10-K 1 a2100471z10-k.htm 10-K

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 29, 2002

 

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:

 


Title of Each Class

 

 

 

 

Name of Each Exchange on
Which Registered

 

 

Class A Common Stock of $.10 par value

 

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

Not Applicable

(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. Ö 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. ( Ö )

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes. 
Ö  No.

The aggregate market value of Class A Common Stock held by non-affiliates as of June 28, 2002, was approximately $6.38 billion. As of such date, non-affiliates held 89,514 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 18, 2003, was as follows: 151,325,802 shares of Class A Common Stock and 843,806 shares of Class B Common Stock.

 

Document incorporated by reference

 

 

Part

 

Proxy Statement for the 2003 Annual Meeting of Stockholders

 

III

 

 

 



INDEX TO THE NEW YORK TIMES COMPANY

2002 FORM 10-K


PART I

Item No.

 

 

 

Page

 

1.

 

Business

 

 

1

 

 

 

 

Introduction

 

 

1

 

 

 

 

Newspapers

 

 

2

 

 

 

 

The New York Times

 

 

2

 

 

 

 

Circulation

 

 

2

 

 

 

 

Advertising

 

 

2

 

 

 

 

Production and Distribution

 

 

3

 

 

 

 

Related Businesses

 

 

4

 

 

 

 

New England Newspaper Group

 

 

4

 

 

 

 

Circulation: Globe

 

 

4

 

 

 

 

Circulation: Worcester Telegram & Gazette

 

 

5

 

 

 

 

Advertising

 

 

6

 

 

 

 

Production and Distribution

 

 

6

 

 

 

 

Regional Newspapers

 

 

6

 

 

 

 

Broadcasting

 

 

7

 

 

 

 

New York Times Digital

 

 

8

 

 

 

 

Forest Products Investments and Other Joint Ventures

 

 

8

 

 

 

 

Forest Products Investments

 

 

8

 

 

 

 

Other Joint Ventures

 

 

9

 

 

 

 

Raw Materials

 

 

9

 

 

 

 

Competition

 

 

10

 

 

 

 

Employees

 

 

11

 

 

 

 

Labor Relations

 

 

11

 

 

2.

 

Properties

 

 

12

 

 

3.

 

Legal Proceedings

 

 

12

 

 

4.

 

Submission of Matters to a Vote of Security Holders

 

 

12

 

 

 

 

Executive Officers of the Registrant

 

 

13

 

 

 

 

PART II

 

 

 

 

 

5.

 

Market for the Registrant’s Common Equity and Related Stockholder Matters

 

 

14

 

 

 

 

Equity Compensation Plan Information

 

 

14

 

 

6.

 

Selected Financial Data

 

 

15

 

 

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

15

 

 

7A.

 

Quantitative and Qualitative Disclosure About Market Risk

 

 

15

 

 

8.

 

Financial Statements and Supplementary Data

 

 

15

 

 

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

 

15

 

 

 

 

PART III

 

 

 

 

 

10.

 

Directors and Executive Officers of the Registrant

 

 

15

 

 

11.

 

Executive Compensation

 

 

15

 

 

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

 

15

 

 

13.

 

Certain Relationships and Related Transactions

 

 

15

 

 

14.

 

Controls and Procedures

 

 

16

 

 

 

 

PART IV

 

 

 

 

 

15.

 

Exhibits, Financial Statement Schedules and Reports on Form 8-K

 

 

16

 

 

 



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, electronic information and publishing, Internet businesses, and forest products and other investments. Financial information about industry segments is incorporated by reference to Note 16 to the Consolidated Financial Statements on pages F-43 to F-46 of this report.

The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the Proxy Statement for its Annual Meeting of Stockholders are made available, free of charge, on its Web site http:/www.nytco.com, as soon as reasonably practicable after such reports have been filed with or furnished to the Securities and Exchange Commission (the “SEC”).

The Company currently classifies its businesses into the following segments:

¨     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, Mass. (the “T&G”); 15 other newspapers in Alabama, California, Florida, Louisiana, North Carolina and South Carolina (the “Regional Newspapers”); a newspaper distributor in the New York City metropolitan area; news, photo and graphics services and news and features syndication; and licensing of the trademarks and copyrights of The Times and the Globe.

¨     Broadcasting: television stations WREG-TV in Memphis, Tenn.; WTKR-TV in Norfolk, Va.; KFOR-TV in Oklahoma City, Okla.; WNEP-TV in Scranton, Pa.; WHO-TV in Des Moines, Iowa; WHNT-TV in Huntsville, Ala.; WQAD-TV in Moline, Ill.; and KFSM-TV in Fort Smith, Ark.; and radio stations WQXR(FM) and WQEW(AM) in New York City.

¨     New York Times Digital: the Company’s digital and business information division, including NYTimes.com (www.nytimes.com), Boston.com (www.boston.com), and the licensing of electronic databases through its Digital Archive Distribution business.

Additionally, the Company owns minority equity interests in a Canadian newsprint company and a supercalendered paper manufacturing partnership in Maine.

As of December 29, 2002 (the end of the Company’s fiscal year), the Company and The Washington Post Company (the “Post Company”) each owned a one-half interest in the International Herald Tribune, an international English language newspaper (the “IHT”). On January 1, 2003, the Company purchased from the Post Company its 50% share in the IHT for approximately $65 million.

In April 2002, the Company and Discovery Communications, Inc. entered into a joint venture to own and operate Discovery Civilization Channel (to be renamed Discovery Times Channel in the first quarter of 2003, “DTC”), a digital cable television channel. The Company invested approximately $100 million for a 50% interest in DTC.

In February 2002, New England Sports Ventures, LLC (“NESV”), in which the Company is an investor, purchased the Boston Red Sox baseball club (including Fenway Park and approximately 80% of New England Sports Network, a regional cable sports network). The Company invested $75.0 million for an interest of approximately 17% in NESV.




2

Revenue from individual customers, and revenues, operating profit and identifiable assets of foreign operations are not significant.

NEWSPAPERS

The Newspaper Group segment consists of The Times, the New England Newspaper Group, 15 Regional Newspapers, a newspaper distributor, and certain related businesses.

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 55% of the weekday (Monday through Friday) circulation is sold in the 31 counties that make up the greater New York City area, which includes New York City, Westchester, Long Island, and parts of upstate New York, Connecticut, New Jersey and Pennsylvania; 45% is sold elsewhere. On Sundays, approximately 51% of the circulation is sold in the greater New York City area and 49% 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, 2002, The Times has the largest daily and Sunday circulation of all seven-day newspapers in the United States.

The Times’s average net paid weekday and Sunday circulations for each of the years ended December 29, 2002, and December 30, 2001, are shown in the table below:

 

 

Weekday (Mon. - Fri.)

 

Sunday

 

 

 

(Thousands of copies)

 

2002

 

 

1,131.4

 

 

1,682.1

 

2001

 

 

1,143.7

 

 

1,659.9

 

 

Approximately 60% of the weekday circulation and 61% of the larger Sunday circulation were sold through home delivery in 2002. During the year ended December 29, 2002, the average weekday circulation of The Times decreased approximately 12,300 copies to approximately 1,131,400 copies and the average Sunday circulation decreased by approximately 13,800 copies to approximately 1,682,100 copies. The decrease in weekday and Sunday copies sold by The Times in 2002 compared with 2001 was primarily due to the comparison with the extraordinary sales in 2001 as a result of 9/11 and related coverage.

An increase in home-delivery rates was effective February 4, 2002, and an increase in the daily newsstand price in the greater New York metropolitan area was effective December 30, 2002.

Advertising

Total advertising volume in The Times for each of the fiscal years ended December 29, 2002, and December 30, 2001, as measured by The Times, is shown in the table below. The “National” heading in the table below includes such categories as entertainment, financial and general advertising.

 




3

 

 

 

Full Run

 

 

 

 

 

 

 

 

 

Retail
Inches

 

National
Inches

 

Classified
Inches

 

Zoned
Inches

 

Total1
Inches

 

Preprint
Copies
Distributed

 

 

 

(Inches and Preprints in Thousands)

 

2002

 

434.4

 

1,346.3

 

 

692.1

 

 

869.4

 

3,342.2

 

 

545,723

 

 

2001

 

475.0

 

1,370.2

 

 

781.2

 

 

939.5

 

3,565.9

 

 

489,660

 

 

 

The table includes volume for The New York Times Magazine, which published 3,315 pages of advertising in 2002, compared with 3,328 pages in 2001, representing approximately 205,500 and 206,300 inches, respectively.

