-----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, Pc4QTnnuzYZFJF+6C1olFuRdaa1vfeNhZ9uhNNZFi+AgSQ5dexQ/jjbLgYRsc57g uKJ0ExT8WapYUh9bdw3Qrg== 0001005477-99-005096.txt : 19991111 0001005477-99-005096.hdr.sgml : 19991111 ACCESSION NUMBER: 0001005477-99-005096 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990926 FILED AS OF DATE: 19991110 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-Q SEC ACT: SEC FILE NUMBER: 001-05837 FILM NUMBER: 99746184 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-Q 1 FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For Quarter Ended September 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, NEW YORK ---------------------------------------- (Address of principal executive offices) 10036 ---------- (Zip Code) Registrant's telephone number, including area code 212-556-1234 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|. Number of shares of each class of the registrant's common stock outstanding as of November 5, 1999 (exclusive of treasury shares): Class A Common Stock 170,406,039 shares Class B Common Stock 849,520 shares PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE NEW YORK TIMES COMPANY CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (Dollars and shares in thousands, except per share data)
Three Months Ended Nine Months Ended ----------------------------------- ---------------------------------- September 26, September 27, September 26, September 27, 1999 1998 1999 1998 ----------------------------------- ---------------------------------- Revenues Advertising........................................... $513,707 $471,166 $1,598,974 $1,510,621 Circulation........................................... 168,181 167,180 513,741 507,205 Other................................................. 47,770 44,382 135,386 136,654 -------- -------- ---------- ---------- Total.............................................. 729,658 682,728 2,248,101 2,154,480 -------- -------- ---------- ---------- Production costs Raw materials......................................... 67,462 83,493 237,245 260,016 Wages and benefits.................................... 142,285 137,145 436,584 426,647 Other................................................. 103,240 97,203 306,181 295,646 -------- -------- ---------- ---------- Total.............................................. 312,987 317,841 980,010 982,309 Selling, general and administrative expenses.............. 303,901 263,466 885,219 809,266 -------- -------- ---------- ---------- Total.............................................. 616,888 581,307 1,865,229 1,791,575 -------- -------- ---------- ---------- Operating profit.......................................... 112,770 101,421 382,872 362,905 Income from joint ventures................................ 4,888 5,336 12,356 13,614 Interest expense - net.................................... 12,936 10,337 37,673 30,964 Gain on dispositions of assets............................ -- -- -- 12,619 -------- -------- ---------- ---------- Income before income taxes and extraordinary item.................................... 104,722 96,420 357,555 358,174 Income taxes.............................................. 44,716 41,445 152,676 155,831 -------- -------- ---------- ---------- Income before extraordinary item.......................... 60,006 54,975 204,879 202,343 Extraordinary item, net of tax Debt extinguishment................................... -- -- -- 7,716 -------- -------- ---------- ---------- Net Income................................................ $ 60,006 $ 54,975 $ 204,879 $ 194,627 ======== ======== ========== ========== Average number of common shares outstanding Basic................................................ 173,829 188,546 176,560 190,889 Diluted.............................................. 177,720 192,284 180,068 195,082 Per share of common stock Basic earnings before extraordinary item............. $ 0.35 $ 0.29 $ 1.16 $ 1.06 Extraordinary item, net of tax....................... -- -- -- (0.04) -------- -------- ---------- ---------- Basic earnings after extraordinary item.............. $ 0.35 $ 0.29 $ 1.16 $ 1.02 ======== ======== ========== ========== Diluted earnings before extraordinary item........... $ 0.34 $ 0.29 $ 1.14 $ 1.04 Extraordinary item, net of tax....................... -- -- -- (0.04) -------- -------- ---------- ---------- Diluted earnings after extraordinary item............ $ 0.34 $ 0.29 $ 1.14 $ 1.00 ======== ======== ========== ========== Dividends............................................ $ 0.105 $ 0.095 $ 0.305 $ 0.275 ======== ======== ========== ==========
See Notes to Consolidated Condensed Financial Statements. 2 THE NEW YORK TIMES COMPANY CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) September 26, December 27, 1999 1998 ------------- ------------ (Unaudited) ASSETS Current Assets Cash and cash equivalents ....................... $ 43,578 $ 35,991 Accounts receivable-net ........................ 324,235 331,933 Inventories Newsprint and magazine paper ................. 28,134 27,705 Work-in-process and other .................... 5,780 4,582 ---------- ---------- Total inventories ........................ 33,914 32,287 Deferred income taxes ........................... 27,866 40,612 Other current assets ............................ 99,639 76,153 ---------- ---------- Total current assets ..................... 529,232 516,976 ---------- ---------- Other Assets Investments in joint ventures ................... 126,212 122,273 Property, plant and equipment (less accumulated depreciation of $992,720 in 1999 and $897,304 in 1998) ........................ 1,267,686 1,326,196 Intangible assets acquired Cost in excess of net assets acquired (less accumulated amortization of $264,078 in 1999 and $240,676 in 1998) ................ 969,700 963,347 Other intangible assets acquired (less accumulated amortization of $80,384 in 1999 and $64,746 in 1998) ................. 348,588 364,226 Miscellaneous assets ............................ 223,918 172,091 ---------- ---------- TOTAL ASSETS ........................................ $3,465,336 $3,465,109 ========== ========== See Notes to Consolidated Condensed Financial Statements. 3 THE NEW YORK TIMES COMPANY CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands)
September 26, December 27, 1999 1998 ------------- ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Commercial paper outstanding ......................................... $ 219,500 $ 124,100 Accounts payable ..................................................... 177,839 163,783 Accrued payroll and other related liabilities ........................ 85,149 87,265 Accrued expenses ..................................................... 183,388 166,761 Unexpired subscriptions .............................................. 83,413 81,080 Current portion of long-term debt and capital lease obligations ......................................... 101,926 1,867 ----------- ----------- Total current liabilities ......................................... 851,215 624,856 ----------- ----------- Other Liabilities Long-term debt ....................................................... 414,195 513,695 Capital lease obligations ............................................ 83,138 84,123 Deferred income taxes ................................................ 143,113 165,268 Other ................................................................ 595,307 545,697 ----------- ----------- Total other liabilities ........................................... 1,235,753 1,308,783 ----------- ----------- Total liabilities ................................................. 2,086,968 1,933,639 ----------- ----------- Stockholders' Equity Capital stock of $.10 par value Class A - authorized 300,000,000 shares; issued: 1999 - 188,496,309; 1998 - 185,763,418 (including treasury shares: 1999 - 16,680,441; 1998 - 5,000,000) ................................... 18,850 18,575 Class B - convertible - authorized 849,602 shares; issued: 1999 - 849,520; 1998 - 849,602 (including treasury shares: 1999 and 1998 - none) .................................................... 86 86 Additional paid-in capital ........................................... 84,423 -- Accumulated other comprehensive income (loss) ........................ 7,166 (2,609) Retained earnings .................................................... 1,828,547 1,677,469 Common stock held in treasury, at cost ............................... (560,704) (162,051) ----------- ----------- Total stockholders' equity ........................................ 1,378,368 1,531,470 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................... $ 3,465,336 $ 3,465,109 =========== ===========
