at law for damages shall be inadequate. Therefore, in the event of breach or anticipatory breach of the covenants set forth in this section by the Executive, the Executive and The Times agree that The Times or TCD shall be entitled to the following particular forms of relief, in addition to remedies otherwise available to it at law or equity: (i) injunctions, both preliminary and permanent, 8 enjoining or retraining such breach or anticipatory breach and the Executive hereby consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction; and (ii) in the event The Times successfully enforces the covenants set forth in Section 9 above, recovery of all reasonable sums expended and costs, including reasonable attorney's fees, incurred by The Times or TCD to enforce the covenants set forth in Section 9. (c) Separability of Covenants. The covenants contained in Section 9 above constitute a series of separate covenants, one for each applicable State in the United States and the District of Columbia, and one for each applicable foreign country. If in any judicial proceeding, a court shall hold that any of the covenants set forth in Section 9 permitted by applicable laws, the Executive and The Times agree that such provisions shall and are hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. The Executive and The Times further agree that the covenants in Section 9 shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by the Executive against The Times whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by The Times of any of the covenants set forth in Section 9. (d) The Executive specifically consents to the jurisdiction of the United States District Court for the Southern District of New York, or if that court is unable to exercise jurisdiction for any reason, to the jurisdiction of the Supreme Court of the State of New York, New York County, for the purpose of enforcing Sections 9 and 10. 11. Withholding of Taxes. The Times and/or TCD shall withhold from any compensation and benefits payable under this Agreement all applicable federal, state, local or other taxes, except that in the case of the Options, the Executive understands and agrees that he cannot exercise any Options until he has paid to TCD the appropriate withholding taxes in accordance with the applicable terms of the Stock Option Plan and the Grant Agreement. 12. Arbitration of Disputes. Except as provided in Section 10 above, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes and judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. Any such arbitration shall take place in the State of New York. 13. Waiver of Jury Trial. In the event any controversy or claim arising out of the Executive's employment or the termination of the Executive's employment is found by a court of competent jurisdiction not to 9 be subject to final and binding arbitration, the Executive and The Times agree to try such claim or controversy to the Court, without use of a jury or advisory jury. 14. Non-Disclosure of Agreement Terms. The Executive agrees that he shall not disclose the terms of this Agreement to any third party other than his immediate family, attorney, accountants, or other consultants or advisors or except as may be required by any governmental authority. 15. No Claim Against Assets. Nothing in this Agreement shall be construed as giving the Executive any claim against any specific assets of The Times or TCD or as imposing any trustee relationship upon The Times in respect of the Executive. The Times shall not be required to establish a special or separate fund or to segregate any of its assets in order to provide for the satisfaction of its obligations under this Agreement. The Executive's rights under this Agreement shall be limited to those of an unsecured general creditor of The Times and its affiliates. Notwithstanding the foregoing, this Section shall not be construed to waive any rights guaranteed to the Executive by law. 16. Successors and Assignment. Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. (a) Company Successor. The Times shall require any person (or persons acting as a group) who acquires ownership or effective control of The Times or TCD (or, in the event that TCD is not yet separately incorporated, the Internet business unit of the Times, or any successor thereto) or ownership of a substantial portion of the business or assets of The Times or TCD (whether direct or indirect, by purchase, merger, consolidation or otherwise), by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as The Times would be required to perform it if no such acquisition had taken place. As used in this Agreement, "The Times" shall mean The Times as defined in the first sentence of this Agreement and any person (or group) who acquires ownership or effective control of The Times or ownership of a substantial portion of the business or assets of The Times or which otherwise becomes bound by all the terms and provisions of this Agreement, whether by the terms hereof, by operation of law or otherwise. (b) Assignment by Executive. The rights and benefits of the Executive under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Section 16 shall preclude the Executive from designating a beneficiary or beneficiaries to receive any benefit payable on his death. 17. Entire Agreement; Amendment. This Agreement, the Grant Agreement and the Separation Agreement and Release set forth the 10 entire understanding of the parties with respect to their subject matter and shall supersede any and all existing oral or written agreements, representations, or warranties between the Executive and The Times or any of its subsidiaries or affiliated entities relating to the terms of the Executive's employment. These agreements may not be amended except by a written agreement signed by both parties. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in that State, without regard to its conflict of laws provisions. 11 19. Notices. Any notice, consent, request or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to those listed below at their following respective addresses or at such other address as each may specify by notice to the others: To The Times: The New York Times Company 229 West 43rd Street New York, New York 10036-3959 Attention: Solomon B. Watson IV To the Executive: At the address for the Executive set forth below. 20. Miscellaneous. (a) Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (b) Separability. If any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. (c) Headings. Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement. (d) Rules of Construction. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa. The parties acknowledge and agree that each has read this entire Agreement, that they have been represented by counsel in the negotiation and execution of this Agreement, that this Agreement is the product of negotiation and that neither of the parties shall be considered the drafter or scrivener of this Agreement. (e) Survival. The provisions of this Agreement (including, without limitation, Sections 9, 10 and 12) which by their terms should survive, and the Executive's and The Times's rights and remedies with respect thereto, shall survive the termination of this Agreement for any reason. (f) Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts shall together constitute but one Agreement. 12 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year set forth below. THE NEW YORK TIMES COMPANY EXECUTIVE By: /s/ Russell T. Lewis /s/ Martin Nisenholtz --------------------------------- ---------------------------------- Name: Russell T. Lewis Date: January 5, 2000 ------------------------------- ---------------------------- Title: President & CEO Address: 4 Pioneer Trail ------------------------------ ------------------------- Date: January 25, 2000 Armonk, NY 10504 ------------------------------- ------------------------- 13 EXHIBIT A TIMES COMPANY DIGITAL, INC. NON-QUALIFIED STOCK OPTION AGREEMENT THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Grant Agreement") is made as of December 1, 1999 by Times Company Digital, Inc., a Delaware corporation (the "Company"), and Martin Nisenholtz (the "Optionee"), pursuant to the Company's 1999 Stock Option Plan (as such may be amended, the "Plan"). Capitalized terms not defined in this Grant Agreement shall have the meanings set forth in the Plan. 1. Award of Options. The Company hereby grants to the Optionee an option (the "Option" or "Options") to acquire two (2) million shares of the Company's Class A-2 Common Stock, par value $0.01 per share (the "Stock"), at the exercise price of $5.86 per share (the "Exercise Price"), subject to the terms and conditions set forth in this Grant Agreement (including Appendix A attached hereto) and the Plan (including, without limitation, the restrictions on exercisability contained in Section 6(b) of the Plan). The Options granted hereunder are non-qualified stock options. 2. Expiration Date. Subject to Section 6(b)(vi) of the Plan, the Options shall expire on December 1, 2009. 3. Vesting. Subject to Section 6(b)(vi) of the Plan and the provisions of Appendix A attached hereto, the Options shall vest over the following 3 years as follows: (i) 200,000 of the Options shall vest immediately on the date of this Grant Agreement; (ii) 600,000 of the remaining 1.8 million Options shall vest on September 1, 2000; and (iii) 300,000 of the remaining 1.2 million Options shall vest every six months thereafter in four equal installments. 4. Exercise of Options. (1) Exercisability. Subject to Section 6(b)(vi) of the Plan and the provisions of Appendix A attached hereto, vested Options may be exercised from time to time at any time after the initial exercisability date set forth in Section 6(b)(v) of the Plan in accordance with the policies and procedures established by the Committee. (2) Payment of Exercise Price. The Exercise Price shall be tendered to the Company at the time of exercise in cash or in such other consideration as shall be permitted by the Committee at the time of exercise, in each case having a total Fair Market Value determined as of the date of exercise equal to the Exercise Price, or a combination of cash and such other consideration having a total Fair Market Value equal to such Exercise Price. The present policies of Parent (as defined in Appendix A attached hereto) do not permit the use of stock retention to pay the Exercise Price and applicable withholding and FICA taxes. However, if in the future Parent's policies change to generally permit payment of the Exercise Price by the use of stock retention, stock retention shall also be made available to the Optionee. (3) Optionee's Representations. If requested by the Company at the time of any exercise, the Optionee agrees as a condition to such exercise to provide the Company with a representation that it is the Optionee's intention at the time of such exercise to acquire the shares being purchased for his or her own account for investment and not with a view to, or for resale in connection with, the distribution thereof within the meaning of the Securities Act of 1933, as amended, and such other representations and agreements requested by the Company as may be required by applicable foreign, federal or state securities laws. (4) Legends. The certificates representing the Stock issued upon exercise of the Options shall bear the following legend, and such other legends as may be required by applicable foreign, federal or state securities laws, if required by the Company: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS AND RIGHTS TO REPURCHASE AND TO REQUIRE TRANSFERS CONTAINED IN A NON-QUALIFIED STOCK OPTION AGREEMENT, DATED AS OF DECEMBER 1, 1999, AS SUCH AGREEMENT MAY BE AMENDED, MODIFIED OR RESTATED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF)." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR FOREIGN SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER APPLICABLE STATE AND FOREIGN SECURITIES LAWS." Any certificate issued at any time in exchange or substitution for any certificate bearing such legends shall also bear such legends, unless, in the opinion of counsel for the Company, the securities represented thereby are no longer subject to the provisions of Appendix A attached hereto or the restrictions imposed under applicable foreign, federal and state securities laws, in which case the applicable legend (or legends) may be removed. 5. Non-transferability of Options. Except to the extent otherwise determined by the Committee consistent with the Plan or set forth on Appendix A attached hereto, the Options granted hereunder shall not be assignable or otherwise transferable other than by will or the laws of descent and distribution. Unless otherwise provided by the Committee or set forth on Appendix A attached hereto, during the lifetime of the Optionee the Options shall be exercisable and elections with respect to the Options may be made only by the Optionee or the Optionee's duly appointed legal guardian or other duly appointed and qualified legal representative 2 6. Termination of Employment. (1) Forfeiture and/or Exercise of Options. Except if the Optionee's employment is terminated without Cause under Section 6(d) or for Good Reason under Section 6(e) of the Employment Agreement executed between the Optionee and The New York Times Company, dated as of September 1, 1999 (the "Employment Agreement"), in the event the Optionee ceases to be an employee of, or provide services to, the Company or any Affiliate thereof for any reason, (i) all of the Optionee's unvested Options shall immediately be forfeited, and (ii) the Optionee's rights with regard to vested Options shall be determined in accordance with Section 6(b)(vi) of the Plan and, if in effect, the applicable provisions of Appendix A attached hereto. In the event that the Optionee's employment is terminated without Cause under Section 6(d) or for Good Reason under Section 6(e) of the Employment Agreement, (i) all of the Optionee's unvested Options shall immediately be vested in the Optionee, and (ii) the Optionee's rights with regard to vested Options shall be determined in accordance with Section 6(b)(vi) of the Plan and, if in effect, the applicable provisions of Appendix A attached hereto. (2) Non-Competition and Non-Solicitation. As a condition to the exercise of any Option that can be exercised after termination, other than termination by reason of death or disability, of the Optionee's employment or service relationship with the Company of any of its Affiliates, the Optionee hereby agrees that (i) the Optionee shall not, directly or indirectly, engage in, assist, or have any active interest in or involvement, whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principle whatsoever in any person, firm or business entity which, directly or indirectly, is engaged in the same business as that conducted and carried out by the Company and which derives fifty (50) percent or more of its gross revenue from the sale of Internet based advertising supporting news content for one (1) year after his termination of employment with the Company for whatever reason, with or without cause or notice (the "Termination"); (ii) the Optionee shall not, in any way, encourage any person or entity that was a customer or vendee of the Company or the Parent to do business with any person, firm or business entity which, directly or indirectly, is engaged in the same business as that conducted and carried out by the Company and which derives fifty (50) percent or more of its gross revenue from the sale of Internet based advertising supporting news content for one (1) year following the Termination; (iii) the Optionee shall not directly or indirectly recruit, solicit, hire or cause to be hired, any individual who is at the time of the Optionee's Termination or who has been within the preceding six (6) month period, an employee of the Company or the Parent for one (1) year following the Termination; (iv) the Optionee shall not, directly or indirectly, in public or 3 private, deprecate, impugn, disparage or defame the Company, the Parent, or any of their agents, employees, officers or directors, nor shall the Optionee assist any other person, firm or company in doing so at any time following the Termination. If a final judicial determination is made that the time or territory above are unenforceable restrictions, the provisions of this Section 6(2) shall not be rendered void but shall be deemed amended to apply to such maximum time and territory and to such other extent as such court may judicially determine or indicate to be reasonable. The provisions contained in this Section 6(2) are not intended to supersede the provisions of any agreement the Optionee and the Company may have concerning the matters contained in this Section, which shall remain in full force and effect. If the covenants contained herein are breached by the Optionee, all Options held by the Optionee and the Optionee's right and ability to exercise the same shall be automatically forfeited without limiting any other remedy available to the Company by reason of such breach. (3) Determination of Disability. Subject to any existing agreements between the Optionee and the Company, the existence of any disability which results in termination of employment shall be determined by the Committee, in its sole discretion. 7. Withholding Tax. In accordance with Section 8(d) of the Plan, the Optionee may be subject to withholding taxes as a result of the exercise or settlement of an Option or other payment in respect of an Option, and the satisfaction of such withholding requirements shall be a condition precedent to the delivery to the Optionee of certificates for shares of Stock pursuant to any exercise of an Option. 8. Restrictions on Transfers of Stock. The Optionee hereby agrees to be bound as an "Employee Stockholder" by the provisions of Appendix A attached hereto and made a part hereof, as such provisions may be amended, modified or restated by the Company from time to time in its sole discretion; provided, however, that any such amendment, modification or change shall not (other than by operation of Section 8(c) of the Plan) (i) reduce the number of shares of Stock subject to Options granted under this Grant Agreement, (ii) change the securities for which the Options are exercisable, (iii) increase the Exercise Price or (iv) lengthen the time periods contained herein or in the Plan respecting the vesting of such Options. 9. Sale of the Company. In the event that Parent effects a "Sale of the Company" (as defined in Appendix A attached hereto), (i) the Plan may be terminated by the Company, (ii) all unvested Options that would not have vested within one year after the Sale of the Company shall terminate at the time of the sale, and (iii) the vesting of certain unvested Options shall be accelerated as more fully described in Section 6(e) of the Plan. 10. Confidentiality. The Optionee shall hold in strict confidence, unless compelled to disclose by judicial or administrative process or other requirements of law, all documents and information concerning the Company furnished to the Optionee which are marked or identified as confidential, except to the extent that such information is now or hereafter in the public domain through no fault of the Optionee. Failure to comply with this confidentiality provision shall 4 result in the automatic termination of all Options (vested and unvested) held by the Optionee. 11. Governing Law. This Grant Agreement shall be governed by the laws of the State of Delaware, without giving effect to principles of conflicts of laws. 12. Counterparts. This Grant Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. EXECUTIVE /s/ Martin Nisenholtz ---------------------------------------- Name: Martin Nisenholtz TIMES COMPANY DIGITAL, INC. By: /s/ Rhonda L. Brauer ------------------------------ Name: Rhonda Brauer Title: Assistant Secretary The undersigned agrees to be bound by the provisions of the attached Appendix A attached hereto applicable to it: THE NEW YORK TIMES COMPANY By: /s/ Rhonda L. Brauer ------------------------------ Name: Rhonda Brauer Title: Assistant Secretary 5 ARTICLE I CERTAIN DEFINITIONS 1.1. Defined Terms. The following terms, as used in this Appendix A, have the meanings set forth below. Other defined terms are defined in the following Sections of this Appendix A. "Affiliate" means, with respect to any Person, any other Person that controls, is controlled by, or is under common control with, such Person. For the purposes of this definition, "control" (including, with its correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of securities, by contract or otherwise. For purposes of this Agreement, employees and directors of Parent and its Affiliates shall not be "Affiliates" of Parent. "Agreement and Plan of Merger" means the Agreement and Plan of Merger, dated as of July 22, 1999, among Parent, the Company, ABZ Acquisition, Inc., Abuzz Technologies, Inc. and the other parties thereto. "Asset Contribution Agreement" has the meaning ascribed to such term in the Agreement and Plan of Merger. "Board" means the Board of Directors of the Company. "Class A Common Stock" means (i) (a) the Company's Class A-1 Common Stock, par value $0.01 per share, and the Company's Class A-2 Common Stock, par value $0.01 per share, (b) any securities into which such common stock shall have been changed or (c) any securities resulting from any reclassification or recapitalization of such common stock, and (ii) all other securities (other than Class B Common Stock) of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, after payment on any securities entitled to a preference on dividends or other distributions upon any dissolution, liquidation or winding-up, either to all or to a share of the balance of payments upon such dissolution, liquidation or winding-up. "Class B Common Stock" means the Company's Class B Common