Advertising rates for The Times increased an average of 6% in January 2002, and 7% in January 2003.

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

The Times is printed at its production and distribution facilities in Edison, N.J., and Flushing, N.Y., 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 City metropolitan area.

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:

Region2

 

Print Sites

Midwest

 

Chicago, Ill.; Canton, Ohio; Ann Arbor, Mich.; Columbia, Mo; Dayton, Ohio; Minneapolis, Minn.

Northeast

 

Billerica, Mass.3; Springfield, Va.

Southeast

 

Atlanta, Ga.; Ft. Lauderdale, Fla.; Lakeland, Fla.4; Gastonia, N.C.

Southwest

 

Austin, Tex.; Phoenix, Ariz.

West

 

Torrance and Concord, Calif.; Kent, Wash.; Denver, Colo.

 


1    All totals exclude preprint inches.

2    Most advance sections of the Sunday newspaper distributed in these areas are printed in Edison, N.J., Flushing, N.Y., Concord, Calif. or Dayton, Ohio.

3    At the Globe.

4    At the Regional Newspaper, The Ledger.



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 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 (N.Y.), New Jersey and the counties of Westchester (N.Y.) and Fairfield (Conn.). Approximately 92% of The Times’s single-copy daily circulation and 89% of its single-copy Sunday circulation in the New York City metropolitan area are delivered by City & Suburban or The Times. Approximately 96% of The Times’s daily home-delivered circulation and 95% of its Sunday home-delivered circulation in the New York City metropolitan area are delivered to depots by City & Suburban or The Times.

Related Businesses

Name

 

Description of Business

New York Times Index

 

Produces and licenses The New York Times Index, a print publication

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

New York Times Television

 

Using New York Times-branded and other content, creates television programming for a variety of commercial and public broadcast and cable television networks

 

New England Newspaper Group

The Globe and the T&G constitute the Company’s New England Newspaper Group.

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.).

Circulation: Globe

The Globe is a daily (Monday through Saturday) and Sunday newspaper, which commenced publication in 1872. The Globe is distributed throughout New England, although its circulation is concentrated in the Boston metropolitan area. According to ABC reports, for the 26 weeks ended September 29, 2002, the weekday (Monday through Friday) circulation of the Globe was the 17th largest of any weekday newspaper; circulation of the Sunday edition was the 11th 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.




5

The Globe’s average net paid weekday and Sunday circulations for each of the years ended December 29, 2002, and December 30, 2001, are shown below:

 

 

Weekday (Mon-Fri)

 

Sunday

 

 

 

(Thousands of copies)

 

2002

 

 

466.3

 

 

 

699.4

 

 

2001

 

 

472.5

 

 

 

704.0

 

 

 

During the fiscal year ended December 29, 2002, the average weekday circulation of the Globe decreased approximately 6,200 copies to approximately 466,300 copies and the average Sunday circulation decreased by approximately 4,600 copies to approximately 699,400 copies. The decrease in weekday copies sold by the Globe in 2002 compared with 2001 was primarily due to the effect of a price increase at the Globe in 2002. The decrease in Sunday copies sold by the Globe in 2002 compared with 2001 was primarily due to the elimination, in June 2001, of the Sunday Globe edition delivered on Saturdays.

Approximately 78.6% of the Globe’s weekday circulation and 69.4% of its larger Sunday circulation are sold through home delivery; the remainder are sold primarily on newsstands.

Circulation: Worcester Telegram & Gazette

The T&G is a daily (Monday through Saturday) newspaper, which began publishing in 1866. Its Sunday companion, the Sunday Telegram, began in 1884. These newspapers and several Company-owned non-daily newspapers, some published under the name of Coulter Press, circulate throughout Worcester County and northeastern Connecticut.

The T&G’s average net paid weekday and Sunday circulations, for each of the years ended December 29, 2002 and December 30, 2001, are shown below:

 

 

Daily (Mon-Sat)

 

Sunday

 

 

 

(Thousands of copies)

 

2002

 

 

103.0

 

 

 

122.3

 

 

2001

 

 

104.5

 

 

 

124.8

 

 

 

From December 30, 2001 to December 29, 2002, the average daily circulation of the T&G decreased approximately 1,500 copies to approximately 103,000 copies, and the average Sunday circulation decreased approximately 2,500 copies to approximately 122,300 copies. The decrease in weekday and Sunday copies sold by the T&G in 2002 compared with 2001 was primarily due to the competitive environment, including aggressive home delivery discounting throughout its circulation area by a major competitor, and the extraordinarily high single copy and home delivery sales the previous year in the wake of 9/11. Approximately 75% of its daily and Sunday circulations are distributed by home delivery; the remainder is sold in stores or newsstands.




6

Advertising

The New England Newspaper Group’s advertising volumes by category of advertising for each of the fiscal years ended December 29, 2002, and December 30, 2001 for all editions are set forth below:

 

 

Full Run

 

Zoned
Inches

 

Total1
Inches

 

Preprint
Copies
Distributed

 

Retail
Inches

 

National
Inches

 

Classified
Inches

 

 

(Inches and Preprints in Thousands)

 

2002

 

859.7

 

 

784.6

 

 

 

1,593.1

 

 

1,117.8

 

4,355.2

 

1,033,347

 

2001

 

865.0

 

 

762.5

 

 

 

1,641.7

 

 

880.6

 

4,149.8

 

957,564

 

 

Both the Globe and the T&G increased advertising rates in each category of advertising in 2002. The T&G increased all rates, effective as of January 1, 2002. Additionally, the Globe’s latest increase in certain retail and preprint advertising rates occurred on September 1, 2002. These rate increases ranged from 2% to 5%. National full run and national preprint rates at both the Globe and the T&G increased January 1, 2003 between 4% to 6%.

Based on information supplied by major daily newspapers published in New England and assembled by the New England Newspaper Association, Inc. for the fiscal year ending December 29, 2002, the Globe ranked first and the T&G ranked sixth 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, Mass., satellite plant. All editions of the T&G are printed and prepared for delivery at its plant in Millbury, Mass.

Virtually all of the Globe’s home-delivered circulation was delivered in 2002 by a third-party service provider. The T&G delivers approximately 10,700 daily and approximately 15,800 Sunday Globes in its home-delivery area. Direct single-copy distribution by the Globe, its subsidiary Retail Sales, Inc. and the T&G accounted for 21.4% and 30.6% of the average weekday and Sunday single-copy distribution of the Globe in 2002.

Regional Newspapers

The Regional Newspapers include 14 daily newspapers, of which 12 publish on Sunday, and one weekly newspaper.

The average weekday and Sunday circulations for the fiscal year ended December 29, 2002 for each of these newspapers are shown below:

 

 

Daily

 

Sunday

 

 

 

Daily

 

Sunday

 

Daily Newspapers

 

Circulation

 

Circulation

 

Daily Newspapers

 

Circulation

 

Circulation

 

The Gadsden Times (Ala.)

 

 

23,000

 

 

 

24,600

 

 

The Ledger (Lakeland, Fla.)

 

 

69,900

 

 

 

87,300

 

 

The Tuscaloosa News (Ala.)

 

 

34,600

 

 

 

36,900

 

 

The Courier (Houma, La.)

 

 

17,800

 

 

 

19,900

 

 

TimesDaily (Florence, Ala.)

 

 

31,000

 

 

 

33,800

 

 

Daily Comet (Thibodaux, La.)

 

 

11,500

 

 

 

N/A

 

 

The Press Democrat (Santa Rosa, Calif.)

 

 

88,000

 

 

 

95,800

 

 

The Dispatch (Lexington, N.C.)

 

 

12,200

 

 

 

N/A

 

 

Sarasota Herald-Tribune (Fla.)

 

 

106,100

 

 

 

132,700

 

 

Times-News (Hendersonville, N.C.)

 

 

19,300

 

 

 

19,500

 

 

Star-Banner (Ocala, Fla.)

 

 

47,800

 

 

 

51,400

 

 

Wilmington Morning Star (N.C.)

 

 

53,900

 

 

 

60,700

 

 

The Gainesville Sun (Fla.)

 

 

47,400

 

 

 

53,800

 

 

Herald-Journal (Spartanburg, S.C.)

 

 

51,900

 

 

 

59,900

 

 

 

The Petaluma Argus-Courier, in Petaluma, Calif., the Company’s only weekly newspaper, had average weekly circulation for the twelve-month period ended December 29, 2002, of 7,687.


1    All totals exclude preprint inches.

 



7

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, N.Y.)