See Notes to Consolidated Condensed Financial Statements. 4 THE NEW YORK TIMES COMPANY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Nine Months Ended ---------------------------- September 26, September 27, 1999 1998 ---------------------------- OPERATING ACTIVITIES Net cash provided by operating activities ............ $ 381,934 $ 327,594 --------- --------- INVESTING ACTIVITIES Additions to property, plant and equipment ........... (47,140) (54,385) Net proceeds from dispositions ....................... 11,434 9,934 Other-net ............................................ (18,181) 17,260 --------- --------- Net cash used in investing activities ................ (53,887) (27,191) --------- --------- FINANCING ACTIVITIES Commercial paper borrowings .......................... 95,400 67,750 Debt extinguishment .................................. -- (75,616) Other long-term debt reduction ....................... (1,151) (3,204) Capital shares Issuances ....................................... 13,941 6,365 Repurchases ..................................... (374,849) (318,336) Dividends paid to stockholders ....................... (53,801) (52,357) --------- --------- Net cash used in financing activities ................ (320,460) (375,398) --------- --------- Increase/(Decrease) in cash and cash equivalents ..... 7,587 (74,995) Cash and cash equivalents at the beginning of the year 35,991 106,820 --------- --------- Cash and cash equivalents at the end of the quarter .. $ 43,578 $ 31,825 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION NONCASH FINANCING AND INVESTING TRANSACTIONS 1. Repurchases of common stock in connection with noncash exercises under the Company's stock option plans increased treasury stock by $24.3 million in 1999 and $30.2 million in 1998. Additional paid-in capital was increased by a corresponding amount. The cost of shares reacquired in connection with taxes due from optionees on noncash exercises under the Company's stock option plans is included in repurchases in the Consolidated Condensed Statements of Cash Flows above and amounted to $12.9 million in the first nine months of 1999 and $21.7 million in the first nine months of 1998. 2. In February 1999 the Company purchased a minority interest in TheStreet.com for $15.0 million, of which $3.0 million was in cash and $12.0 million represents an irrevocable credit for services to be used by TheStreet.com through February 2003. Investment and deferred revenue accounts were increased by $12.0 million accordingly. OTHER Amounts in these statements of cash flows are presented on a cash basis and may differ from those shown in other sections of the financial statements. See Notes to Consolidated Condensed Financial Statements. 5 THE NEW YORK TIMES COMPANY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. General The accompanying Notes to Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements included in the annual report on Form 10-K for the year ended December 27, 1998, for The New York Times Company (the "Company") filed with the Securities and Exchange Commission. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations, as of and for the interim period ended, have been included. Due to the seasonal nature of the Company's business, results for the interim periods are not necessarily indicative of a full year's operations. The fiscal periods included herein comprise 13 weeks for the three-month periods and 39 weeks for the nine-month periods. Certain reclassifications have been made to the 1998 Consolidated Condensed Financial Statements to conform with classifications used at September 26, 1999. 2. Income Taxes Reconciliations between the effective rate on income before income taxes and extraordinary item, and the federal statutory rate are as follows:
Three Months Ended Nine Months Ended --------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ % of % of % of % of (Dollars in thousands) Amount Pre-tax Amount Pre-tax Amount Pre-tax Amount Pre-tax - ------------------------------------------------------------------------------------------------------------------------------------ Tax at the federal statutory rate.............. $36,653 35.0% $33,747 35.0% $125,144 35.0% $120,944 35.0% State and local income taxes-net of federal benefit...................................... 5,851 5.6 6,197 6.4 19,979 5.6 23,014 6.7 Amortization of nondeductible intangible assets acquired.............................. 1,909 1.8 1,852 1.9 6,517 1.8 6,704 1.9 Other-net ..................................... 303 0.3 (351) (0.3) 1,036 0.3 (344) (0.1) --------------------------------------------------------------------------------- Subtotal....................................... $44,716 42.7% $41,445 43.0% $152,676 42.7% $150,318 43.5% --------------------------------------------------------------------------------- Gain on dispositions of assets................. -- -- -- -- -- -- 5,513 -- --------------------------------------------------------------------------------- Income tax expense............................. $44,716 -- $41,445 -- $152,676 -- $155,831 -- =================================================================================
The IRS has principally completed its review of the Company's current federal tax audit cycle for the years 1993 through 1995. This tax audit resulted in a favorable tax settlement, which was not material to the Company's Consolidated Condensed Financial Statements. 3. Debt Obligations In July 1999 the availability of funds under a revolving credit agreement was increased 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 outstanding under these agreements was $219.5 6 million as of September 26, 1999. The amount available under these agreements was $180.5 million as of September 26, 1999. Approximately $537.6 million of stockholders' equity was unrestricted under these agreements at September 26, 1999. The Company currently maintains $599.3 million in long-term debt and capital leases, of which $100.0 million is due on April 28, 2000, and the remainder of which generally matures from October 2003 to March 2025. On November 5, 1999, the Company issued an additional $49.5 million in notes under its medium-term note program which mature on November 5, 2009. 4. Stock Repurchase Program During the first nine months of 1999, the Company repurchased 10.6 million shares of Class A Common Stock at a cost of $362.0 million. The average price of these repurchases was $34 per share. The effect of these repurchases on diluted earnings per share for the third quarter was an increase of $.03 and for the nine months ended September 26, 1999, was an increase of $.09. 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. As of November 5, 1999, the remaining amount of repurchase authorizations from the Company's Board of Directors was $451.4 million. 5. Voluntary Staff Reductions The Company recorded work force reduction expenses of $6.1 million in the third quarter of 1999 and $10.1 million for the first nine months of 1999. No charges were recorded in the first nine months of 1998. Work force reduction accruals included in accrued expenses on the Company's Consolidated Condensed Balance Sheets amounted to $17.2 million at September 26, 1999, and $22.0 million at December 27, 1998. Most of the accruals outstanding at September 26, 1999, will be paid within one year. 6. Comprehensive Income The Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," established standards for reporting comprehensive income and requires that all components of comprehensive income be presented in financial statements. Comprehensive income for the Company principally includes unrealized gains/(losses) on available-for-sale securities, as defined under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," foreign currency translation adjustments, and net income as reported in the Company's Consolidated Condensed Statements of Income. The unrealized appreciation on available-for-sale securities, which were purchased in 1999, was included in miscellaneous assets on the Company's Consolidated Condensed Balance Sheets and amounted to $16.4 million as of September 26, 1999. The fair value of the available-for-sale securities included in miscellaneous assets was $32.0 million as of September 26, 1999. Comprehensive income for 1999 and 1998 was as follows:
- --------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended --------------------------------------------------------- September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------------- Net Income $60,006 $54,975 $204,879 $194,627 Foreign currency translation adjustments (152) (1,009) 1,291 (2,153) Change in unrealized gains/(losses) on marketable securities (8,539) -- 16,429 -- Income tax benefit/(charge) 3,907 434 (7,945) 926 - --------------------------------------------------------------------------------------------------------------------- Comprehensive income $55,222 $54,400 $214,654 $193,400 - ---------------------------------------------------------------------------------------------------------------------
7 The accumulated other comprehensive income (loss) on the Company's Consolidated Condensed Balance Sheets was net of a deferred income tax liability of $5.8 million as of September 26, 1999, and net of a deferred income tax asset of $2.1 million as of December 27, 1998. 7. Segment Statements of Income
- ----------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ------------------------------------------------------------------------------ September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- REVENUES Newspapers............................. $667,680 $620,964 $2,051,926 $1,950,079 Broadcast.............................. 35,210 34,817 109,107 109,164 Magazines.............................. 26,768 26,947 87,068 95,237 ----------------------------------------------------------------------------------- Total................................ $729,658 $682,728 $2,248,101 $2,154,480 =================================================================================== OPERATING PROFIT (LOSS) Newspapers............................. $109,029 $ 95,013 $ 365,205 $ 332,085 Broadcast.............................. 9,957 9,679 31,648 30,573 Magazines.............................. 3,975 4,489 16,551 24,810 Unallocated corporate expenses......... (10,191) (7,760) (30,532) (24,563) ----------------------------------------------------------------------------------- Total................................ 112,770 101,421 382,872 362,905 ----------------------------------------------------------------------------------- Income from joint ventures............ 4,888 5,336 12,356 13,614 Interest expense, net.................. 12,936 10,337 37,673 30,964 Gain on dispositions of assets......... -- -- -- 12,619 ----------------------------------------------------------------------------------- Income before income taxes and extraordinary item............... 104,722 96,420 357,555 358,174 Income taxes........................... 44,716 41,445 152,676 155,831 ----------------------------------------------------------------------------------- Income before extraordinary item....... 60,006 54,975 204,879 202,343 Extraordinary item, net of tax: Debt extinguishment.................. -- -- -- 7,716 ----------------------------------------------------------------------------------- NET INCOME............................. $ 60,006 $ 54,975 $ 204,879 $ 194,627 ===================================================================================
See Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q for more information on the Company's reportable operating segments. 8. Dividend Rate Increase On April 15, 1999, the Board of Directors authorized a $.01 increase in the quarterly dividend payments from $.095 per share to $.105 per share on both Class A and B Common Stock effective with the June 1, 1999, record date. 9. Acquisitions On October 14, 1999, the Company announced an agreement to acquire the assets and assume certain liabilities of a daily newspaper, the Worcester Telegram & Gazette, in Worcester, Massachusetts, for approximately $295.0 million. This acquisition is expected to close prior to the end of the Company's fiscal year ending December 1999. The cost of this acquisition is expected to be funded through financing currently available to the Company. On July 22, 1999, the Company acquired Abuzz Technologies, Inc. ("Abuzz"), an Internet knowledge management concern. The principal business of Abuzz involves a software solution that facilitates the building of online communities of 8 interest by connecting people with questions to people with answers. This acquisition is not material to the Company's Consolidated Condensed Financial Statements. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Advertising revenues accounted for approximately 71% and circulation revenues accounted for 23% of the Company's revenues in the third quarter and first nine months of 1999. Advertising revenues influence the pattern of the Company's consolidated revenues because they are seasonal in nature. Traditionally, second-quarter and fourth-quarter advertising volume is higher than that which occurs in the first and third quarters when economic activity tends to be lower after the holiday season and in the summer period. Quarterly trends are also affected by the overall economy and economic conditions that may exist in specific markets served by each of the Company's business segments. Newsprint is the major component of the Company's cost of raw materials. The Company's cost of newsprint was lower in the third quarter and the first nine months of 1999 than in the comparable 1998 periods. The cost of newsprint during the remainder of 1999 is expected to be below that of 1998. The Company's consolidated financial results for the quarter and nine months ended September 26, 1999, compared with the quarter and nine months ended September 27, 1998, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ------------------------------------------------------------------------------------ September 26, September 27, September 26, September 27, (Dollars in thousands, except per share data) 1999 1998 % Change 1999 1998 % Change - ------------------------------------------------------------------------------------------------------------------------------ Revenues $729,658 $682,728 6.9% $2,248,101 $2,154,480 4.3% - ------------------------------------------------------------------------------------------------------------------------------ Operating profit $112,770 $101,421 11.2% $ 382,872 $ 362,905 5.5% - ------------------------------------------------------------------------------------------------------------------------------ Net Income before special items $ 63,526 $ 54,975 15.6% $ 210,691 $ 195,248 7.9% Special items (3,520) -- N/A (5,812) (621) N/A - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 60,006 $ 54,975 9.2% $ 204,879 $ 194,627 5.3% - ------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share: Net Income before special items $ 0.36 $ 0.29 24.1% $ 1.17 $ 1.01 15.8% Special items (0.02) -- N/A (0.03) (0.01) N/A - ------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share $ 0.34 $ 0.29 17.2% $ 1.14 $ 1.00 14.0% - ------------------------------------------------------------------------------------------------------------------------------