Stock, par value $0.01 per share, any securities into which such Class B Common Stock shall have been changed or any securities resulting from any reclassification or recapitalization of such Class B Common Stock. A-1 "Class A Enterprise Value" means that portion of the Enterprise Value, expressed in dollars, represented by a share of Class A Common Stock. "Class A Stockholders" means the holders of the Class A Common Stock. "Class B Stockholders" means the holders of Class B Common Stock. "Common Stock" means collectively the Class A Common Stock and the Class B Common Stock. "Company" means Times Company Digital, Inc., a Delaware corporation. "Company IPO" means the consummation of an underwritten initial public offering of the Company's Class A-2 Common Stock registered under the Securities Act. "Company Securities" means the Class A Common Stock, the Class B Common Stock, any Options, and any securities issued with respect thereto as a result of any stock dividend, stock split, reclassification, recapitalization, reorganization, merger, consolidation or similar event or upon the conversion, exchange or exercise thereof; provided, however, that for the purpose of this Appendix A, "Company Securities" held by any Optionee shall only include Options and any securities acquired in connection with the exercise of Options (other than Special Options as defined in the Agreement and Plan of Merger) held by such Optionee. "Diluted Basis" means, with respect to the calculation of the number of shares of Class A Common Stock, all shares of Class A Common Stock outstanding at the time of determination and all shares issuable upon the exercise of Options or deliverable in connection with other outstanding options or convertible or exchangeable securities or warrants; provided, however, that with respect to any Options or any other options, shares of Class A Common Stock shall only be included in the determination of Diluted Basis to the extent such Options or other options are vested. "Effective Time" has the meaning ascribed to such term in the Agreement and Plan of Merger. "Employee Stockholder" means any employee of, or service provider to, the Company or any of its Affiliates who receives an Option under the Option Plan, whether or not such Option is exercised, so long as any such Person shall hold Company Securities. "Enterprise Value" means the value of the Company, on a consolidated basis and A-2 disregarding any transfer of assets and liabilities made in contemplation of a Tracking Stock IPO or a Publico IPO, as reflected by the initial public offering price in a Tracking Stock IPO or a Publico IPO. "Exercise Price" means the price payable to purchase shares of Class A Common Stock under an Option. "Fair Market Value" means, with respect to the purchase of any share of Class A Common Stock, as of any particular date, that Value of the Company as determined in good faith by the Board (or any duly appointed committee thereof) based on their knowledge of the value of the Company and, if requested by any member of the Board or such committee, the advice of a third party financial advisor that has experience in providing valuation of companies similar to the Company. Fair Market Value shall be determined as of any particular date required by this Agreement and such other dates as the Board (or any duly appointed committee thereof) shall determine. "Value" shall be based on (i) the fully distributed equity value of the Company (assuming the Class B Common Stock has been converted into Class A Common Stock) as if the Company were freely trading in the public equity market, without taking into account any fees or expenses associated with the issuance of the shares of Class A Common Stock to the public, any minority discount (or premium) or any discount for liquidity, and (ii) the valuation techniques as reasonably determined by the Board (or any duly appointed committee thereof) at the time of the determination of Value, as advised by any financial advisor, and may include, but not be limited to, an analysis of comparable companies and revenues, earnings or a discounted cash flow analysis. "Fair Market Value" with respect to any Option shall mean the Fair Market Value of the Class A Common Stock with respect to which such Option may be exercised less the exercise price with respect to such Option. "Grant Agreement" means the agreement between the Company and a recipient of an Option, setting forth the number of Options granted and certain terms and conditions relating thereto. "Involuntary Transfer" means, with respect to Company Securities of any Employee Stockholder, any involuntary Transfer or Transfer by operation of law of such Company Securities (other than to a Permitted Transferee of such Employee Stockholder who executes a Joinder Agreement) by or in which such Employee Stockholder shall be deprived or divested of any right, title or interest in or to Company Securities, including, without limitation, by seizure under levy of attachment or execution, by foreclosure upon a pledge, in connection with any voluntary or involuntary bankruptcy or other court proceeding to a debtor in possession, trustee in bankruptcy or receiver or other officer or agency, pursuant to any statute pertaining to escheat or abandoned property, pursuant to a divorce or separation agreement or a final decree of a court in a divorce action, upon or occasioned by the legal incompetence of any Employee Stockholder A-3 and to a legal representative of any Employee Stockholder. Notwithstanding the foregoing, Involuntary Transfer shall not include the Transfer of Company Securities by a Stockholder to a Permitted Transferee of such Stockholder provided such Permitted Transferee is a party to a Grant Agreement or executes a Joinder Agreement. "Joinder Agreement" means an agreement pursuant to which a Person subscribes to, and agrees to be bound by, the provisions of this Appendix A as an Employee Stockholder. "Lien" means any lien, claim, charge, encumbrance, security interest or other adverse claim of any kind. "Market Price" means, with respect to each share of Parent Class A Common Stock as of a particular date, the average of the closing prices of such Parent Class A Common Stock on the New York Stock Exchange, Inc. on each of the thirty (30) trading days next preceding such date or, if such Parent Class A Common Stock is not then listed or admitted to trading on such exchange, on the principal national securities exchange on which such Parent Class A Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market, or if such Parent Class A Common Stock is not then listed or admitted to trading on a national securities exchange or quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected by the Board of Directors of Parent or if no such prices are available, the market price per share as determined in good faith by the Board of Directors of Parent. "Minimum Value" has the meaning ascribed to such term in the Agreement and Plan of Merger. "Option" means any option granted pursuant to any Option Plan. "Option Plan" means (i) the 1999 Stock Option Plan of the Company, as the same may be hereinafter amended, modified or restated, and (ii) any additional stock option plans or compensation or incentive plans which provide for the issuance of Class A Common Stock established by the Company for the benefit of its employees and/or the employees of its Affiliates, including without limitation, the Newco Special Options (as defined in the Agreement and Plan of Merger). "Parent" means The New York Times Company, a New York corporation. "Parent Class A Common Stock" means Parent Class A Common Stock, par value $0.10 per share, and any securities into which such Parent Class A Common Stock shall have been A-4 changed or any securities resulting from any reclassification or recapitalization of such Parent Class A Common Stock. "Permitted Transferee" means: (i) as to any Employee Stockholder who is a natural person, any of the following: a lineal ancestor, sibling or descendant (including by adoption) of such Employee Stockholder, or a spouse of such Employee Stockholder, or a natural person who qualifies as a member of the Employer Stockholder's "Immediate Family" (as defined in the 1999 Stock Option Plan of the Company), or one natural person designated by such Employee Stockholder with whom such Employee Stockholder shares his or her principal residence and to whom such Employee Stockholder shall have Transferred Company Securities for no or nominal consideration, or any trust of which such Employee Stockholder is the trustee and which is established solely for the benefit of any of the foregoing individuals and whose terms are not inconsistent with the terms of this Appendix A, or any partnership, the general partner(s) and limited partner(s) (if any) of which are one or more Persons identified in this clause (i); (ii) as to any Class B Stockholder, any other Class B Stockholder or any Affiliate of Parent; (iii) as to any Employee Stockholder, any Class A Stockholder or Class B Stockholder; and (iv) as to any Third Party that becomes a Stockholder and that is not a natural Person, any Affiliate of such Stockholder. "Person" means an individual, partnership, corporation, limited liability company, trust, unincorporated organization, joint venture, government (or agency or political subdivision thereof) or any other entity of any kind. "Pro Rata" means, with respect to one or more Stockholders, in proportion to the number of shares of Common Stock on a Diluted Basis owned by such Stockholder or Stockholders. "Publico Stock Exchange Ratio" means the quotient obtained by dividing (i) the Class A Enterprise Value by (ii) the price per share of Publico Stock to the public in a Publico IPO, with all appropriate adjustments to equitably reflect any subsequent stock dividend, stock split, reclassification, recapitalization, reorganization, merger, consolidation or similar event. A-5 "Qualifying Offering" means the consummation of a Company IPO or the consummation of an underwritten initial public offering of (i) Class A Common Stock registered under the Securities Act (a "Company IPO") or (ii) shares of a class of common equity ("Publico Stock") registered under the Securities Act of an entity ("Publico") that becomes for the purpose of effecting such public offering the owner, directly or indirectly, of an equity interest in the businesses conducted, indirectly or directly, by the Company provided that the balance of the equity of such businesses, to the extent not owned by the Company, is owned, directly or indirectly by the Parent (a "Publico IPO") or (iii) shares of a class of common equity ("Tracking Stock") registered under the Securities Act of Parent designed to track the performance of the businesses of the Company, whether such businesses are conducted through the Company or through another Subsidiary or division of Parent (a "Tracking Stock IPO"). "Sale of the Company" means the sale of the Company (whether by merger, consolidation, recapitalization, reorganization, sale of securities, sale of assets or otherwise but otherwise than a Qualifying Offering) in one transaction or series of related transactions to a Person or Persons not an Affiliate of Parent pursuant to which such Person or Persons (together with its Affiliates) acquires (i) securities representing at least a majority of the voting power of all securities of the Company, assuming the conversion, exchange or exercise of all securities convertible, exchangeable or exercisable for or into voting securities, or (ii) all or substantially all of the Company's assets on a consolidated basis. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder. "Stockholders" means each of the Employee Stockholders, to the extent such Employee Stockholder has exercised his or her Options, and any additional stockholders of the Company, whether or not such additional stockholders hold Company Securities on the date of the Grant Agreement to which this Appendix A is attached or hereinafter acquire such Company Securities, so long as such Person shall hold Company Securities. "Subsidiary" means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest A-6 in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, association or other business entity. "Tracking Stock Exchange Ratio" means the quotient obtained by dividing (i) the Class A Enterprise Value by (ii) the price per share of Tracking Stock to the public in a Tracking Stock IPO, with all appropriate adjustments to equitably reflect any subsequent stock dividend, stock split, reclassification, recapitalization, reorganization, merger, consolidation or similar event. "Transfer" means, directly or indirectly, any sale, transfer, assignment, hypothecation, pledge or other disposition of any Company Securities or any interests therein. ARTICLE II TRANSFERS OF COMPANY SECURITIES 2.1 Restrictions Generally; Securities Act. (a) Each Employee Stockholder agrees that he or she will not, directly or indirectly, Transfer any Company Securities except in accordance with the terms of this Appendix A. Any attempt by any Employee Stockholder to Transfer any Company Securities not in accordance with the terms of this Appendix A shall be null and void and neither the issuer of such securities nor any transfer agent of such securities shall give any effect to such attempted Transfer in its stock records. Notwithstanding anything contained in this Appendix A to the contrary, any transfer of Options shall also be subject to the provisions of the Option Plan and applicable Grant Agreement. In addition, if any Employee Stockholder transfers any Class A Common Stock obtained upon exercise of any Option, pursuant to the terms and limitations of this Appendix A, any Person acquiring such Class A Common Stock shall be considered an Employee Stockholder for the purposes of this Appendix A, except that the provisions of Article IV shall not apply to such Person unless he or she is or thereafter becomes an employee of the Company or any of its Affiliates. (b) Each Employee Stockholder agrees that, in addition to the other requirements imposed herein relating to Transfer, he or she will not Transfer any Company Securities except pursuant to an effective registration statement under the Securities Act, and in compliance with all other applicable foreign and state securities laws, or upon receipt by the Company of an opinion of counsel to the Employee Stockholder reasonably satisfactory (as to both counsel and form of opinion) to the Company or, if agreed by the Board, counsel to the Company, or a no-action letter from the Securities and Exchange Commission addressed to the Company, to the effect that no registration statement is required because of the availability of an A-7 exemption from registration under the Securities Act and, in the case of such opinion of counsel, that such Transfer is in compliance under all applicable foreign and state securities laws. 2.2 Transfers by Employee Stockholders. Each of the Employee Stockholders severally agrees that he or she will not Transfer any Company Securities, except (i) to his or her Permitted Transferee who shall have executed a Joinder Agreement; or (ii) to Parent or any of its Affiliates; or (iii) pursuant to Section 2.4 or 2.5 or Article III, IV or V of this Appendix A; or (iv) pursuant to Section 2.3 of this Appendix A; provided, however, that none of the Employee Stockholders shall Transfer any Company Securities pursuant to Section 2.3 until January 1, 2002 or Transfer any Company Securities at any time after a Tracking Stock IPO or a Publico IPO except by exercise of the Tracking Stock Exchange Right or Publico Exchange Right; provided, further, that in the case of Class A Common Stock obtained upon the exercise of Options, the provisions of Section 4.1 shall apply in the event the Employee Stockholder's employment with the Company or any of its Affiliates has been terminated; and provided, further, that in the case of Options, any such Transfer shall also be subject to the provisions of the Option Plan and the applicable Grant Agreement. 2.3 Right of First Refusal. (a) Except for Transfers permitted pursuant to clauses (i) through (iii) of Section 2.2, if any Employee Stockholder (a "Selling Stockholder") desires to Transfer any Class A Common Stock permitted to be Transferred under Section 2.2 (the "Offered Securities") to any person (a "Third Party"), prior to any Transfer such Selling Stockholder shall give written notice of the proposed Transfer (the "Notice of Intention") to Parent, specifying the type and number of Offered Securities which such Selling Stockholder wishes to Transfer, the name of the Third Party, the proposed cash purchase price (the "Offer Price") therefor, and all other material terms and conditions of the proposed Transfer and setting forth a representation of the Selling Stockholder that the terms reflect an actual, bona fide, arm's-length offer from an unrelated financially responsible Person. (b) For a period of thirty (30) days following its receipt of the Notice of Intention, Parent or its designee or designees shall have the right to purchase at the Offer Price and on the other terms specified in the Notice of Intention, all, but not less than all, of the Offered Securities. The right of Parent pursuant to this Section 2.3(b) shall be exercisable by delivery of a notice to the Selling Stockholder (the "Prospective Buyer Notice") and shall expire if unexercised by Parent within such 30-day period. Parent shall have the right, at its option, to pay for the Offered Securities by delivering the Offer Price in (i) cash or (ii) the number of shares of Parent Class A Common Stock equal to the number obtained by dividing the Offer Price by the Market Price per share of Parent Class A Common Stock, determined as of the date of the delivery to the Selling Stockholder of the Prospective Buyer Notice, plus cash in lieu of any A-8 fractional share. (c) If the Notice of Intention has been duly given, and Parent determines not to exercise its option to purchase the Offered Securities, then the Selling Stockholder shall have the right, for a period of sixty (60) days from the earlier of (i) the expiration of the option period pursuant to subsection (b) of this Section 2.3 or (ii) the date on which such Selling Stockholder receives notice from Parent that it will not exercise the option granted pursuant to subsection (b) of this Section 2.3, to sell to the Third Party the Offered Securities under this Section 2.3 at a price not less than the Offer Price and on the other terms set forth in the Notice of Intention, subject to compliance with any applicable Federal, state or foreign securities laws; provided that prior to any such Transfer to the Third Party, such Third Party executes and delivers to the Company, a Joinder Agreement. (d) The closing of any purchase and sale pursuant to this Section 2.3 shall (i) take place on such date, not later than sixty (60) business days after the delivery to the Selling Stockholder of a Prospective Buyer Notice, as Parent and the Selling Stockholder shall select, and (ii) be in accordance with the procedures set forth in Section 7.15. 2.4 Involuntary Transfers. (a) Upon the occurrence of any event which would cause any Company Securities owned by an Employee Stockholder to be Transferred by Involuntary Transfer (other than to a Permitted Transferee), (i) each unvested Option so Transferred shall lapse and become null and void, and (ii) such Employee Stockholder (or his legal representative or successor) shall give Parent written notice thereof stating the terms of such Involuntary Transfer, the identity of the transferee or proposed transferee, the price or other consideration, if readily determinable, for which the Company Securities are proposed to be or have been Transferred and the number of Company Securities which are the subject of such Transfer. After its receipt of such notice or, failing such receipt, after Parent otherwise obtains actual knowledge of such a proposed or completed Involuntary Transfer, Parent or its designee or designees shall have the right and option to purchase all or any portion of such Company Securities, which right shall be exercised by written notice given by Parent to the transferor (or transferee following the occurrence of any Involuntary Transfer) within sixty (60) days following the later of (i) Parent's receipt of such notice or, failing such receipt, Parent's obtaining actual knowledge of such proposed or completed Transfer and (ii) the date of such Involuntary Transfer. (b) Any purchase pursuant to this Section 2.4 shall be at the price and on the terms applicable to such Involuntary Transfer. If the nature of the event giving rise to such Involuntary Transfer is such that no readily determinable consideration is to be paid for or assigned to the Transfer of the Company Securities, the price to be paid by Parent for each share A-9 of Company Securities (other than Options) shall be the Fair Market Value thereof as of the date of Transfer, and the price to be paid by Parent for each Option shall be the (x) Fair Market Value of the Class A Common Stock with respect to which such Option may be exercised less (y) the Exercise Price with respect to such Option. The closing of the purchase and sale of such Company Securities pursuant to this Section 2.4 shall be held at the place and on the date established by Parent, which in no event shall be less than ten (10) nor more than forty-five (45) days from the date on which Parent gives notice of its election to purchase such Company Securities, and shall be in accordance with the procedures set forth in Section 7.15. 