 

June 1, 2006

WQEW(AM) (New York, N.Y.)

 

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. Network compensation has declined at all stations over the past several years. This industry trend is expected to result in the eventual elimination of network compensation at all of the Company’s television stations.

Station

 

Market’s
Nielsen Ranking1

 

Network
Affiliation

 

Band

WTKR-TV

 

41

 

CBS

 

VHF

WREG-TV

 

43

 

CBS

 

VHF

KFOR-TV

 

45

 

NBC

 

VHF

WNEP-TV

 

53

 

ABC

 

UHF2

WHO-TV

 

72

 

NBC

 

VHF

WHNT-TV

 

83

 

CBS

 

UHF2

WQAD-TV

 

92

 

ABC

 

VHF

KFSM-TV

 

108

 

CBS

 

VHF

 

In each market, the Company also operates a digital television station associated with its analog station. All of the digital stations operate in the UHF band and, at present, all simultaneously broadcast the same programs (except for the digital format) as the corresponding analog stations.

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. 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.


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.




8

NEW YORK TIMES DIGITAL

New York Times Digital (“NYTD”) operates the Company’s largest digital businesses, which include the following:

NYTimes.com

 

Exclusive Internet access to the complete news content of The Times, plus enhanced features and regularly updated breaking news

Boston.com

 

Information concerning Boston and New England and featuring exclusive Internet access to the complete news content of the Globe

Digital Archive Distribution

 

Licenses archive databases of The Times and the Globe to electronic information providers

 

NYTD derives most of its revenue from the sale of advertising on its two primary Web sites, NYTimes.com and Boston.com. Advertising is sold to both national and local customers. The form of advertising is diverse, including Web site banners, rich media, larger-sized and sequential placements (such as Surround Sessions) and a substantial amount of paid listings for jobs, real estate and automobiles. Non-advertising revenue is primarily from the Digital Archive Distribution business, which licenses archived information in databases to resellers of that information.

NYTimes.com and Boston.com continue to reach wide audiences across the New York and Boston metropolitan regions, the nation and around the world. In the United States alone, according to Nielsen NetRatings, an Internet traffic measurement service, unique users visiting NYTD’s Web sites reached over 9 million in the month of December 2002 compared to 7 million in December 2001.  In addition, over 3.5 million people receive requested newsletters from NYTimes.com each day. The reach of the Web sites is instrumental in creating a substantial stream of newspaper subscription orders each year. In 2002, over 85,000 subscription orders for The Times or the Globe originated from these two Web sites.

FOREST PRODUCTS INVESTMENTS AND OTHER JOINT VENTURES

The Company has ownership interests in one newsprint mill and one supercalendered (high finish paper used in some magazines and preprinted inserts, which is a higher-value grade than newsprint) paper mill (the “Forest Products Investments”) as well as in DTC, NESV and the IHT.

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 Abitibi-Consolidated (“Abitibi”), a global manufacturer of paper. Malbaie purchases pulp from Abitibi and manufactures newsprint from this raw material on the paper machine it owns within the Abitibi paper mill at Clermont, Quebec. Malbaie is wholly dependent upon Abitibi for its pulp. In 2002, Malbaie produced 220,000 metric tons of newsprint, 86,000 tons of which were sold to the Company, with the balance sold to Abitibi for resale.

The Company has a 40% equity interest in a partnership operating a supercalendered paper mill in Maine, Madison Paper Industries (“Madison”). Madison produces supercalendered paper at its facility in Madison, Me. Madison purchases all of its wood from local suppliers, mostly under long-term contracts. In 2002 Madison produced 184,000 metric tons, 14,000 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




9

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 Ventures

As of December 29, 2002, the Company and the Post Company each owned a one-half interest in the IHT. On January 1, 2003, the Company purchased from the Post Company its 50% share in the IHT for approximately $65 million. Beginning in 2003, the IHT will be included as part of the Newspaper Group segment. The newspaper is edited in Paris and printed in Athens, Bangkok, Beirut, Bologna, Doha (Quatar), Frankfurt, Hong Kong, Jakarta, Kuala Lumpur, Linköping (Sweden), London, Madrid, Manila, New York, Osaka, Paris, Seoul, Singapore, Taipei, Tel Aviv, The Hague, Tokyo and Zurich.

The Company’s approximately 17% investment in NESV, which owns the Boston Red Sox, Fenway Park and approximately 80% of New England Sports Network, a regional cable sports network, is categorized under “Other Joint Ventures.”

The Company’s 50% interest in DTC, the digital cable channel co-owned with Discovery Communications, Inc., is also categorized under “Other Joint Ventures.”

All of the above investments were accounted for under the equity method in 2002.

RAW MATERIALS

The primary raw materials used by the Company are newsprint and supercalendered paper. The Company purchases newsprint from a number of North American producers. A significant portion of such newsprint is purchased from Abitibi, North America’s largest producer of newsprint.

In 2002 and 2001 the Company used the following types and quantities of paper (all amounts in metric tons):

Publication

 

Newsprint

 

Coated,
Supercalendered
and Other Paper

 

 

 

2002

 

2001

 

2002

 

2001

 

The Times1

 

298,000

 

 

308,000

 

 

24,300

 

 

25,000

 

 

New England Newspaper Group1

 

133,000

 

 

130,000

 

 

3,700

 

 

4,400

 

 

Regional Newspapers

 

84,000

 

 

86,000

 

 

 

 

 

 

Magazine Group2

 

 

 

 

 

 

 

2,500

 

 

Total

 

515,000

 

 

524,000

 

 

28,000

 

 

31,900

 

 

 


1   The Times and the Globe use coated, supercalendered or other paper for The New York Times Magazine and the Globe’s Sunday Magazine.

2    On April 2, 2001, the Company sold its Magazine Group, which included Golf Digest, Golf Digest Woman, Golf World and Golf World Business.




10

The paper used by The Times, The New York Times Magazine, the New England Newspaper Group, the Regional Newspapers and the magazines published by the Magazine Group was purchased under contracts with unrelated suppliers and related suppliers in which the Company holds equity interests (see “Forest Products Investments”).

COMPETITION

The Times competes for advertising and circulation 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 direct mail, magazines, television, radio, the Internet and other media.

The Globe competes for advertising and circulation 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, television, radio, the Internet and other media. The T&G competes with other daily and weekly newspapers distributed in Worcester, Mass., as well as with radio, television and direct mail.

The Regional Newspapers compete for advertising and circulation with a variety of newspaper and other advertising media in their markets.

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, satellite-to-home systems, and with other local media and the Internet. WQXR(FM) competes for listeners primarily with two all-newscommercial radio stations and with WNYC(FM), a non-commercial station, which features both news and classical music. It competes for advertising revenues with many adult-audience commercial radio stations and other media in New York City and surrounding suburbs.

The New York Times News Service and The New York Times Syndicate operations compete with several other syndicated features and supplemental news services.

New York Times Digital primarily competes with other advertising-supported news and information Web sites, such as MSNBC.com and CNN.com, and classified advertising portals, such as Monster.com (help-wanted advertising).

The IHT’s key competitors include The Wall Street Journal’s European and Asian Editions, the London-based Financial Times, Time, Newsweek International and The Economist. Satellite distribution of CNN, Fox News and the BBC adds a broadcast component to the available global sources of English language news, and the Internet provides additional sources of English language news.

DTC is a non-fiction channel that offers documentary programming on recent history and newsworthy events. It competes with cable channels like A&E and the History Channel. DTC also competes for viewers and advertisers with all other broadcast and cable channels.

NESV competes in the Boston consumer entertainment market primarily with other professional sports teams and other forms of live, film and broadcast entertainment. New England Sports Network competes for television audiences with broadcast television stations and other cable television networks throughout most of New England. The Boston Red Sox, Fenway Park and the New England Sports Network compete for advertising with all forms of local and national media including television, radio, newspapers, magazines, direct mail and outdoor advertising.

 




11

EMPLOYEES

As of December 29, 2002, the Company had approximately 12,150 full-time equivalent employees.

The Times

 

4,590

 

New England Newspaper Group

 

3,090

 

Regional Newspapers

 

2,900

 

Broadcast Group

 

960

 

New York Times Digital

 

240

 

Corporate/Shared Services

 

370

 

Total Company

 

12,150

 

 

Labor Relations

Approximately 3,300 full-time equivalent employees of The Times and City & Suburban are represented by 14 unions with 18 labor agreements. Collective bargaining agreements, covering the following categories of employees, with the expiration dates noted below, are either in effect or have expired and negotiations for new contracts are ongoing:  For The Times: machinists, carpenters and New York Newspaper Guild (representing non-production employees) (March 30, 2003); operating engineers (May 31, 2003); pressmen (March 30, 2005); mailers, typographers, electricians and paperhandlers (March 30, 2006); stereotypers (March 30, 2007); and drivers (March 30, 2008); For C&S: building maintenance employees (May 31, 2003); 4 groups of  mechanics (January 1, May 31, September 30 and October 31, 2003); and drivers (March 30, 2008).