The 1999 third-quarter net income was $63.5 million or $.36 diluted earnings per share compared with net income of $55.0 million or $.29 diluted earnings per share in the third quarter of 1998, excluding special items. For the first nine months, net income was $210.7 million or $1.17 diluted earnings per share compared with net income of $195.2 million or $1.01 diluted earning per share for the first nine months of 1998, excluding special items. Including special items, the 1999 third-quarter net income was $60.0 million or $.34 diluted earnings per share compared with net income of $55.0 million or $.29 diluted earnings per share in the third quarter of 1998. For the first nine months net income, including special items, was $204.9 million or $1.14 diluted earnings per share compared with the net income of $194.6 million or $1.00 diluted earnings per share for the first nine months of 1998. Revenues for the third quarter of 1999 were $729.7 million, a 6.9% increase over 1998 third-quarter revenues of $682.7 million. Revenues for the first nine months of 1999 were $2,248.1 million, a 4.3% increase from $2,154.5 million for the same period in 1998. The increase was primarily from higher advertising rates and an improved advertising mix. 9 Operating profit in the third quarter of 1999 increased 17.2% to a record $118.9 million from $101.4 million in the 1998 third quarter, excluding special items. On the same basis, operating profit for the first nine months of the year rose 8.3% to $393.0 million from $362.9 million in the corresponding period of 1998. Operating profit in the third quarter of 1999 increased 11.2% to $112.8 million from $101.4 million in the third quarter of 1998, including special items. For the first nine months of 1999, operating profit rose 5.5% to $382.9 million from $362.9 million in the corresponding period of 1998. Special items included a $6.1 million pre-tax charge for work force reduction expenses primarily at The Boston Globe ($.02 diluted earnings per share) in the third quarter of 1999. No special items were recorded in the third quarter of 1998. For the first nine months of 1999, there were work force reduction expenses of $10.1 million before taxes ($.03 diluted earnings per share), primarily at The Boston Globe. For the first nine months of 1998, special items included a debt extinguishment charge, a gain on the sale of magazine properties, and a gain on the sale of equipment, which together totaled a $1.1 million charge before taxes ($.01 diluted earnings per share). Excluding special items, EBITDA (earnings before interest, taxes, depreciation and amortization) in the third quarter rose to $172.5 million from $155.6 million in the 1998 third quarter. On the same basis, EBITDA for the first nine months of 1999 was $551.2 million compared with $518.2 million in the same period of 1998. The 1999 third-quarter EBITDA rose to $166.4 million from $155.6 million in the comparable 1998 period, including special items. On the same basis, EBITDA for the first nine months of 1999 was $541.0 million compared with $518.2 million in the same period of 1998. EBITDA is presented since it is a widely accepted indicator of funds available to service debt, although it is not a measure of liquidity or of financial performance under generally accepted accounting principles ("GAAP"). The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. Consolidated operating expenses for 1999 and 1998 were as follows:
- ---------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended -------------------------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 % Change 1999 1998 % Change - ---------------------------------------------------------------------------------------------------------------------------- Production costs Raw materials $ 67,462 $ 83,493 -19.2% $ 237,245 $ 260,016 -8.8% Wages and benefits 142,285 137,145 3.7% 436,584 426,647 2.3% Other 103,240 97,203 6.2% 306,181 295,646 3.6% - ---------------------------------------------------------------------------------------------------------------------------- Total production costs 312,987 317,841 -1.5% 980,010 982,309 -0.2% Selling, general and administrative expenses 303,901 263,466 15.3% 885,219 809,266 9.4% - ---------------------------------------------------------------------------------------------------------------------------- Total expenses $616,888 $581,307 6.1% $1,865,229 $1,791,575 4.1% - ----------------------------------------------------------------------------------------------------------------------------
Production costs for the third quarter of 1999 were $313.0 million, a 1.5% decrease from 1998 third-quarter production costs of $317.8 million. For the first nine months of 1999, production costs were $980.0 million, a 0.2% decrease from $982.3 million in the comparable period of 1998. For the third quarter and first nine months of 1999 lower newsprint prices favorably affected costs. Selling, general and administrative expenses ("SGA expenses") in the third quarter of 1999 were $303.9 million, a 15.3% increase over the 1998 third-quarter SGA expenses of $263.5 million. For the first nine months of 1999, SGA expenses were $885.2 million, a 9.4% increase, compared with $809.3 million for the same period in 1998. The higher level 10 of SGA expenses is partly attributable to increased national distribution and promotion costs at The New York Times newspaper, as well as higher total salary costs and work force reduction expenses. Work force reduction expenses included in the third quarter and nine months of 1999 were $6.1 million and $10.1 million, primarily at The Boston Globe. Other Items Interest expense-net increased to $12.9 million in the 1999 third quarter and $37.7 million in the first nine months of 1999 compared with $10.3 million and $31.0 million in the comparable 1998 periods, principally due to additional borrowings to fund the Company's share repurchase program. The effective income tax rate for the third quarter and first nine months of 1999 was 42.7% compared with 43.0% in the 1998 third quarter and 43.5% in the first nine months of 1998. The decreases in the effective income tax rates were primarily due to lower state and local income taxes. Consolidated revenues, EBITDA, depreciation and amortization and operating profit by business segment were as follows:
- ----------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ---------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 % Change 1999 1998 % Change - ----------------------------------------------------------------------------------------------------------------- REVENUES Newspapers ................... $ 667,680 $ 620,964 7.5% $ 2,051,926 $ 1,950,079 5.2% Broadcast .................... 35,210 34,817 1.1% 109,107 109,164 -0.1% Magazines .................... 26,768 26,947 -0.7% 87,068 95,237 -8.6% --------------------------------------------------------------------------------- Total ...................... $ 729,658 $ 682,728 6.9% $ 2,248,101 $ 2,154,480 4.3% ================================================================================= EBITDA Newspapers ................... $ 150,868 $ 137,945 9.4% $ 489,260 $ 459,661 6.4% Broadcast .................... 14,329 14,071 1.8% 44,751 43,831 2.1% Magazine ..................... 4,339 4,022 7.9% 17,601 20,086 -12.4% Unallocated corporate expenses (8,125) (5,905) -37.6% (23,218) (19,286) -20.4% Joint ventures ............... 4,976 5,424 -8.3% 12,620 13,878 -9.1% --------------------------------------------------------------------------------- Total ...................... $ 166,387 $ 155,557 7.0% $ 541,014 $ 518,170 4.4% ================================================================================= DEPRECIATION AND AMORTIZATION Newspapers ................... $ 41,839 $ 42,932 -2.5% $ 124,055 $ 127,576 -2.8% Broadcast .................... 4,372 4,392 -0.5% 13,103 13,258 -1.2% Magazine ..................... 364 (467) N/A 1,050 (4,724) N/A Corporate .................... 2,066 1,824 13.3% 7,313 5,247 39.4% Joint ventures ............... 88 88 -- 264 264 -- --------------------------------------------------------------------------------- Total ...................... $ 48,729 $ 48,769 -0.1% $ 145,785 $ 141,621 2.9% ================================================================================= OPERATING PROFIT (LOSS) Newspapers ................... $ 109,029 $ 95,013 14.8% $ 365,205 $ 332,085 10.0% Broadcast .................... 9,957 9,679 2.9% 31,648 30,573 3.5% Magazines .................... 3,975 4,489 -11.5% 16,551 24,810 -33.3% Unallocated corporate expenses (10,191) (7,760) -31.3% (30,532) (24,563) -24.3% --------------------------------------------------------------------------------- Total ...................... $ 112,770 $ 101,421 11.2% $ 382,872 $ 362,905 5.5% =================================================================================
11 Newspaper Group: The Newspaper Group consists of The New York Times ("The Times"), The Boston Globe ("The Globe"), 21 regional newspapers, newspaper distributors, a news service, a features syndicate, TimesFax, licensing operations of the New York Times databases and microfilm and Internet-related ventures.