2.5 Sale of the Company. If the Class B Stockholders and/or their Permitted Transferees or the Company sign an agreement of sale, merger agreement or similar agreement relating to a Sale of the Company, Parent shall notify each Employee Stockholder, in writing, of the terms and conditions of such proposed sale including all arrangements between the Company, Parent (or its Affiliates), on the one hand, and the proposed buyer, on the other hand. Notwithstanding any other provision of this Appendix A, each such Employee Stockholder will take all necessary and desirable actions in connection with the consummation of such Sale of the Company, and if such transaction is structured as a sale of Company Securities, within ten (10) business days of the receipt of such notice (or such longer period of time as Parent shall designate in such notice) such Employee Stockholders shall cause all of their respective Company Securities (with respect to Options, only to the extent vested, including vesting under the provisions of Section 6(e) of the Company's 1999 Stock Option Plan, and all unvested Options shall terminate and be null and void) to be sold to the designated purchaser on the same terms and conditions and for the same per share consideration (less the Exercise Price in the case of vested Options) as the Company Securities being sold by the Class B Stockholders or their Permitted Transferees. In furtherance of, and not in limitation of the foregoing, in connection with a Sale of the Company, each Employee Stockholder will (i) consent to and raise no objections against the Sale of the Company or the process pursuant to which it was arranged, (ii) waive any dissenter's or appraisal rights and other similar rights, and (iii) execute all documents containing such terms and conditions as those executed by other Stockholders as directed by the Class B Stockholders or their Permitted Transferees. All Stockholders will bear their Pro Rata share of the costs and expenses incurred in connection with a Sale of the Company. Costs incurred by any Stockholder on its own behalf will not be shared by other Stockholders. No Employee Stockholder shall be obligated under this Section 2.5 unless: (i) the Sale of the Company is a bona fide arm's-length transaction; (ii) all holders of Common Stock are treated equally in the transaction; (iii) the Board determines that the transaction is fair to the Company and the Stockholders; (iv) the price paid for all outstanding Company Securities is at least equal to the Fair Market Value as determined by the Board; and (v) no representations or warranties, or indemnity, are required from an Employee Stockholder other than as to the ownership of such Employee Stockholder's Company Securities free and clear of Liens. A-10 ARTICLE III RIGHTS OF INCLUSION 3.1 Rights of Inclusion. (a) If the Class B Stockholders and/or their Permitted Transferees (the "Transferor") propose to Transfer any Company Securities ("Transferor Shares"), except as set forth in Section 3.2, to one or more Persons (any such Persons are referred to as the "Buyer"), then, as a condition to such Transfer, the Transferor shall cause the Buyer to include a written offer (the "Article III Offer"), subject to compliance with any applicable Federal, state or foreign securities laws, to each of the Employee Stockholders and each other holder of Class A Common Stock (collectively, the "Offerees"), to purchase from each Offeree, at the option of each Offeree, up to a Pro Rata number of shares of Class A Common Stock as the Class B Common Stock sold by the Transferor, on the same terms and conditions as are applicable to the Transferor Shares, all of which terms shall be specified in the Article III Offer, except that none of the Offerees shall be required to provide any representation or warranty or other undertaking other than with respect to its ownership of, and authority to transfer, such Class A Common Stock free and clear of all Liens. Notwithstanding the foregoing, if any Offeree does not accept its Article III Offer in full, the other Offerees shall have the right to sell pursuant to the Article III Offer up to the number of shares of Class A Common Stock not being sold by such Offeree, Pro Rata among such Offerees, until all such shares are sold or until they do not desire to sell any more shares. The Transferor shall provide a written notice (the "Inclusion Notice") of the Article III Offer to each Offeree, who may accept the Article III Offer by providing a written notice of acceptance of the Article III Offer to the Transferor within thirty (30) days of delivery of the Inclusion Notice. (b) The Buyer shall have ninety (90) days, commencing on the fifteenth (15th) day following delivery of the Inclusion Notice, in which to purchase the Class A Common Stock with respect to which an Article III Offer was accepted along with the Transferor Shares. The material terms of such sale, including, without limitation, price and form of consideration, shall be as set forth in the Inclusion Notice. If at the end of such 90-day period the Buyer has not completed the purchase of all the Transferor Shares and all the Offerees' Class A Common Stock proposed to be sold, the Transferor Shares and such Offerees' Class A Common Stock will not be sold and the provisions of this Article III shall continue to be in effect as to future Transfers. (c) Concurrently with the Transfer of the Transferor Shares and shares of Class A Common Stock of the Offerees to the Buyer pursuant to the Article III Offer, the Buyer shall pay, and the Transferor shall cause the Buyer to pay, to each Offeree its respective portion of the sales price of the shares of Class A Common Stock sold pursuant thereto. A-11 3.2 Certain Transfers. The provisions of this Article III shall not apply to any Transfer or proposed Transfer of Company Securities by the Class B Stockholders and any of their Permitted Transferees (i) to a Permitted Transferee thereof who shall have executed a Joinder Agreement, (ii) pursuant to a Sale of the Company in which the designated purchaser has agreed to purchase from all Employee Stockholders all their respective Company Securities on the terms and conditions set forth in Section 2.5 or (iii) which, together with all other Transfers of Company Securities by the Class B Stockholders and their Permitted Transferees (not including Transfers to Permitted Transferees), represent less than fifteen percent (15%) of the Common Stock, on a Diluted Basis. ARTICLE IV REPURCHASE OF COMPANY SECURITIES OWNED BY EMPLOYEE STOCKHOLDERS 4.1 Termination of Employment or Services. In the event that any Employee Stockholder who, on, or at any time after, the date of the Grant Agreement to which this Appendix A is attached, is employed by the Company or any of its Affiliates shall cease to be employed by or cease to provide services to, the Company or any of its Affiliates for any reason (including death, permanent disability, voluntary termination of employment, termination for cause, termination without cause, or retirement or otherwise), such Employee Stockholder (or his personal representative) shall promptly notify Parent of the termination and, within ninety (90) days after Parent's receipt of such notice, Parent or its designee or designees may, at their option, elect to purchase the Company Securities owned by such Employee Stockholder (or his personal representative) and his Permitted Transferees, which would include for this purpose any Company Securities transferred to any spouse or other person by such Employee Stockholder, whether or not such transferee is an Employee Stockholder (collectively, "Sellers"), exercisable by written notice (a "Purchase Notice") delivered to Sellers and, upon the giving of such notice, Sellers shall be obligated to sell those Company Securities which are designated in the Purchase Notice; provided, however, that in the event notice of such termination is not given, a Purchase Notice may in any event be given by Parent at any time following the termination. As provided in the Option Plan, unless otherwise provided in the Grant Agreement to which this Appendix A is attached, all unvested Options will terminate upon such termination of employment (or termination of service relationship). Employee Stockholders who cease to be employees of, or service providers to, the Company or any of its Affiliates will have the right to exercise their vested Options after termination of employment (or termination of service relationship) to the extent provided in the Option Plan and Grant Agreement, subject to the conditions and limitations (including time periods) set forth in the applicable Option Plan and Grant Agreement to which this Appendix A is attached. Notwithstanding anything herein to the contrary, with respect to (x) any Option that shall have survived such termination of employment (or termination of service relationship) pursuant to the terms of any applicable Option Plan or Grant A-12 Agreement, and (y) shares of Class A Common Stock that might have been acquired by reason of the exercise of an Option within six months prior to the termination date, Parent's purchase right under this Section 4.1 shall be applicable only to shares of Class A Common Stock obtained upon the exercise of such Option, and in each case held by the Employee Stockholder for at least six months after such exercise or delivery, such right to be exercisable by delivery of a Purchase Notice as aforesaid during the ninety day period after the day on which such Employee Stockholder has held such shares for six months. Notwithstanding anything herein to the contrary, Employee Stockholders, on their behalf and on behalf of their personal representatives and Permitted Transferees, agree not to transfer any Class A Common Stock received upon such exercise of until the expiration of the period during which Parent has the right to purchase such stock. 4.2 Purchase Price. (a) The purchase price for each share of Company Securities (other than Options) to be purchased pursuant to Section 4.1 shall be the Fair Market Value thereof as of the date of the termination of employment, and the purchase price for each Option to be purchased shall be the Fair Market Value of the shares of Class A Common Stock with respect to which the Option may be exercised, as of the date of termination of employment, less the Exercise Price with respect of such Options. (b) Parent shall have the right, at its option, to pay for the Company Securities to be purchased by delivering (i) the purchase price in cash, (ii) a note of Parent with a term of not greater than two years and bearing interest at the rate then paid by Parent to its principal lending bank and with a principal amount equal to the purchase price, or (iii) a number of shares of Parent Class A Common Stock equal to the number obtained by dividing the aggregate purchase price by the Market Price per share of Parent Class A Common Stock, determined as of the date of the delivery of the Purchase Notice, plus cash in lieu of any fractional share. 