Approximately 2,300 full- and part-time employees of the Globe are represented by 10 unions with 12 labor agreements. Collective bargaining agreements, covering the following categories of employees, with the expiration dates noted below, are either in effect or have expired and negotiations for new contracts are ongoing:  Boston Newspaper Guild representing non-production employees (December 31, 2000); drivers, engravers, paperhandlers, machinists and garage mechanics (December 31, 2004); pressman, mailers and warehouse employees (December 31, 2001); typographers (December 31, 2006, with a wage re-opener on December 31, 2002); and technical services group and electricians (December 31, 2003).

Approximately one-third of the 714 full-time equivalent employees of the T&G are represented by four unions. Contracts with three production unions expire on November 30, 2006, August 31, 2006 and October 8, 2003, respectively. The Providence Newspaper Guild was certified as the bargaining agent for the newsroom employees in 1993 and for the circulation employees in 2000. Negotiations with this union are ongoing.

Approximately 150 of the 400 employees at the Press Democrat are represented by four unions. The contracts with the Newspaper Guild, Pressmen, and Typographical unions expire in 2008. Negotiations to achieve a new contract are currently underway with the Teamsters, who represent certain employees in the circulation department.

New York Times Digital, New York Times Television, WQXR(FM) and the IHT also have unions representing their employees.

The Company cannot predict the timing or the outcome of the various negotiations described above.




12

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 29, 2002, are listed below.

General Character of Property

 

Approximate Area in
Square Feet (Owned)

 

Approximate Area in
Square Feet (Leased)

 

Newspaper Publishing

 

 

 

 

 

 

 

 

 

Printing plants, business and editorial offices, garages and warehouse space located in:

 

 

 

 

 

 

 

 

 

New York, N.Y.

 

 

714,000

 

 

 

97,800

 

 

Flushing, N.Y.

 

 

 

 

 

515,000

1

 

Edison, N.J.

 

 

 

 

 

1,300,000

2

 

Boston, Mass.

 

 

652,000

 

 

 

 

 

Billerica, Mass.

 

 

290,000

 

 

 

 

 

Other locations

 

 

1,696,600

 

 

 

417,600

 

 

New York Times Digital

 

 

 

 

 

102,800

 

 

Broadcasting

 

 

 

 

 

 

 

 

 

Business offices, studios and transmitters at various locations

 

 

325,350

 

 

 

30,400

 

 

Total

 

 

3,677,950

 

 

 

2,463,600

 

 

 

The Company plans to build a new headquarters, which will be located in New York City, in the Times Square area. The building will contain approximately 1.54 million gross square feet of space, of which 825,000 gross square feet will be occupied by the Company. On December 13, 2001, the Company announced the execution of a 99-year ground lease for the building site by the Company and the Forest City Ratner Companies Inc. (its development partner) with a New York State agency. The lease gives the Company the option to purchase the site after 29 years. The Company is targeting occupancy for 2006.

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.

ITEM 4. Submission of Matters to a Vote of Security Holders.

Not applicable.


1    The Company is leasing a 31-acre site in Flushing, N.Y., 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.

 



13

Executive Officers of the Registrant

Name

 

Age

 

Employed By
Registrant Since

 

Recent Position(s) Held As Of
February 21, 2003

 

Corporate Officers

 

 

 

 

 

 

 

 

 

Arthur Sulzberger, Jr.

 

51

 

 

1978

 

 

Chairman (since 1997) and Publisher of The Times (since 1992)

 

Russell T. Lewis

 

55

 

 

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

 

53

 

 

1984

 

 

Vice Chairman and Senior Vice President (since 1997); Vice President, Operations Development (1996 to 1997)

 

Cynthia H. Augustine

 

45

 

 

1986

2

 

Senior Vice President, Human Resources (since 1998) and Broadcasting (since 2000); President, The New York Times Company Broadcast Group (since 2000); Partner in Sabin, Bermant and Gould LLP (1994 to 1998)

 

Leonard P. Forman

 

57

 

 

1974

3

 

Senior Vice President and Chief Financial Officer (since 2002); Senior Vice President (since 2001); President and Chief Executive Officer, The New York Times Company Magazine Group, Inc. (1998 to 2001); Senior Vice President, Corporate Development, New Ventures and Electronic Businesses (1996-1998)

 

Solomon B. Watson IV

 

58

 

 

1974

 

 

Senior Vice President (since 1996); Vice President (1990 to 1996); General Counsel (since 1989); and Secretary (2000 to 2002)

 

James C. Lessersohn

 

47

 

 

1987

 

 

Vice President, Finance and Corporate Development (since 2001); Vice President and Treasurer (1999 to 2001); Vice President, Corporate Planning (1997 to 1999); Managing Director, Corporate Planning (1994 to 1997)

 

Stuart Stoller

 

47

 

 

1996

 

 

Vice President and Corporate Controller (since 1996)

 

Michael G. Williams

 

46

 

 

1998

 

 

Vice President, Chief Information Officer (since 2000); Vice President, Chief Information Officer, The Times (since 1998); Vice President, Information Technology and Chief Technology Officer, The Seagram Spirits and Wine Group (1992 to 1998)

 

R. Anthony Benten

 

39

 

 

1989

 

 

Treasurer (since 2001); Assistant Treasurer (1997-2001); Director of Treasury (1997)

 

 


1   Mr. Lewis left the Company in 1973 and returned in 1977.

2   Ms. Augustine left the Company in 1993 and returned in 1998.

3   Mr. Forman left the Company in 1986 and returned in 1996.




14

 

Name

 

Age

 

Employed By
Registrant Since

 

Recent Position(s) Held As Of
February 21, 2003

Operating Unit Executives

 

 

 

 

 

 

 

 

P. Steven Ainsley

 

50

 

 

1982

 

 

President and Chief Operating Officer, Regional Newspaper Group (since 2003); Senior Vice President, Regional Newspaper Group (1999-2002); Publisher, The Santa Barbara News-Press (1993-1999)

Richard H. Gilman

 

52

 

 

1983

 

 

Publisher of The Globe (since 1999); Senior Vice President, Operations (1993 to 1998) and Circulation (1998 to 1999) of The Times

Martin A. Nisenholtz

 

47

 

 

1995

 

 

Chief Executive Officer, New York Times Digital (since 1999); President, The New York Times Electronic Media Company (1995 to 1999)

Janet L. Robinson

 

52

 

 

1983

 

 

Senior Vice President, Newspaper Operations (since 2001), and President and General Manager of The Times (since 1996); Senior Vice President, Advertising of The Times (1995-1996)

 

PART II

ITEM 5. Market for the Registrant’s Common Equity and Related Stockholder Matters.

The additional information required by this item appears at pages F-1 and F-51 of this Form 10-K.

Equity Compensation Plan Information

 

Plan category

 

Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights

 

Weighted average exercise price of outstanding options,
warrants and rights

 

Number of securities remaining available for future issuance under equity compensation plans (excluding securities
reflected in column (a))

 

 

 

(a)

 

(b)

 

(c)

 

Equity compensation plans approved by security holders

 

 

 

 

 

 

 

 

 

 

 

Stock Options

 

 

29,055,000

1

 

$39

 

 

11,358,000

2

 

ESPP

 

 

 

 

 

 

 

9,812,000

3

 

Stock Awards

 

 

133,000

4

 

 

 

 

1,715,000

5

 

Total

 

 

29,188,000

 

 

 

 

 

22,885,000

 

 

Equity compensation plans not approved by security  holders

 

 

None

 

 

None

 

 

None

 

 

 


1   Includes shares of Class A Common Stock to be issued upon exercise of stock options granted under the 1991 Executive Stock Incentive Plan
the “1991 Plan”) and the Non-Employee Directors’ Stock Option Plan.

2   Includes shares of Class A Common Stock available for future stock options to be granted under the 1991 Plan and the Non-Employee Directors’ Stock Option Plan.

3   Includes shares of Class A Common Stock available for future issuance under the Employee Stock Purchase Plan.

4   Includes shares of Class A Common Stock to be issued upon conversion of stock awards under the 1991 Plan.

5   Includes shares of Class A Common Stock available for stock awards under the 1991 Plan.




15

ITEM 6. Selected Financial Data.