- -------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended -------------------------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, 1999 1998 % Change 1999 1998 % Change - -------------------------------------------------------------------------------------------------------------------------------- Revenues $667,680 $620,964 7.5% $2,051,926 $1,950,079 5.2% - -------------------------------------------------------------------------------------------------------------------------------- EBITDA $150,868 $137,945 9.4% $ 489,260 $ 459,661 6.4% - -------------------------------------------------------------------------------------------------------------------------------- Operating Profit $109,029 $95,013 14.8% $ 365,205 $ 332,085 10.0% - --------------------------------------------------------------------------------------------------------------------------------
Total Newspaper Group revenues in the third quarter were $667.7 million compared with $621.0 million in the third quarter of 1998. For the first nine months of 1999, revenues were $2,051.9 million compared with $1,950.1 million in the first nine months of 1998. The increase in 1999 revenues for the first nine months was primarily due to higher advertising rates and an improved advertising mix. Performance was strongest at The Times and The Globe where advertising revenues increased 10.9% and 9.8% for the third quarter. At the Regional Newspaper Group, advertising revenues were also strong, increasing 6.9% for the third quarter, due in part to the success of Celebrate 2000, a comprehensive program of millennium-related advertising, circulation and promotion initiatives. Third-quarter operating profit for the Newspaper Group increased 21.1% to $115.1 million from $95.0 million in the 1998 third quarter, excluding special items. For the first nine months of the year, operating profit increased 13.0% to $375.3 million from $332.1 million in the comparable 1998 period, excluding special items. Advertising, circulation and other revenue, by major product of the Newspaper Group, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended --------------------------------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 % Change 1999 1998 % Change - ------------------------------------------------------------------------------------------------------------------------------------ The New York Times Advertising $260,451 $234,859 10.9% $ 828,687 $ 765,355 8.3% Circulation 110,397 107,767 2.4% 337,991 328,161 3.0% Other 37,642 35,463 6.1% 105,777 103,613 2.1% - ------------------------------------------------------------------------------------------------------------------------------------ Total $408,490 $378,089 8.0% $1,272,455 $1,197,129 6.3% - ------------------------------------------------------------------------------------------------------------------------------------ The Boston Globe Advertising $114,432 $104,207 9.8% $ 339,668 $ 330,117 2.9% Circulation 34,414 34,294 0.3% 100,317 100,817 -0.5% Other 2,216 2,139 3.6% 6,538 6,215 5.2% - ------------------------------------------------------------------------------------------------------------------------------------ Total $151,062 $140,640 7.4% $ 446,523 $ 437,149 2.1% - ------------------------------------------------------------------------------------------------------------------------------------ Regional Newspapers Advertising $ 86,006 $ 80,448 6.9% $ 263,673 $ 247,490 6.5% Circulation 18,318 18,462 -0.8% 57,665 58,010 -0.6% Other 3,804 3,325 14.4% 11,610 10,301 12.7% - ------------------------------------------------------------------------------------------------------------------------------------ Total $108,128 $102,235 5.8% $ 332,948 $ 315,801 5.4% - ------------------------------------------------------------------------------------------------------------------------------------ Total Newspaper Group Advertising $460,889 $419,514 9.9% $1,432,028 $1,342,962 6.6% Circulation 163,129 160,523 1.6% 495,973 486,988 1.8% Other 43,662 40,927 6.7% 123,925 120,129 3.2% - ------------------------------------------------------------------------------------------------------------------------------------ Total $667,680 $620,964 7.5% $2,051,926 $1,950,079 5.2% ====================================================================================================================================
12 Advertising volume was as follows:
- ----------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine months Ended --------------------------------------------------------------------------------------------- (Inches in thousands, preprints in September 26, September 27, September 26, September 27, thousands of copies) 1999 1998 % Change 1999 1998 % Change - ----------------------------------------------------------------------------------------------------------------------------------- The New York Times Retail 112.6 123.6 -8.9% 375.1 383.6 -2.2% National 330.8 301.1 9.9% 1,061.9 993.8 6.9% Classified 235.4 243.3 -3.2% 748.7 761.7 -1.7% Zoned 214.3 222.8 -3.8% 720.3 715.6 0.7% - ----------------------------------------------------------------------------------------------------------------------------------- Total 893.1 890.8 0.3% 2,906.0 2,854.7 1.8% - ----------------------------------------------------------------------------------------------------------------------------------- Preprints 95,501 74,598 28.0% 288,557 226,586 27.3% - ----------------------------------------------------------------------------------------------------------------------------------- The Boston Globe Retail 145.8 151.1 -3.5% 441.1 461.0 -4.3% National 170.2 156.6 8.6% 524.3 511.7 2.5% Classified 347.2 340.6 1.9% 1,041.8 1,033.6 0.8% Zoned 54.9 58.7 -6.5% 185.7 199.4 -6.9% - ----------------------------------------------------------------------------------------------------------------------------------- Total 718.1 707.0 1.6% 2,192.9 2,205.7 -0.6% - ----------------------------------------------------------------------------------------------------------------------------------- Preprints 181,565 185,041 -1.9% 558,763 536,654 4.1% - ----------------------------------------------------------------------------------------------------------------------------------- Regional Newspapers Retail 1,732.6 1,793.3 -3.4% 5,438.6 5,657.6 -3.9% National 62.4 54.2 15.1% 203.3 186.7 8.9% Classified 2,001.4 1,893.2 5.7% 5,956.2 5,608.0 6.2% Legal 89.3 95.4 -6.4% 362.7 391.4 -7.3% - ----------------------------------------------------------------------------------------------------------------------------------- Total 3,885.7 3,836.1 1.3% 11,960.8 11,843.7 1.0% - ----------------------------------------------------------------------------------------------------------------------------------- Preprints 251,086 245,466 2.3% 790,942 765,852 3.3% - -----------------------------------------------------------------------------------------------------------------------------------
Average circulation for The Times, The Globe and the Regional Newspapers (excluding non-dailies) for the third quarter and nine months ended September 26, 1999, compared with the third quarter and nine months ended September 27, 1998, was as follows:
- --------------------------------------------------------------------------------------------------------------------- Three Months Ended September 26, 1999 -------------------------------------------------------------------- % Change % Change (Copies in thousands) Weekday Sunday - --------------------------------------------------------------------------------------------------------------------- Average Net Paid Circulation The New York Times 1,070.1 0.8% 1,637.7 1.0% The Boston Globe 463.6 -1.9% 737.5 -1.5% Regional Newspapers 698.6 -0.8% 747.4 -1.1% - ---------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------- Nine Months Ended September 26, 1999 -------------------------------------------------------------------- % Change % Change (Copies in thousands) Weekday Sunday - --------------------------------------------------------------------------------------------------------------------- Average Net Paid Circulation The New York Times 1,100.3 2.0% 1,672.7 2.2% The Boston Globe 462.6 -1.1% 729.2 -2.7% Regional Newspapers 732.8 -0.4% 779.8 -0.9% - ---------------------------------------------------------------------------------------------------------------------