4.3 Closing. The closing for all purchases and sales of Company Securities provided for in this Article IV shall be held at the principal executive offices of Parent at 10:00 a.m., local time, on such date as may be designated in writing by Parent, but no later than the 60th day after the date of the delivery of the Purchase Notice and shall be in accordance with the procedures set forth in Section 7.15. ARTICLE V CONVERSION OF OPTIONS; EXCHANGE OF COMPANY SECURITIES 5.1 Conversion of Options; Exchange Rights. A-13 (a) Upon the consummation of a Tracking Stock IPO, and without any action by the Company or the Optionee, each unexercised Option shall automatically be converted into an Option to purchase shares of Tracking Stock with appropriate adjustment in the number of shares and exercise price consistent with the Tracking Stock Exchange Ratio and having the same remaining term and vesting schedule as the Option so converted. Upon the consummation of a Tracking Stock IPO (or at any time thereafter), each Employee Stockholder holding Class A Common Stock shall have the right (the "Tracking Stock Exchange Right") to acquire from Parent, in exchange for all or any portion of the Class A Common Stock then owned by such Stockholder such number of shares of Tracking Stock equal to the product of (i) the number of shares of Class A Common Stock to be exchanged by such Stockholder and (ii) the Tracking Stock Exchange Ratio. (b) Upon the consummation of a Publico IPO, and without any action by the Company or the Optionee, each unexercised Option shall automatically be converted into an Option to purchase shares of Publico Stock with appropriate adjustments in the number of shares and exercise price consistent with the Publico Stock Exchange Ratio and having the same remaining term and vesting schedule as the Option so converted. Upon the consummation of a Publico IPO (or at any time thereafter), Parent shall cause Publico to provide to each Employee Stockholder holding Class A Common Stock the right (the "Publico Exchange Right" and collectively with the Tracking Stock Exchange Right, the "Exchange Rights") to acquire from Publico, in exchange for all or any portion of the Class A Common Stock then owned by such Employee Stockholder, such number of shares of Publico Stock equal to the product of (i) the number of shares of Class A Common Stock and (ii) the Publico Stock Exchange Ratio. 5.2 Exercise of the Exchange Rights. In order to exercise an Exchange Right, an Employee Stockholder holding Class A Common Stock must notify Parent or Publico, as the case may be (the "Issuer"), in writing (the "Exchange Notice") of such exercise of the Exchange Right. 5.3 Closing of the Exchange. The closing of the Exchange Right exercise shall occur at 10:00 a.m., ten (10) business days after delivery of the Exchange Notice at the principal executive officers of the Issuer (or at such other time and/or place as may be agreed by the Issuer and the Employee Stockholder holding Class A Common Stock) and in accordance with the procedures set forth in Section 7.15. Each Employee Stockholder holding Class A Common Stock acknowledges and agrees that the Tracking Stock or Publico Stock issued to him or her will be subject to applicable restrictions under Federal and state securities laws and will bear appropriate legends to such effect. 5.4 Lock-Up. A-14 (a) Each Employee Stockholder holding Class A Common Stock agrees not to offer, sell, contract to sell or otherwise dispose of any Tracking Stock within seven (7) days before or during the lock-up period after the date of any final prospectus relating to a Tracking Stock IPO or any other underwritten offering of Tracking Stock, except pursuant to the written consent of the underwriters for such offering. Each holder of Class A Common Stock agrees to execute and deliver to such underwriters an agreement, in customary form, confirming the foregoing. (b) Each Employee Stockholder holding Class A Common Stock agrees not to offer, sell, contract to sell or otherwise dispose of any Publico Stock within seven (7) days before or during the lock-up period after the date of any final prospectus relating to a Publico IPO or any other underwritten offering of Publico Stock, except pursuant to the written consent of the underwriters for such offering. Each Employee Stockholder holding Class A Common Stock agrees to execute and deliver to such underwriters an agreement, in customary form, confirming the foregoing. ARTICLE VI CERTAIN OTHER MATTERS; WORKING CAPITAL NEEDS 6.1 Transferees. Unless otherwise consented to by Parent, the parties hereto agree that as a condition precedent to the issuance by the Company of shares of Class A Common Stock to a Permitted Transferee of an Employee Stockholder or any Third Party, the Company shall require such Person to execute a Joinder Agreement. Notwithstanding the foregoing, to the extent approved by Parent and specified in any Joinder Agreement (or amendment thereto) pursuant to which any Person agrees to be bound by the terms hereof, the provisions of this Appendix may be varied to be more or less restrictive with respect to any such Person. 6.2 Stock Issuance. The Company shall issue no shares of Class A Common Stock or securities convertible, exchangeable or exercisable for or into shares of Class A Common Stock after a Tracking Stock IPO or a Publico IPO. 6.3 No Right to Employment. Nothing contained herein nor the ownership of any Company Securities shall confer upon any Employee Stockholder the right to employment or to remain in the employ of the Company or any of its Affiliates. 6.4 Working Capital. It is contemplated that the Company may require additional funds for working capital. Should Parent, in its discretion, determine to provide such funds (including, without limitation, pursuant to Section 2.07(c) of the Agreement and Plan of Merger), A-15 it may do so (i) by purchasing shares of Class A Common Stock or Class B Common Stock at the most recent Fair Market Value per share of Class A Common Stock (the Class B Common Stock being valued at the same per share price as the Class A Common Stock) calculated prior to the date of the capital contribution, or (ii) by lending funds to the Company at an interest rate not to exceed three percentage points over the prime rate of Parent's principal lending bank. In the event of a loan, the Company shall keep a record of the number of shares of Class A Common Stock or Class B Common Stock that could have been purchased with such funds at the most recent Fair Market Value per share of Class A Common Stock calculated prior to the date of such working capital advance, subject to customary anti-dilution adjustments (the "Conversion Value"). Parent at its option, may thereafter, at any time, convert all or any part of such loan into shares of Class A Common Stock or Class B Common Stock either at the most recent Fair Market Value per share of Class A Common Stock calculated prior to the conversion date or at the Conversion Value. Notwithstanding the foregoing, in the event Parent or any of its Affiliates determines to provide the Company with funds for working capital within six months of the Effective Time (other than $5,000,000 to be provided pursuant to the Asset Contribution Agreement), if funds are provided by such Person, such shares (or any other securities of the Company convertible into Class A Common Stock, Class B Common Stock or other securities) shall be purchased, or such Conversion Value shall be calculated, on the basis of a market value of the Company equal to the greater of (i) the valuation of the Company as of the Effective Time prepared by Ernst & Young LLP or (ii) $500,000,000. ARTICLE VII MISCELLANEOUS 7.1 Governing Law. The corporate laws of the State of Delaware will govern all questions concerning the relative rights of the Company and its Stockholders hereunder. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. 7.2 Entire Agreement; Amendments. This Appendix A (together with the related Grant Agreement) constitutes the entire agreement of the parties with respect to the subject matter hereof and may be amended, modified or supplemented only by a written instrument duly executed by the Company and Parent, except that (i) any amendment, modification or supplement that materially, adversely and disproportionately affects the Employee Stockholders at any time after such Stockholders have exercised Options and received shares of Class A Common Stock shall require the consent of the Employee Stockholders who hold such Class A A-16 Common Stock in accordance with Section 7.4 hereof, and (ii) any amendment, modification or supplement made before an Employee Stockholder exercises an Option shall be governed by the provisions of Section 7 of the related Grant Agreement. Notwithstanding anything to the contrary contained herein, no provision of this Appendix A shall prevent or otherwise restrict Parent from purchasing Company Securities from Employee Stockholders pursuant to this Appendix A or otherwise at a price per share different from that specified in this Appendix A. 7.3 Term. As to an Employee Stockholder, this Appendix A shall terminate upon the earlier of (a) a Sale of the Company, (b) the repurchase of all of the Employee Stockholder's Options and shares of Class A Common Stock pursuant to Article IV or (c) with the exception of Section 2.1, the exchange of all of the Employee Stockholder's shares of Class A Common Stock for Tracking Stock or Publico Stock and the conversion of the Options into options to acquire Tracking Stock or Publico Stock, as the case may be, pursuant to Article V. The provisions of Sections 2.2, 2.3, 2.4 and 2.5, Article III and Sections 6.1 and 6.2 shall terminate upon the consummation of a Company IPO. 7.4 Certain Actions. Unless otherwise expressly provided herein, whenever any action is required under this Appendix A by the Employee Stockholders, it shall be by the affirmative vote of those Employee Stockholders who hold Class A Common Stock representing more than 50% of such Class A Common Stock on a Diluted Basis (but not taking into account any Options, the holders of which shall have no vote unless and until they have exercised such Options and received Class A Common Stock) then held by the Employee Stockholders as a group. 7.5 Recapitalization, Exchanges, Etc., Affecting Company Securities. The provisions of this Appendix A shall apply, to the full extent set forth herein with respect to the Company Securities, to any and all shares of the Company capital stock or any successor or assign of the Company (whether by merger, consolidation, sale of assets, or otherwise, including shares issued by a parent corporation in connection with a triangular merger) which may be issued in respect of, in exchange for, or in substitution of, Company Securities, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, reclassifications and the like occurring after the date hereof. 7.6 Waiver. No waiver by any party of any term or condition of this Appendix A, in one or more instances, shall be valid unless in writing, and no such waiver shall be deemed to be construed as a waiver of any subsequent breach or default of the same or a similar nature. 