The information required by this item appears at pages F-1 to F-2 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-21 of this Form 10-K.

ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk.

The information required by this item appears at page F-21 of this Form 10-K.

ITEM 8. Financial Statements and Supplementary Data.

The information required by this item appears at pages F-22 to F-48 and pages F-50 to F-51 of this Form 10-K.

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 “Board of Directors and Corporate Governance,” of the Company’s Proxy Statement for the 2003 Annual Meeting of Stockholders.

ITEM 11. Executive Compensation.

The information required by this item is incorporated by reference to the sections entitled “Directors’ Compensation,” “Directors’ and Officers’ Liability 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 2003 Annual Meeting of Stockholders. See Item 5 of this Annual Report on Form 10-K for information concerning the Company’s equity compensation plans.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.

The information required by this item is incorporated by reference to the sections entitled “Voting On Matters Before The Annual Meeting,” “Principal Holders of Common Stock,” “Security Ownership of Management and Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “The 1997 Trust,” of the Company’s Proxy Statement for the 2003 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,” 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 2003 Annual Meeting of Stockholders.




16

ITEM 14. Controls and Procedures.

Russell T. Lewis, the Company’s Chief Executive Officer, and Leonard P. Forman, the Company’s Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 29, 2002. Based on such evaluation, each of Messrs. Lewis and Forman concluded that the Company’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. No significant changes were made in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation by Messrs. Lewis and Forman.

PART IV

ITEM 15. 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-22 to F-48. The report of Deloitte & Touche LLP, Independent Auditors, dated January  27, 2003, is set forth on page F-49 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-22 to F-48. 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 on the aforementioned pages.

 

 

Page

 

Ratio of Earnings to Fixed Charges

 

Exhibit 12

 

Independent Auditors’ Consent

 

Exhibit 23

 

Consolidated Schedules for the Three Years Ended December 29, 2002:

 

 

 

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.



17

(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 December 20, 2001 (filed as an Exhibit to the Company’s Form 10-K, dated February 22, 2002 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.

(10.1)                              The Company’s 1991 Executive Stock Incentive Plan, as amended through September 20, 2001 (filed as an Exhibit to the Company’s Form 10-Q dated November 8, 2001, and incorporated by reference herein).

(10.2)                              The Company’s 1991 Executive Cash Bonus Plan, as amended through May 23, 2000 (filed as an Exhibit to the Company’s Form 10-Q dated November 8, 2000, and incorporated by reference herein).

(10.3)                              The Company’s Non-Employee Directors’ Stock Option Plan, as amended through September 21, 2000 (filed as an Exhibit to the Company’s Form 10-Q dated November 8, 2000, and incorporated by reference herein).

(10.4)                              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).

(10.5)                              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).

(10.6)                              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).

(10.6.1)                    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).

(10.6.2)                    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).

(10.7)                              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).

(10.8)                              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).

(10.9)                              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).

(10.10)                       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).




18

(10.11)                       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).

(10.12)                       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).

(10.13)                       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).

(10.14)                       The Company’s Deferred Executive Compensation Plan, as amended effective December 20, 2002 (filed as an Exhibit to the Company’s Form S-8 dated December 20, 2002, and incorporated by reference herein).

(10.15)                       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).

(10.16)                       Distribution Agreement, dated as of September 17, 2002, by and among the Company, J.P. Morgan Securities Inc., Banc of America Securities LLC, and Banc One Markets, Inc. (filed as an Exhibit to the Company’s Form 8-K dated September 18, 2002, and incorporated by reference herein).

(10.17)                       Calculation Agent Agreement, dated as of September 17, 2002, by and between the Company and JPMorgan Chase Bank (filed as an Exhibit to the Company’s Form 8-K dated September 18, 2002, and incorporated by reference herein).

(10.18)                       Employment Agreement, dated as of September 1, 1999, between the Company and Martin Nisenholtz (filed as an Exhibit to the Company’s Form 10-K dated March 14, 2000, and incorporated by reference herein).

(10.19)                       Agreement of Lease, dated December 12, 2001, between the 42nd St. Development Project, Inc., as Landlord, and The New York Times Building LLC, as Tenant (filed as an Exhibit to the Company’s Form 10-K dated February 22, 2002, and incorporated by reference herein).

(12)                                        Ratio of Earnings to Fixed Charges.

(21)                                        Subsidiaries of the Company.

(23)                                        Consent of Deloitte & Touche LLP.

(99.1)          Certification Pursuant to 18 U.S.C. Section 1350, as Added By Section 906 of the Sarbanes-Oxley Act of 2002.

(99.2)          Certification Pursuant to 18 U.S.C. Section 1350, as Added By Section 906 of the Sarbanes-Oxley Act of 2002.

 

(B)   REPORTS ON FORM 8-K

The Company did not file any reports on Form 8-K during the last quarter of the fiscal year ended December 29, 2002.




19

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: February 24, 2003

(Registrant)

The New York Times Company

By:

/s/ Rhonda L. Brauer

 

Rhonda L. Brauer, 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 Sulzberger, Jr.

 

Chairman, Director

 

February 24, 2003

Russell T. Lewis

 

Chief Executive Officer,
President and Director (Principal Executive Officer)

 

February 24, 2003

Michael Golden

 

Vice Chairman, Senior Vice
President and Director

 

February 24, 2003

John F. Akers

 

Director

 

February 24, 2003

Brenda C. Barnes

 

Director

 

February 24, 2003

Raul E. Cesan

 

Director

 

February 24, 2003

Jacqueline H. Dryfoos

 

Director

 

February 24, 2003

Leonard P. Forman

 

Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)

 

February 24, 2003

William E. Kennard

 

Director

 

February 24, 2003

David E. Liddle

 

Director

 

February 24, 2003

Ellen R. Marram

 

Director

 

February 24, 2003

Henry B. Schacht

 

Director

 

February 24, 2003

Donald M. Stewart

 

Director

 

February 24, 2003

Stuart Stoller

 

Vice President, Corporate
Controller (Principal Accounting Officer)

 

February 24, 2003

Cathy J. Sulzberger

 

Director

 

February 24, 2003

 



20

Form of Certification Required
by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

I, Russell T. Lewis, certify that:

1.                 I have reviewed this annual report on Form 10-K of The New York Times Company;

2.                 Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.                 Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.                 The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in paragraph (c) of Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)                designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)               evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)                presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.                 The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)                all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)               any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.                 The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  February 24, 2003

 

 

/s/ Russell T. Lewis

 

 

Russell T. Lewis

 

 

Chief Executive Officer

 



21

 

Form of Certification Required
by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

I, Leonard P. Forman, certify that:

1.                 I have reviewed this annual report on Form 10-K of The New York Times Company;

2.                 Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.                 Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.                 The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in paragraph (c) of Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)                designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)               evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)                presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.                 The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions);

a)                all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)               any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.                 The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  February 24, 2003

 

 

/s/ Leonard P. Forman

 

 

Leonard P. Forman

 

 

Chief Financial Officer

 

 



 

 

THE NEW YORK TIMES COMPANY

2002 FINANCIAL REPORT

 

Contents

 

Page

 

 

 

 

 

Selected Financial Data

 

F-1

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

F-3

 

Overview

 

F-3

 

Results of Operations

 

F-4

 

Consolidated Results

 

F-4

 

Operating Segment Information

 

F-7

 

Liquidity and Capital Resources

 

F-10

 

Pension and Postretirement Benefits

 

F-13

 

Critical Accounting Policies

 

F-14

 

2003 Guidance

 

F-16

 

Reconciliations of GAAP to Non-GAAP Financial Measures

 

F-17

 

Recent Accounting Pronouncements

 

F-19

 

Factors That Could Affect Operating Results

 

F-19

 

Market Risk

 

F-21

 

Audited Financial Statements

 

F-22

 

Consolidated Statements of Income

 

F-22

 

Consolidated Balance Sheets

 

F-23

 

Consolidated Statements of Cash Flows

 

F-24

 

Consolidated Statements of Stockholders’ Equity

 

F-25

 

Notes to the Consolidated Financial Statements

 

F-26

 

Independent Auditors’ Report

 

F-49

 

Management’s Responsibilities Report

 

F-49

 

Quarterly Information (unaudited)

 

F-50

 

Market Information

 

F-51

 

 




F-1

SELECTED FINANCIAL DATA

 

 

Years Ended

 

 

(In thousands, except per share and employee data)