Circulation growth for The Times was primarily due to additional availability 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 service to attract new readers and retain existing ones. 13 Internet-related revenues and the operating loss in the Newspaper Group were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended ------------------------------------------------------------------------------------------------------ September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 % Change 1999 1998 % Change - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Advertising $ 6,319 $ 3,604 75.3% $ 15,292 $ 9,835 55.5% Circulation and Other 1.053 614 71.5% 2,683 2,522 6.4% ------------------------------------------------------------------------------------------------------ Total $ 7,372 $ 4,218 74.8% $ 17,975 $12,357 45.5% ====================================================================================================== Operating Loss $(6,150) $(3,164) -94.4% $(13,450) $(7,286) -84.6% ======================================================================================================
Revenues from Internet-related ventures in the Newspaper Group grew 74.8% in the third quarter to $7.4 million versus $4.2 million in the 1998 third quarter. For the first nine months of 1999 revenue increased 45.5% to $18.0 million from $12.4 million in the comparable 1998 period. Internet-related revenues and the operating loss include The New York Times on the Web, New York Today, boston.com and the Regional Newspapers' Web sites. In July 1998 The New York Times on the Web stopped charging users outside the United States for subscription fees. Broadcast Group: The Broadcast Group is comprised of eight network-affiliated television stations and two radio stations.
- ----------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ----------------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 % Change 1999 1998 % Change - ----------------------------------------------------------------------------------------------------------------- Revenues $35,210 $34,817 1.1% $109,107 $109,164 -0.1% - ----------------------------------------------------------------------------------------------------------------- EBITDA $14,329 $14,071 1.8% $ 44,751 $ 43,831 2.1% - ----------------------------------------------------------------------------------------------------------------- Operating Profit $ 9,957 $ 9,679 2.9% $ 31,648 $ 30,573 3.5% - -----------------------------------------------------------------------------------------------------------------
Revenues increased 1.1% in the third quarter to $35.2 million from $34.8 million in the 1998 third quarter, while operating profit improved 2.9% to $10.0 million from $9.7 million last year. Year-to-date, revenues and operating profit totaled $109.1 million and $31.6 million compared with $109.2 million and $30.6 million in the same period of 1998, when the Company's eight television stations benefited from broadcasting political advertising, and four of the eight television stations benefited from the Winter Olympics. Year-to-date, revenues and operating profit were adversely affected by tornado coverage at the Company's Oklahoma City station. 14 Magazine Group: The Magazine Group is comprised of three golf publications and related activities in the golf field.
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended ------------------------------------------------------------------------------------------------------- September 26, September 27, September 26, September 27, (Dollars in thousands) 1999 1998 % Change 1999 1998 % Change - ------------------------------------------------------------------------------------------------------------------------------------ (13 Weeks) (39 Weeks) Revenues Magazines $26,768 $26,114 2.5% $87,068 $89,404 -2.6% Non-Compete Agreement -- 833 N/A -- 5,833 N/A - ------------------------------------------------------------------------------------------------------------------------------------ Total Revenues $26,768 $26,947 -0.7% $87,068 $95,237 -8.6% - ------------------------------------------------------------------------------------------------------------------------------------ EBITDA $ 4,339 $ 4,022 7.9% $17,601 $20,086 -12.4% - ------------------------------------------------------------------------------------------------------------------------------------ Operating Profit (Loss) Magazines $ 3,975 $ 3,656 8.7% $16,551 $18,977 -12.8% Non-Compete Agreement -- 833 N/A -- 5,833 N/A - ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Profit $ 3,975 $ 4,489 -11.5% $16,551 $24,810 -33.3% - ------------------------------------------------------------------------------------------------------------------------------------
Revenue increased 2.5% in the third quarter to $26.8 million compared with $26.1 million in the third quarter last year. Operating profit increased 8.7% to $4.0 million from $3.7 million in the third quarter last year. Revenue and operating profit rose as the Group's largest publication, Golf Digest, increased its advertising volume and base. For the first nine months of 1999, revenues and operating profit were $87.1 million and $16.6 million compared with $89.4 million and $19.0 million in the same period in 1998. Excluded from the results are revenue and operating profit from the amortization of a non-compete agreement that ended in July 1998. Consolidation in the golf equipment industry and a competitive rate environment adversely affected the Group's performance. Liquidity and Capital Resources Net cash provided by operating activities was $381.9 million for the first nine months of 1999 compared with $327.6 million for the first nine months of 1998. The increase of $54.3 million in 1999 was primarily due to improved earnings, as well as improvements in working capital. Net cash used in investing activities was $53.9 million in the first nine months of 1999 compared with $27.2 million in the 1998 comparable period. The increase of $26.7 million in 1999 was primarily due to additional minority interest investments in Internet-related companies. This increase was partially offset by reduced levels of capital expenditures. Net cash used in financing activities was $320.5 million in the first nine months of 1999 compared with $375.4 million in the 1998 comparable period. The decrease of $54.9 million in 1999 was primarily related to the debt extinguishment in 1998, partially offset by an increase in commercial paper borrowings to fund increased levels of stock repurchases. The Company believes that cash generated from its operations and the availability of funds from external sources should be adequate to cover all cash requirements, including working capital needs, stock repurchases, planned capital expenditures and acquisitions, and dividend payments to stockholders. The ratio of current assets to current liabilities was 62% at September 26, 1999, and 74% at September 27, 1998. This decrease is principally due to an increase in commercial paper outstanding at September 26, 1999, mostly resulting from the funding of stock repurchases, as well as an increase of $100.0 million in the current portion of long-term debt. The ratio of long-term debt and capital lease obligations as a percentage of total capitalization was 27% at September 26, 1999, compared with 24% at September 27, 1998. Financing: The Company's total debt, including commercial paper and