7.7 Assignment; Successors and Assigns. (a) Parent may assign any of its rights, interests or obligations under Sections 2.3 or 2.4 or Articles IV or V to any Person. A-17 (b) Except as otherwise expressly provided herein, this Appendix A shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns (including, without limitation, transferees of Company Securities); provided, however, that (i) nothing contained herein shall be construed as granting any Employee Stockholder the right to Transfer any Company Securities except in accordance with this Appendix A and with respect to Options, the applicable Option Plan; and (ii) any Third Party which acquires Company Securities in accordance with Section 2.3 shall be bound by the provisions of this Appendix A as an Employee Stockholder with respect to such Company Securities, except that the provisions of Article IV shall not apply to the Company Securities of such Third Party (unless such Third Party is also or thereafter becomes an employee of the Company or any of its Subsidiaries). 7.8 Remedies. In the event of a breach by any party to this Appendix A of its obligations under this Agreement, any party injured by such breach, in addition to being entitled to exercise all rights granted by law, including recovery of damages and costs (including reasonable attorneys' fees), will be entitled to specific performance of its rights under this Appendix A. The parties agree that the provisions of this Appendix A shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of any such provision will be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. 7.9 Income Tax Withholding. Each Employee Stockholder who is or becomes an employee of the Company or any Affiliate thereof authorizes the Company or such Affiliate to make any required withholding for the payment of any and all income taxes and other sums that may be due any governmental authority as a result of the receipt by such Employee Stockholder of compensation income under Section 83 of the Internal Revenue Code of 1986, as amended, or similar provisions of foreign, state or local law, if required by applicable law, and agrees, if requested by the Company or any Affiliate thereof and in lieu of all or a portion of such withholding, to pay the Company or such Affiliate in a lump sum such amounts as the Company or such Affiliate may be required to remit to any governmental authority on behalf of such Employee Stockholder in respect of any such taxes and other sums. 7.10 Invalid Provisions. If any provision of this Appendix A is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any Employee Stockholder, the Company or Parent under this Appendix A will not be materially and adversely affected thereby, (i) such provision will be fully severable, (ii) this Appendix A will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Appendix A will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its A-18 severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Appendix a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 7.11 Headings. The headings used in this Appendix A have been inserted for convenience of reference only and do not define or limit the provisions hereof. 7.12 Further Assurances. Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Appendix A. 7.13 Gender. Whenever the pronouns "he" or "his" are used herein they shall also be deemed to mean "she" or "hers" or "it" or "its" whenever applicable. Words in the singular shall be read and construed as though in the plural and words in the plural shall be construed as though in the singular in all cases where they would so apply. 7.14 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission or mailed by prepaid first class mail, return receipt requested, or if delivered to a nationally recognized overnight courier prepaid to the parties at the following addresses or facsimile numbers: (i) If to the Company, to: Times Company Digital, Inc. 1120 Avenue of the Americas New York, New York 10036 Attention: Kenneth A. Richieri, Esq. Facsimile: (212) 556-4634 with a copy to: (ii) If to Parent, to: The New York Times Company 229 West 43rd Street New York, New York 10036 Attention: Solomon B. Watson IV, Esq. Facsimile: (212) 556-4634 (iii) If to an Employee Stockholder, to the address of such Person set forth in A-19 the records of the Company. All such notices, requests and other communications will (w) if delivered personally to the address as provided in this Section 7.14 be deemed given upon delivery against written receipt, (x) if delivered by facsimile transmission to the facsimile number as provided in this Section 7.15 be deemed given upon receipt, (y) if delivered by mail in the manner described above to the address as provided in this Section 7.14 upon the earlier of the third business day following mailing or upon receipt and (z) if delivered by a nationally recognized overnight courier to the address as provided in this Section 7.14, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 7.14). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto. 7.15 Closing Procedures. At the closing of any purchase and sale of Company Securities under this Appendix A, the selling Stockholder shall deliver certificates evidencing the securities being sold duly endorsed, or accompanied by written instruments of transfer in form satisfactory to the purchaser, duly executed by the selling Stockholder, free and clear of any Liens, against delivery of a certified or bank cashier's check in the amount of the purchase price or, if applicable, certificates for the number of Parent Class A Common Stock (plus cash in lieu of any fractional share) to which such selling Stockholder is entitled. In the event that Parent delivers Parent Class A Common Stock to such selling Stockholder, the selling Stockholder shall, in addition, deliver to Parent such representations and documents as Parent reasonably deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations, and Parent, in its absolute discretion, may take such additional actions as it deems appropriate to effect such compliance, including, without limitation, placing legends on certificates for Parent Class A Common Stock and issuing stop-transfer orders to transfer agents. A-20 EXHIBIT B SEPARATION AGREEMENT AND RELEASE 1. Termination of Employment. My employment with The New York Times Company ("The Times") terminated effective as of ______________________________. 2. Consideration. I understand that in consideration for my execution of this Separation Agreement and Release (the "Separation Agreement"), and my fulfillment of the promises made in this Separation Agreement and the Employment Agreement between The Times and me dated as of September 1, 1999 (the "Employment Agreement"), The Times agrees to provide me with the compensation and benefits set forth in Section 8 of the Employment Agreement. 3. Conditions Applying to Payment of Benefits. I understand and agree that the compensation and benefits payable to me pursuant to Section 2 above are subject to my compliance with the terms and conditions set forth in this Separation Agreement and the Employment Agreement. 4. General Release of Claims. I hereby voluntarily release The Times, Times Company Digital, and their subsidiaries, partners, affiliates, owners, agents, officers, directors, employees, successors and assigns, and all related persons, individually and in their official capacities (hereinafter collectively referred to as the "Released Parties"), of and from any and all claims, known and unknown, relating to my employment or cessation of employment that I, my heirs, executors, administrators, successors, and assigns, have or may have as of the date of execution of this Separation Agreement, including, but not limited to, any alleged violation of: o The National Labor Relations Act; o Title VII of the Civil Rights Act of 1964; o Sections 1981 through 1988 of Title 42 of the United States Code; o Civil Rights Act of 1991; o The Employee Retirement Income Security Act of 1974 ("ERISA"); o The Age Discrimination in Employment Act of 1967; o The Americans with Disabilities Act of 1990; o The Fair Credit Reporting Act; o The Fair Labor Standards Act; o The Occupational Safety and Health Act; o The Family and Medical Leave Act of 1993; o Executive Order 11246; o The New York Equal Pay Law; o The New York Human Rights Law; o The New York Civil Rights Act; o The New York State Wage and Hour Laws; o The New York City Administrative Code, Title VII; o The New York Occupational Safety and Health Laws; o any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance; o any public policy, contract, tort, or common law; o any claims for vacation, sick or personal leave, pay or payment pursuant to any practice, policy, handbook, or manual of The Times; or o any allegation for costs, fees or other expenses including attorneys' fees incurred in these matters. Notwithstanding the foregoing, the release set forth in this Section 4 shall not apply to any vested benefits accrued by me prior to the effective date of this Separation Agreement under any compensation or benefit plans, programs and arrangements maintained by The Times for the benefit of its employees and subject to ERISA. 5. No Existing Claims. I confirm that no claim, charge, or complaint against the Released Parties exists before any federal, state, or local court or administrative agency. 6. No Recovery or Relief. I hereby waive my right to accept any relief or recovery, including costs and attorney's fees, from any charge or complaint filed by me or on my behalf against the Released Parties before any federal, state, or local court or administrative agency, except as such waiver is prohibited by law. 7. No Participation In Claims. I understand that if this Separation Agreement were not signed, I would have the right to voluntarily assist other individuals in bringing claims against the Released Parties. I hereby waive that right and shall not provide any such assistance other than assistance in an investigation or proceeding conducted by an agency of the United States government. 8. Nonadmission of Wrongdoing. I agree that neither this Separation Agreement nor the furnishing of the consideration for the general release set forth in this Separation Agreement shall be deemed or construed at any time for any purpose as an admission by the Released Parties of any liability or unlawful conduct of any kind. 9. Breach of Agreement. I agree that if I breach any of the promises set forth in this Separation Agreement or if I challenge the general release set forth in this Separation Agreement, The Times shall have the right to terminate the benefits payable under the Separation Agreement and to require me to return all monies paid by The Times in consideration for my signing the general release included in this Separation Agreement. 