 

December 29,
2002

 

 

December 30, 

2001

 

 

December 31, 
2000

 

 

December 26, 
1999

 

 

December 27,
1998

 

 

REVENUES AND INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

$

3,079,007

 

 

 

$

3,015,958

 

 

 

$

3,374,017

 

 

 

$

3,046,190

 

 

 

$

2,841,491

 

 

Operating profit

 

 

544,868

 

 

 

374,403

 

 

 

616,579

 

 

 

552,630

 

 

 

493,137

 

 

Income from continuing operations before income taxes

 

 

491,387

 

 

 

339,854

 

 

 

653,744

 

 

 

519,812

 

 

 

475,437

 

 

Income from continuing operations

 

 

299,747

 

 

 

202,222

 

 

 

386,240

 

 

 

299,433

 

 

 

269,573

 

 

Discontinued operations, net of income taxes – Magazine Group

 

 

 

 

 

242,450

 

 

 

11,296

 

 

 

10,744

 

 

 

17,057

 

 

Extraordinary item, net of income taxes – debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,716

)

 

Net income

 

 

299,747

 

 

 

444,672

 

 

 

397,536

 

 

 

310,177

 

 

 

278,914

 

 

FINANCIAL POSITION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment - net

 

 

$

1,197,368

 

 

 

$

1,166,863

 

 

 

$

1,207,160

 

 

 

$

1,218,396

 

 

 

$

1,326,196

 

 

Total assets

 

 

3,633,842

 

 

 

3,438,684

 

 

 

3,606,679

 

 

 

3,495,802

 

 

 

3,465,109

 

 

Long-term debt and capital lease obligations

 

 

728,789

 

 

 

598,703

 

 

 

636,866

 

 

 

598,327

 

 

 

597,818

 

 

Common stockholders’ equity

 

 

1,269,307

 

 

 

1,149,653

 

 

 

1,281,163

 

 

 

1,448,658

 

 

 

1,531,470

 

 

PER SHARE OF COMMON STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

$

1.98

 

 

 

$

1.29

 

 

 

$

2.30

 

 

 

$

1.71

 

 

 

$

1.43

 

 

Discontinued operations, net of income taxes – Magazine Group

 

 

 

 

 

1.54

 

 

 

.07

 

 

 

.06

 

 

 

.09

 

 

Extraordinary item, net of income taxes – debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(.04

)

 

Net income

 

 

$

1.98

 

 

 

$

2.83

 

 

 

$

2.37

 

 

 

$

1.77

 

 

 

$

1.48

 

 

Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

$

1.94

 

 

 

$

1.26

 

 

 

$

2.25

 

 

 

$

1.67

 

 

 

$

1.40

 

 

Discontinued operations, net of income taxes – Magazine Group

 

 

 

 

 

1.52

 

 

 

.07

 

 

 

.06

 

 

 

.09

 

 

Extraordinary item, net of income taxes – debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(.04

)

 

Net income

 

 

$

1.94

 

 

 

$

2.78

 

 

 

$

2.32

 

 

 

$

1.73

 

 

 

$

1.45

 

 

Dividends per share

 

 

$

.53

 

 

 

$

.49

 

 

 

$

.45

 

 

 

$

.41

 

 

 

$

.37

 

 

Common stockholders’ equity per share

 

 

$

8.20

 

 

 

$

7.18

 

 

 

$

7.47

 

 

 

$

8.08

 

 

 

$

7.94

 

 

KEY RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit to revenues

 

 

18

%

 

 

12

%

 

 

18

%

 

 

18

%

 

 

17

%

 

Return on average common stockholders’ equity

 

 

25

%

 

 

37

%

 

 

29

%

 

 

21

%

 

 

17

%

 

Return on average total assets

 

 

8

%

 

 

13

%

 

 

11

%

 

 

9

%

 

 

8

%

 

Long-term debt and capital lease obligations to total capitalization

 

 

36

%

 

 

34

%

 

 

33

%

 

 

29

%

 

 


28

%

 

Current assets to current liabilities

 

 

.77

 

 

 

.66

 

 

 

.70

 

 

 

.92

 

 

 

.83

 

 

FULL-TIME EQUIVALENT EMPLOYEES

 

 

12,150

 

 

 

12,050

 

 

 

14,000

 

 

 

13,400

 

 

 

13,200

 

 

 

   The Selected Financial Data should be read in conjunction with the Consolidated Financial Statements included in this Form 10-K.

   See page F-2 for certain items included in Selected Financial Data. All earnings per share amounts for the items on page F-2 are on a diluted basis.

   For comparability, certain prior year amounts have been reclassed to conform with the 2002 presentation.

   All fiscal years presented above comprise 52 weeks except fiscal year 2000 which comprises 53 weeks.



F-2

Included in the Selected Financial Data are the items below.

2002

The items below amount to a net $7.6 million pre-tax charge ($4.7 million after tax, or $.03 per share).

¨  a $12.6 million pre-tax charge ($7.7 million after tax, or $.05 per share) for work force reduction expenses (“Buyouts”) (see Notes 6 and 16 of the Notes to the Consolidated Financial Statements).

¨  $5.0 million in income on a pre-tax basis ($3.0 million after tax, or $.02 per share) related to a $25.0 million non-compete agreement (the “non-compete agreement”) entered into in connection with the sale of the Santa Barbara News–Press in 2000. The total amount of the non-compete agreement is recognized as income on a straight-line basis over the life of the agreement (see Note 3 of the Notes to the Consolidated Financial Statements).

2001

The items below amount to a net $283.8 million in income on a pre-tax basis ($153.5 million after tax, or $.96 per share).

¨  a $412.0 million pre-tax gain ($241.3 million after tax, or $1.51 per share) resulting from the sale of Golf Digest, Golf Digest Woman, Golf World and Golf World Business (“Magazine Group”) (see Note 3 of the Notes to the Consolidated Financial Statements).

¨  a $90.4 million pre-tax charge ($53.8 million after tax, or $.34 per share) for Buyouts (see Notes 6 and 16 of the Notes to the Consolidated Financial Statements).

¨  $5.0 million in income on a pre-tax basis ($2.9 million after tax, or $.02 per share) related to the non-compete agreement (see Note 3 of the Notes to the Consolidated Financial Statements).

¨  $42.8 million in amortization expense ($36.9 million after tax, or $.23 per share) which would not have been expensed if Statement of Financial Accounting Standards (“FAS”) No. 142, Goodwill and Other Intangible Assets, had been adopted at the beginning of 2001 (see Note 2 of the Notes to the Consolidated Financial Statements).

2000

The items below amount to a net $10.1 million in income on a pre-tax basis (a charge of $3.2 million after tax, or $.01 per share).

¨  an $85.3 million pre-tax net gain ($61.1 million after tax, or $.36 per share). This resulted from a gain of $132.1 million ($91.6 million after tax) in connection with the sale of seven newspapers and nine telephone directory operations as well as the amortization of income related to the non-compete agreement, partially offset by a disposition loss and write-downs for certain of the Company’s equity investments in online ventures in the aggregate amount of $46.8 million ($30.5 million after tax) (see Note 3 of the Notes to the Consolidated Financial Statements).

¨  a $22.7 million pre-tax noncash charge ($20.4 million after tax, or $.12 per share) for a write-down of intangible assets related to an acquisition made in 1999. This charge is included in amortization expense.

¨  a $5.3 million pre-tax charge ($3.1 million after tax, or $.02 per share) for Buyouts (see Notes 6 and 16 of the Notes to the Consolidated Financial Statements).

¨  $47.2 million in amortization expense ($40.8 million after tax, or $.23 per share) which would not have been expensed if FAS 142 had been adopted at the beginning of 2000 (see Note 2 of the Notes to the Consolidated Financial Statements).

1999

The items below amount to a net $54.8 million pre-tax charge ($43.8 million after tax, or $.24 per share).

¨  a $15.5 million pre-tax charge ($8.9 million after tax, or $.05 per share) for Buyouts, principally at The Boston Globe.

¨  $39.3 million in amortization expense ($34.9 million after tax, or $.19 per share) which would not have been expensed if FAS 142 had been adopted at the beginning of 1999.

1998

The items below amount to a net $38.1 million pre-tax charge ($33.5 million after tax, or $.18 per share).

¨  a $4.6 million pre-tax gain ($2.6 million after tax, or $.01 per share) from the sale of equipment.

¨  a $13.7 million pre-tax extraordinary charge ($7.7 million after tax, or $.04 per share) in connection with the repurchase of $78.1 million from a total of $150.0 million, 8.25% notes due in 2025.