capital leases, was $818.8 million at September 26, 1999, and $670.9 million at September 27, 1998. The increase in total debt was primarily from an increase in commercial paper. On April 28, 2000, $100.0 million of long-term debt will be due; the remainder of the Company's long-term 15 debt and capital leases generally matures between October 2003 and March 2025. On November 5, 1999, the Company issued an additional $49.5 million in notes under its medium-term note program, which mature on November 5, 2009. Effective July 1999 the Company increased the funds available under its revolving credit agreements from $300.0 million to $400.0 million. These agreements require, among other provisions, specified levels of stockholders' equity. A revolving credit agreement for $200.0 million expires in June 2000, and an additional revolving credit agreement for $200.0 million expires in July 2002. The Company had $219.5 million in commercial paper outstanding at September 26, 1999, and $67.8 million at September 27, 1998, which obligations are supported by these revolving credit agreements. The amount available under these agreements is $180.5 million as of September 26, 1999. Approximately $537.6 million of stockholders' equity was unrestricted under these agreements at September 26, 1999, and $759.6 million was unrestricted at September 27, 1998. This decrease was principally due to stock repurchases. On October 14, 1999, the Company announced an agreement to acquire the assets and assume certain liabilities of a daily newspaper, the Worcester Telegram & Gazette, in Worcester, Massachusetts, for approximately $295.0 million. This acquisition is expected to close prior to the end of the Company's fiscal year ending December 1999. The cost of this acquisition is expected to be funded through financing currently available to the Company. Capital Expenditures: The Company currently estimates that capital expenditures for 1999 will range from $80.0 million to $90.0 million. The Company currently anticipates that depreciation and amortization expense will approximate $195.0 million for 1999 compared with $188.2 million in 1998. Year 2000 Readiness Disclosure: The Company has evaluated the potential impact of the situation commonly known as the "Year 2000 problem." The Year 2000 problem, which is common to most corporations, concerns the ability of information systems, primarily computer software programs, to properly recognize and process date-sensitive information related to the Year 2000. In April 1997 the Company began to identify all of its Year 2000 concerns for all facets of its operations. A Year 2000 Program Office was established, and a detailed inventory of all systems issues required to be addressed in connection with the Year 2000 was created. Information was gathered for each system including: o type of system and its relative importance o probable method and cost of remediation and o targeted start and end dates for addressing Year 2000 issues. This inventory includes systems to: o create the Company's publications o operate the Company's production and distribution facilities o operate the Company's broadcast stations o operate the Company's business and financial applications and o control facility and infrastructure areas (building systems, utilities, security systems, etc.). 16 The systems identified in the inventory were further categorized into five priority classifications: o Shutdown - highest priority. If these systems (e.g., editorial systems, presses, and utilities) were to fail, the Company's ability to continue its operations would be seriously impaired. Approximately 8% of the identified systems are in this category. o Impractical Workaround - If these systems were to fail, the available alternatives are too expensive to implement. Approximately 9%. o Costly Workaround - If these systems were to fail, a feasible but costly alternative exists. Approximately 28%. o Additional But Manageable Cost - If these systems fail, an alternative solution exists at a moderate cost. Approximately 22%. o No Impact - Little if any consequence to the business if these systems fail. Approximately 33%. By October 1997 the Company had completed the inventory phase and turned its attention to the remediation phase. Target dates for each item in the inventory were identified and are continually monitored to ensure timely resolution of the issues. The remediation strategy involves a mix of purchasing new systems, modifying existing systems, retiring obsolete systems and confirming vendor compliance. As of September 26, 1999, 99% of all systems had been remediated and tested. Testing systems for Year 2000 compliance includes the use of dates that simulate transactions and environments, both prior and subsequent to the Year 2000, including specific testing for leap year. The Company has communicated with most of its suppliers and other vendors, and is contacting its significant advertisers, seeking assurances that they will be Year 2000 compliant. Although there is no certainty that any major business partner will function without disruption in the Year 2000, the Company's goal is to obtain detailed information about its advertisers' and suppliers' Year 2000 plans and to identify those companies that could pose a significant risk of failure. The Company will make alternate arrangements where necessary. Generally, the Company is not dependent on a single source for any products or services, except for products or services supplied by public utilities. In the event a significant supplier or other vendor is unable to provide products or services to the Company due to a Year 2000 failure, the Company believes it has adequate alternate sources for such products or services. There is no guarantee, however, that such alternate products or services would be available at the same terms and conditions or that the Company would not experience some adverse effects as a result of switching to alternate sources. To date, the Company has identified total estimated costs in connection with the Year 2000 problem of between $15.0 million and $20.0 million. This estimate does not include systems previously scheduled for replacement without regard to the Year 2000 issue. Of this amount, approximately $10.0 million will be for systems replacements involving capital outlays (which are not deducted as an expense on the Company's Consolidated Statements of Income). The remaining amount is being deducted as an expense on the Company's Consolidated Statements of Income through 1999. Approximately 75% of this expense total is attributable to the use of currently available internal resources. The cost of the Company's Year 2000 remediation efforts is being funded with cash flows from operations. 17 With respect to its internal operations, those over which the Company has direct control, the Company believes that all of its critical systems (i.e., those categorized in the shutdown or impractical workaround categories described above) will be remediated and tested by the end of the fourth quarter of 1999. Like most large business enterprises, the Company is reliant upon certain critical vendors. Certain of these vendors have yet to provide a Year 2000 compliant product, while services that are provided by certain other vendors cannot be tested (i.e., power and telecommunications). The Company believes the possibility of critical vendor failures to be remote based on the information supplied to date by such critical vendors. The Company's Year 2000 strategies include contingency planning, encompassing business continuity both within the Company and in the external business environment. The planning effort encompasses all critical Company areas. The Company's contingency planning for the Year 2000 will address a variety of scenarios that could occur. Because of the Company's extensive efforts to formulate and carry out an effective Year 2000 remediation program, the Company believes that such remediation will be completed on a timely basis and should effectively minimize any disruption to the Company's operations due to Year 2000 issues. The Company does not expect Year 2000 issues to have a material effect on its results of operations, liquidity or financial condition. Factors That Could Affect Operating Results Except for the historical information contained herein, the matters discussed in this quarterly report are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. These risks and uncertainties include national and local conditions, as well as competition, that could influence the levels (rate or volume) of retail, national and classified advertising and circulation generated by the Company's various markets and material increases in newsprint and magazine paper prices. They also include other risks detailed from time to time in the Company's publicly-filed documents, including the Company's Annual Report on Form 10-K for the period ended December 27, 1998. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company's quantitative and qualitative market risk is principally associated with market interest rate fluctuations related to its debt obligations. The Company does not consider such market risk significant. 18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.18.1 Amendment No.3, dated as of June 17, 1999, to the Company's Deferred Executive Compensation Plan 10.19.1 Amendment No. 2, dated as of June 17,1999, to The New York Times Designated Employees Deferred Earnings Plan 12 Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K have been filed during the period for which this report is filed. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE NEW YORK TIMES COMPANY -------------------------- (Registrant) Date: November 10, 1999 /s/ John M. O'Brien ----------------- ----------------------------- John M. O'Brien Senior Vice President and Chief Financial Officer (Principal Financial Officer) 20 Exhibit Index to Quarterly Report Form 10-Q Quarter Ended September 26, 1999 Exhibit No. Exhibit - ----------- ------- 10.18.1 Amendment No.3, dated as of June 17, 1999, to the Company's Deferred Executive Compensation Plan 10.19.1 Amendment No. 2, dated as of June 17,1999, to The New York Times Designated Employees Deferred Earnings Plan 12 Ratio of Earnings to Fixed Charges 27 Financial Data Schedule 21 EX-10.18.1 2 DEFERRED EXECUTIVE COMPENSATION PLAN Exhibit 10.18.1 THE NEW YORK TIMES COMPANY DEFERRED EXECUTIVE COMPENSATION PLAN Amendment No. 3 THIS INSTRUMENT made as of June 17, 1999, by The New York Times Company (the "Company"). W I T N E S S E T H: WHEREAS, the Company maintains The New York Times Company Deferred Executive Compensation Plan, as amended from time to time (the "Plan"); WHEREAS, pursuant to Article IX of the Plan, the Company has reserved the right, by action of the ERISA Board Committee, to amend the Plan; NOW, THEREFORE, the Plan is amended as follows: FIRST: Effective immediately, Section 9.1 of the Plan is hereby amended by adding the following paragraph at the end thereof: The above notwithstanding, effective June 17, 1999, the Employer shall have right to amend the Plan from time to time by an action of the ERISA Management Committee. All amendments shall be subject to the provisions of Section 9.3 of the Plan. SECOND: Effective immediately, Section 9.2 of the Plan is hereby amended by adding the following paragraph at the end thereof: The above notwithstanding, effective June 17, 1999, the Employer shall have the right to terminate the Plan at any time by an action of the ERISA Management Committee. Such termination shall be subject to the provisions of Section 9.3 of the Plan. IN WITNESS WHEREOF, The New York Times Company has caused this Amendment to be executed by its duly authorized officer and its corporate seal to be affixed hereto as of the date first set forth above. 1 THE NEW YORK TIMES COMPANY By: /s/ Laura J. Corwin ------------------------------------ Laura J. Corwin, Secretary 2 EX-10.19.1 3 DESIGNATED EMPLOYEES DEFERRED EARNINGS PLAN Exhibit 10.19.1 THE NEW YORK TIMES DESIGNATED EMPLOYEES DEFERRED EARNINGS PLAN Amendment No. 2 THIS INSTRUMENT made as of June 17, 1999, by The New York Times Company (the "Company"). W I T N E S S E T H: WHEREAS, the Company maintains The New York Times Designated Employees Deferred Earnings Plan, as amended from time to time (the "Plan"); WHEREAS, pursuant to Article IX of the Plan, the Company has reserved the right, by action of the ERISA Board Committee, to amend the Plan; NOW, THEREFORE, the Plan is amended as follows: FIRST: Effective immediately, Section 9.1 of the Plan is hereby amended by adding the following paragraph at the end thereof: The above notwithstanding, effective June 17, 1999, the Employer shall have right to amend the Plan from time to time by an action of the ERISA Management Committee. All amendments shall be subject to the provisions of Section 9.3 of the Plan. SECOND: Effective immediately, Section 9.2 of the Plan is hereby amended by adding the following paragraph at the end thereof: The above notwithstanding, effective June 17, 1999, the Employer shall have the right to terminate the Plan at any time by an action of the ERISA Management Committee. Such termination shall be subject to the provisions of Section 9.3 of the Plan. IN WITNESS WHEREOF, The New York Times Company has caused this Amendment to be executed by its duly authorized officer and its corporate seal to be affixed hereto as of the date first set forth above. 1 THE NEW YORK TIMES COMPANY By: /s/ Laura J. Corwin ------------------------------------ Laura J. Corwin, Secretary 2 EX-12 4 RATIO OF EARNINGS TO FIXED CHARGES THE NEW YORK TIMES COMPANY Ratio of Earnings to Fixed Charges (Dollars in thousands, except ratio) (Unaudited) Exhibit 12
Three Months Ended Nine Months Ended September 26, September 26, September 26, September 26, 1999 1998 1999 1998 ------------------------------------------------------------ Earnings from continuing operations before fixed charges Income before income taxes, income from joint ventures and an extraordinary item (A) $ 99,834 $ 91,084 $ 345,199 $ 344,560 Less net gain on dispositions of assets -- -- -- (12,619) Distributed earnings from less than fifty percent owned affiliates 3,941 4,480 7,416 11,336 --------------------------------------------------------- Adjusted pre-tax earnings from continuing operations 103,775 95,564 352,615 343,277 Fixed charges less capitalized interest 16,253 13,585 47,186 41,239 --------------------------------------------------------- Earnings from continuing operations before fixed charges $ 120,028 $ 109,149 $ 399,801 $ 384,516 ========================================================= Fixed charges Interest expense, net of capitalized interest $ 13,485 $ 11,164 $ 39,208 $ 34,117 Capitalized interest -- -- -- 173 Portion of rentals representative of interest factor 2,768 2,421 7,978 7,122 --------------------------------------------------------- Total fixed charges $ 16,253 $ 13,585 $ 47,186 $ 41,412 ========================================================= Ratio of earnings to fixed charges 7.38 8.03 8.47 9.29 =========================================================
A. 1998 excludes a $13.7 million pre-tax extraordinary item in April resulting from the early extinguishment of certain long term debt. EX-27 5 FINANCIAL DATA SCHDULE
5 This schedule contains summary financial information extracted from the Consolidated Condensed Financial Statements as of and for the quarter ended September 26, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-26-1999 DEC-28-1998 SEP-26-1999 43,578 0 367,198 42,963 33,914 529,232 2,260,406 992,720 3,465,336 851,215 0 0 0 18,936 1,359,432 3,465,336 0 2,248,101 0 980,010 0 0 37,673 357,555 152,676 204,879 0 0 0 204,879 1.16 1.14
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