10. Governing Law and Interpretation. This Separation Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflict of laws provisions. If any provision of the Separation Agreement other than the general release set forth in section 4 above, is declared legally or factually invalid or unenforceable by any court of competent jurisdiction and if such provision cannot be modified to be enforceable to any extent or in any application, then such provision immediately shall become null and void, leaving the remainder of this Separation Agreement in full force and affect. If any portion of the general release set forth in this Separation Agreement is declared to be unenforceable by a court of competent jurisdiction in any action in which I participate or join, I agree that all consideration paid to me under this Separation Agreement and the Employment Agreement shall be offset against any monies that I may receive in connection with any such action. 2 11. Entire Agreement. This Separation Agreement sets forth the entire agreement between me and the Released Parties and it supersedes any and all prior agreements or understandings, whether written or oral, between the parties, except as otherwise specified in this Separation Agreement and the Employment Agreement (including Sections 9 and 10 thereof). I acknowledge that I have not relied on any representations, promises, or agreements of any kind made to me in connection with my decision to sign this Separation Agreement, except for those set forth in this Separation Agreement and the Employment Agreement. 12. Amendment. This Separation Agreement may not be amended except by a written agreement signed by both parties which specifically refers to this Separation Agreement. 13. Right to Revoke. I understand that I have the right to revoke this Separation Agreement at any time during the seven (7) day period following the date on which I first sign the Separation Agreement. If I want to revoke, I must make a revocation in writing which states: "I hereby revoke my acceptance of the Separation Agreement and General Release." This written revocation must be delivered by hand or sent by certified mail with a postmark dated before the end of the seven-day revocation period to Solomon B. Watson IV, The New York Times Company, 229 West 43d Street, New York, NY 10036; otherwise, such revocation shall not be effective. 14. Effective Date. This Separation Agreement shall not become effective or enforceable until the expiration of the 7-day revocation period described in Section 12 above. I UNDERSTAND THAT BY SIGNING THIS SEPARATION AGREEMENT, I SHALL BE WAIVING MY RIGHTS UNDER FEDERAL, STATE AND LOCAL LAW TO BRING ANY CLAIMS THAT I HAVE OR MIGHT HAVE AGAINST THE RELEASED PARTIES. I UNDERSTAND THAT MY RIGHT TO RECEIVE BENEFITS SET FORTH IN SECTION 8 OF THE EMPLOYMENT AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS SEPARATION AGREEMENT AND THAT I WOULD NOT RECEIVE SUCH BENEFITS BUT FOR MY EXECUTION OF THIS SEPARATION AGREEMENT. I HAVE BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS SEPARATION AGREEMENT. I ALSO HAVE BEEN ADVISED IN WRITING BY THE TIMES THAT I HAVE TWENTY-ONE (21) DAYS TO CONSIDER THIS SEPARATION AGREEMENT. I AGREE THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS SEPARATION AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) DAY CONSIDERATION PERIOD. 3 IN WITNESS WHEREOF, I have executed this Separation Agreement and Release as of the date set forth below. Signed:________________________________________________________________________ Name: _________________________________________________________________________ Date: _________________________________________________________________________ ACCEPTED AND ACKNOWLEDGED BY THE NEW YORK TIMES COMPANY By: _________________________________ Name: _______________________________ Title: ______________________________ Date: _______________________________ 4 EX-12 6 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 THE NEW YORK TIMES COMPANY RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
Years Ended ----------------------------------------------------------------------- December 26, December 27, December 28, December 29, December 31, (In thousands, except ratio) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before Fixed charges Income before income taxes, income from joint ventures and an extraordinary item (1)(2) $520,564 $ 484,506 $ 423,375 $ 179,686 $ 218,810 Less net gain on dispositions of assets -- (12,619) (10,388) (32,836) (11,291) Distributed earnings from less than fifty percent owned affiliates 13,061 18,192 14,982 16,957 7,980 Less pre-tax preferred stock dividends -- -- (129) (174) (163) - ----------------------------------------------------------------------------------------------------------------------------------- Adjusted pre-tax earnings from continuing operations 533,625 490,079 427,840 163,633 215,336 Fixed charges less capitalized interest 63,448 56,594 55,304 40,821 42,970 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before fixed charges $597,073 $ 546,673 $ 483,144 $ 204,454 $ 258,306 - ----------------------------------------------------------------------------------------------------------------------------------- Fixed charges Interest expense, net of capitalized interest $ 52,503 $ 46,927 $ 45,039 $ 30,759 $ 33,574 Capitalized interest -- 173 5,394 19,574 15,177 Less pre-tax preferred stock dividends -- -- 129 174 163 Portion of rentals representative of interest factor 10,945 9,667 10,136 9,888 9,233 - ----------------------------------------------------------------------------------------------------------------------------------- Total fixed charges $ 63,448 $ 56,767 $ 60,698 $ 60,395 $ 58,147 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of earnings to fixed charges 9.41 9.63 7.96 3.39 4.44 - -----------------------------------------------------------------------------------------------------------------------------------
(1) 1998 excludes a $13.7 million pre-tax extraordinary item resulting from the early extinguishment of certain long-term debt (see Note 7 of the Notes to the Consolidated Financial Statements). (2) 1996 includes a $126.8 million pre-tax noncash accounting charge related to SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. EX-21 7 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE COMPANY(1),(2) Jurisdiction of Incorporation or Name of Subsidiary Organization - ----------------- ---------------- NYT Capital, Inc.............................................. Delaware City & Suburban Delivery Systems, Inc...................... Delaware Comet-Press Newspapers, Inc................................ Delaware Crossroads Holding Corporation............................. New Jersey Donohue Malbaie Inc. (49%)................................. Canada Globe Newspaper Company, Inc............................... Massachusetts Boston Globe Electronic Publishing, Inc................. Massachusetts Boston Globe Marketing, Inc............................. Massachusetts Community Newsdealers Inc............................... Massachusetts Globe Specialty Products, Inc........................... Massachusetts NYT Management Services................................. Massachusetts Retail Sales, Inc....................................... Massachusetts Hendersonville Newspaper Corporation....................... North Carolina Lakeland Ledger Publishing Corporation..................... Florida NYT Holdings, Inc.......................................... Delaware NYT Shared Service Center, Inc............................. Delaware The Dispatch Publishing Company, Inc....................... North Carolina The Houma Courier Newspaper Corporation.................... Delaware The Times Southwest Broadcasting, Inc...................... Arkansas The New York Times Company Magazine Group, Inc............. Delaware NYT Special Services, Inc............................... Delaware The New York Times Distribution Corporation................ Delaware The New York Times Electronic Media Company................ Delaware The New York Times Sales, Inc.............................. Delaware The New York Times Syndication Sales Corporation........... Delaware The Spartanburg Herald-Journal, Inc........................ Delaware Times Leasing, Inc......................................... Delaware Times On-Line Services, Inc................................ New Jersey Wilmington Star-News, Inc.................................. New York WNEP-TV, Inc............................................... Pennsylvania WNEP-TV, LP............................................. Delaware Worcester Telegram & Gazette Corporation................... Massachusetts WREG-TV, Inc............................................... Delaware WREG-TV, LLC............................................ Delaware WTKR-TV, Inc............................................... Delaware The New York Times Company.................................... New York International Herald Tribune S.A.S. (50%).................. France London Bureau Limited...................................... United Kingdom Madison Paper Industries (partnership) (40%)............... Maine NYT Administradora de Bens e Servicos Ltda................. Brazil NYT 1896T, Inc............................................. Delaware Rome Bureau S.r.l.......................................... Italy Times Company Digital, Inc. (95.8%)........................ Delaware Abuzz Technologies, Inc................................. Delaware - ---------- (1) 100% owned unless otherwise indicated. (2) The names of certain subsidiaries have been omitted because, considered in the aggregate, as a single subsidiary, they would not constitute a significant subsidiary. EX-23 8 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The New York Times Company: We consent to the incorporation by reference in Registration Statements No. 333-43369, No. 333-43371, No. 333-37331, No. 333-09447, No. 2-91826, No. 33-31538, No. 33-43210, No. 33-43211, No. 33-50461, No. 33-50465, No. 33-50457, No. 33-50467, No. 33-50459, and No. 33-56219 on Form S-8 and in Registration Statements No. 333-64275, No. 333-62023, No. 333-53007, No. 33-57403 and No. 333-95685 on Form S-3 of our report dated January 28, 2000 (February 17, 2000 as to Note 18), appearing in the Annual Report on Form 10-K of The New York Times Company for the year ended December 26, 1999. We also consent to the reference to us under the heading "Experts" in Registration Statements No. 2-91826 and No. 33-31538 on Form S-8 and No. 333-64275, No. 333-62023, No. 333-53007, No. 33-57403 and No. 333-95685 on Form S-3. /s/ DELOITTE & TOUCHE LLP New York, NY March 14, 2000 EX-27 9 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-26-1999 DEC-28-1998 DEC-26-1999 63,861 0 406,503 39,749 53,611 614,908 2,195,163 976,767 3,495,802 673,514 0 0 0 17,882 1,430,776 3,495,802 0 3,130,629 0 1,378,840 0 0 50,718 538,464 228,287 310,177 0 0 0 310,177 1.77 1.73
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