¨  an $8.0 million pre-tax gain ($4.5 million after tax, or $.02 per share) from the satisfaction of a post-closing requirement related to the sale of assets of the Company’s tennis, sailing and ski magazines in 1997.

¨  $5.8 million in pre-tax income ($3.3 million after tax, or $.02 per share) related to a non-compete agreement entered into as part of the divestiture of the Company’s Women’s Magazine Division in 1994.

¨  a $5.4 million pre-tax charge ($3.1 million after tax, or $.02 per share) for Buyouts.

¨  $37.4 million in amortization expense ($33.1 million after tax, or $.17 per share) which would not have been expensed if FAS 142 had been adopted at the beginning of 1998.

 





OVERVIEW

In 2002 newspapers contributed 93% of the Company’s $3.1 billion in revenues, while broadcasting accounted for 5% and New York Times Digital (“NYTD”), the Company’s digital and business information division, accounted for the remainder.

Advertising revenues were 67% and circulation revenues were 27% of the Company’s total revenues in 2002. Newspaper distribution operations and news services made up most of the balance.

Newsprint is the major component of the Company’s cost of raw materials. Average newsprint market prices in 2002 decreased from 2001. The Company expects newsprint prices to be higher in 2003 than 2002 given the extraordinarily low price for newsprint in 2002.

Below are charts of the Company’s consolidated costs and expenses for the three years ended December 29, 2002.

Components of Consolidated Costs and Expenses

Consolidated Costs and Expenses as a Percentage of Revenues

*In 2001 wages and benefits as a percentage of revenues increased compared with 2000 primarily due to lower total revenue resulting from a decline in advertising revenue as well as an increase in work force reductions (“Buyouts”).

Adoption of FAS 142

At the beginning of the Company’s 2002 fiscal year, the Company adopted Statement of Financial Accounting Standards (“FAS”) No. 142, Goodwill and Other Intangible Assets. FAS 142 eliminated the amortization of goodwill and certain other intangibles and requires an impairment test of their carrying value. FAS 142 requires an initial impairment test of goodwill and certain other intangibles to be completed in the year of adoption. An annual impairment test is required in the year of adoption and in the future. The Company completed its initial impairment tests in the first quarter of 2002 and its annual impairment tests in the fourth quarter of 2002, neither of which resulted in the recognition of an impairment of goodwill or other intangibles.  The provisions of FAS 142 are effective for periods after adoption and retroactive application is not permitted.  Therefore, the historical results of periods prior to 2002 in the Company’s Consolidated Statements of Income do not reflect the effect of FAS 142 and, accordingly, the fiscal year 2001 includes amortization expense of $42.4 million in “Selling, general and administrative (‘SGA’) expenses” and $0.4 million in “Net (loss)/income from joint ventures” ($36.9 million after tax, or $.23 per share, collectively).  The fiscal year 2000 includes amortization expense of $46.8 million in SGA expenses and $0.4 million in “Net (loss)/income from joint ventures” ($40.8 million after tax, or $.23 per share, collectively).

GAAP and Non-GAAP Financial Measures

GAAP refers to accounting principles generally accepted in the United States of America. Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) management discusses financial measures in accordance with GAAP and also on a non-GAAP basis. All references in this MD&A to “adjusted” financial measures and EBITDA (operating profit and net (loss)/income from joint ventures before depreciation and amortization) are to non-GAAP financial measures. Management believes that the use of non-GAAP financial measures enables management and investors to evaluate, and compare from period to period, the Company’s results from ongoing operations in a more meaningful and consistent manner. Reconciliations of GAAP to non–GAAP financial measures are included on pages F–17 and F-18.

 




F-4

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The Company’s consolidated financial results for the three years ended December 29, 2002, were as follows:

(In millions, except per
share data)

 

 

 

 

 

 

 

% Change

 

 

2002

 

2001

 

2000

 

02-01

 

01-00

 

Revenues

 

$

3,079.0

 

$

3,016.0

 

$

3,374.0

 

2.1

 

(10.6

)

Operating profit

 

$

544.9

 

$

374.4

 

$

616.6

 

45.5

 

(39.3

)

Net income

 

$

299.7

 

$

444.7

 

$

397.5

 

(32.6

)

11.9

 

Diluted earnings per share

 

$

1.94

 

$

2.78

 

$

2.32

 

(30.2

)

19.8

 

 

All references to earnings per share in this MD&A are to diluted earnings per share unless otherwise noted.

Fiscal years 2002 and 2001 each comprises 52 weeks and fiscal year 2000 comprises 53 weeks. The impact of the 53rd week (the “additional week”) in the Company’s 2000 fiscal year was revenues of $40.2 million, operating profit of $7.1 million, net income of $3.3 million and earnings per share of $.02.

GAAP financial measures in the table above include the following items. All “adjusted” financial measures discussed in this MD&A exclude these items.

2002

The items below amount to a net $7.6 million pre-tax charge ($4.7 million after tax, or $.03 per share).

¨     a $12.6 million pre-tax charge ($7.7 million after tax, or $.05 per share) for Buyouts (see Notes 6 and 16 of the Notes to the Consolidated Financial Statements).

¨     $5.0 million in income on a pre-tax basis ($3.0 million after tax, $.02 per share) related to a $25.0 million non-compete agreement (the “non-compete agreement”) entered into in connection with the sale of the Santa Barbara News-Press in 2000. The total amount of the non-compete agreement is recognized as income on a straight-line basis over the life of the agreement (see Note 3 of the Notes to the Consolidated Financial Statements).

2001

The items below amount to a net $283.8 million in income on a pre-tax basis ($153.5 million after tax, or $.96 per share).

¨     a $412.0 million pre-tax gain ($241.3 million after tax, or $1.51 per share) resulting from the sale of Golf Digest, Golf Digest Woman, Golf World and Golf World Business (“Magazine Group”) (see Note 3 of the Notes to the Consolidated Financial Statements).

¨     a $90.4 million pre-tax charge ($53.8 million after tax, or $.34 per share) for Buyouts (see Notes 6 and 16 of the Notes to the Consolidated Financial Statements).

¨     $5.0 million in income on a pre-tax basis ($2.9 million after tax, or $.02 per share) related to the non-compete agreement (see Note 3 of the Notes to the Consolidated Financial Statements).

¨     $42.8 million in amortization expense ($36.9 million after tax, or $.23 per share) which would not have been expensed if FAS 142 had been adopted at the beginning of 2001 (see Note 2 of the Notes to the Consolidated Financial Statements).

2000

The items below amount to a net $10.1 million in income on a pre-tax basis (a charge of $3.2 million after tax, or $.01 per share).

¨     an $85.3 million pre-tax net gain ($61.1 million after tax, or $.36 per share). This resulted from a gain of $132.1 million ($91.6 million after tax) in connection with the sale of seven newspapers and nine telephone directory operations (“divested Regionals”) as well as the amortization of income related to the non-compete agreement, partially offset by a disposition loss and write-downs for certain of the Company’s equity investments in online ventures in the aggregate amount of $46.8 million ($30.5 million after tax) (see Note 3 of the Notes to the Consolidated Financial Statements).

¨     a $22.7 million pre-tax noncash charge ($20.4 million after tax, or $.12 per share) for a write-down of intangible assets related to an acquisition made in 1999. This charge is included in amortization expense.

¨     a $5.3 million pre-tax charge ($3.1 million after tax, or $.02 per share) for Buyouts (see Notes 6 and 16 of the Notes to the Consolidated Financial Statements).

¨     $47.2 million in amortization expense ($40.8 million after tax, or $.23 per share) which would not have been expensed if FAS 142 had been adopted at the beginning of 2000 (see Note 2 of the Notes to the Consolidated Financial Statements).

2002 Compared with 2001

Revenues were $3.1 billion in 2002, up 2.1% from $3.0 billion in 2001. Advertising revenues remained flat and circulation revenues increased 8.6% in 2002 compared with 2001.  Circulation revenues were higher primarily due to price increases at The New York Times (“The Times”) and The Boston Globe (the “Globe”).

 




F-5

Operating profit in 2002 increased 45.5% to $544.9 million from $374.4 million in 2001. Operating profit in 2002, as adjusted, increased 9.9% to $557.5 million from $507.2 million in 2001.

Net income in 2002 decreased 32.6% to $299.7 million from $444.7 million in 2001. Net income in 2002, as adjusted, increased 4.5% to $304.4 million from $291.2 million in 2001.

The increase in operating profit and net income, as adjusted, primarily resulted from higher circulation revenues and a decrease in newsprint expense, partially offset by an increase in other costs and expenses.

2001 Compared with 2000

Revenues were $3.0 billion in 2001, down 10.6% from $3.4 billion in 2000.  Excluding revenues from the divested Regionals and the effect of the additional week, total revenues for the Company decreased 8.4%, advertising revenues decreased 13.7% and circulation revenues increased 6.2% in 2001 compared with 2000.  Advertising revenues decreased in most categories resulting from a decline in the U.S. economy and circulation revenues increased due to price increases at The Times and the Globe.

Operating profit in 2001 decreased 39.3% to $374.4 million from $616.6 million in 2000. Operating profit in 2001, as adjusted, declined 26.5% to $507.2 million from $690.5 million in 2000.

Net income in 2001 increased 11.9% to $444.7 million from $397.5 million in 2000. Net income in 2001, as adjusted, declined 27.3% to $291.2 million from $400.7 million in 2000.

The decrease in operating profit and net income, as adjusted, was primarily due to lower advertising revenues, partially offset by an increase in circulation revenues and a decrease in total costs and expenses.

EBITDA

The Company’s consolidated EBITDA for 2002, 2001 and 2000 were $685.2, $576.1 and $859.2 million. EBITDA increased 18.9% in 2002 compared with 2001, primarily due to higher circulation revenues and lower costs and expenses. EBITDA decreased 33.0% in 2001 compared with 2000, primarily due to lower advertising revenues, partially offset by lower costs and expenses.

The Company redefined its calculation of EBITDA in 2002 to exclude non-operating items, such as gains and losses on the disposal of assets and the results of discontinued operations. EBITDA for all periods has been restated to conform with the 2002 presentation. The Company believes that EBITDA is a useful measure of evaluating the operating performance of its segments. 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 other financial measures determined under GAAP.

Operating Expenses

Consolidated operating expenses for the three years ended December 29, 2002, were as follows:

 

 

 

 

 

 

 

 

% Change

 

(In millions)

 

2002

 

2001

 

2000

 

02-01

 

01-00

 

Production costs:
Raw materials

 

$

262.3

 

$

321.2

 

$

350.4

 

(18.3

)

 

(8.3

)

Wages and benefits

 

619.7

 

594.2

 

622.6

 

4.3

 

 

(4.6

)

Other

 

470.6

 

477.7

 

488.2

 

(1.5

)

 

(2.2

)

Total production costs

 

1,352.6

 

1,393.1

 

1,461.2

 

(2.9

)

 

(4.7

)

Selling, general and administrative expenses

 

1,181.5

 

1,248.5

 

1,296.2

 

(5.4

)

 

(3.7

)

Total

 

$

2,534.1

 

$

2,641.6

 

$

2,757.4

 

(4.1

)

 

(4.2

)

 

Production costs for 2002 decreased 2.9% compared with 2001, primarily due to lower newsprint expense, partially offset by an increase in compensation and benefits costs. In 2002 the Company’s newsprint expense decreased 19.9% compared with 2001. This resulted from a decrease in the average cost per ton of newsprint of 18.2% and a decrease in consumption of 1.7%.

SGA expenses decreased 5.4% in 2002 compared with 2001.  As adjusted, SGA expenses increased 4.8% to $1.2 billion in 2002 from $1.1 billion in 2001, primarily due to higher bonus accruals linked to improved performance.

Production costs for 2001 decreased 4.7% compared with 2000, primarily due to lower newsprint expense and compensation and benefits costs. In 2001 the Company’s newsprint expense decreased 7.4% compared with 2000. This resulted from an increase in the average cost per ton of newsprint of 5.2%, which was more than offset by a decrease in consumption of 12.6%. The decrease in consumption in 2001 was primarily due to lower advertising volume and web-width reductions, which decrease the size of a printed

 




F-6

sheet, at nine of the Company’s newspapers as compared with two newspapers in 2000.

SGA expenses decreased 3.7% to $1.2 billion in 2001 from $1.3 billion in 2000.  As adjusted, SGA expenses decreased 8.7% to $1.1 billion in 2001 from $1.2 billion in 2000.  The lower level of SGA expenses was principally due to lower compensation and promotion costs.

Joint Ventures

In April 2002 the Company and Discovery Communications, Inc. (“DCI”) formed a joint venture in Discovery Civilization Channel (to be renamed Discovery Times Channel in the first quarter of 2003, “DTC”), a digital cable television channel.  The Company invested approximately $100 million for a 50% interest in DTC.  The operations of DTC are managed by DCI.

In February 2002 New England Sports Ventures, LLC (“NESV”), in which the Company is an investor, purchased the Boston Red Sox baseball club (including Fenway Park and approximately 80% of New England Sports Network, a regional cable sports network).  The Company invested approximately $75 million for an interest of approximately 17% in NESV.

The Company’s investments in DTC and NESV are accounted for under the equity method, and are recorded in “Investments in Joint Ventures” in the Company’s Consolidated Balance Sheets.  The Company’s proportionate shares of the operating results of DTC and NESV are recorded in “Net (loss)/income from joint ventures” in the Company’s Consolidated Statements of Income and in “Investments in Joint Ventures” in the Company’s Consolidated Balance Sheets.

The Company recorded a loss from joint ventures (see Note 5 of the Notes to the Consolidated Financial Statements) of $13.0 million in 2002 compared with income from joint ventures of $7.7 million in 2001 and $15.9 million in 2000.

The loss in 2002 compared with income in 2001 resulted from losses at both DTC and NESV, primarily related to non-cash amortization expense in connection with the allocation of the purchase price among the net assets acquired, as well as lower operating results at the International Herald Tribune (the “IHT”) and the paper mills in which the Company has an equity investment. See Note 18 of the Notes to the Consolidated Financial Statements for information regarding the Company’s purchase of the remaining 50% of the IHT.

The decrease in 2001 compared with 2000 was primarily due to lower operating results at the paper mills in which the Company has an equity investment. In 2001 one of the paper mills shut down its paper machine for an equipment modernization program.

Interest Expense, Net

Interest expense, net decreased to $45.4 million in 2002 from $47.2 million in 2001. The decrease was principally due to reduced interest rates on floating rate borrowings, partially offset by higher levels of debt outstanding. In 2001 interest expense, net decreased to $47.2 million from $64.1 million in 2000. The decrease was principally due to lower levels of debt outstanding and reduced interest rates on floating rate borrowings.

Interest expense, net included interest income of $3.3 million in 2002, $4.2 million in 2001 and $4.5 million in 2000 and capitalized interest of $1.7 million in 2002, $0.5 million in 2001 and none in 2000.

Taxes

The Company’s annual effective income tax rates were 39.0% in 2002, 40.5% in 2001 and 40.9% in 2000.  The Company’s annual effective income tax rates, as adjusted, were 39.0% in 2002, 37.5% in 2001 and 39.5% in 2000.

Discontinued Operations

In April 2001 the Company sold its golf properties, which included the Magazine Group and GolfDigest.com, for $435.0 million. The Company recorded a gain from the sale of $412.0 million ($241.3 million after tax, or $1.51 per share) in 2001.

The results of operations of the Magazine Group are reported as discontinued operations for all periods presented. Diluted earnings per share from discontinued operations of the Magazine Group were $1.52 in 2001 and $.07 in 2000. Revenues and operating profit for the Magazine Group were as follows:

 

 

 

 

 

 

% Change

 

 

(In millions)

 

2001

 

2000

 

01-00

 

Revenues

 

$

26.5

 

$

115.4

 

 

(77.0

)

 

 

Operating Profit

 

$

2.0

 

$

19.3

 

 

(89.6

)

 

 

 

 




F-7

Earnings per Share

Diluted earnings per share as reported in the Company’s Consolidated Statements of Income were $1.94 in 2002, $2.78 in 2001 and $2.32 in 2000.

Included in diluted earnings per share were certain items (see page F-4) which resulted in a decrease of $.03 per share in 2002, an increase of $.96 per share in 2001 and a decrease of $.01 per share in 2000.

Diluted earnings per share, excluding these items, increased 8.2% in 2002 compared with 2001 and decreased 21.9% in 2001 compared with 2000. The increase in 2002 compared with 2001 was primarily due to higher circulation revenues and a decrease in newsprint expense, partially offset by an increase in other costs and expenses. The decrease in 2001 compared with 2000 was primarily due to lower advertising revenues, partially offset by an increase in circulation revenues and a decrease in total costs and expenses.

The effect of Company share repurchases on diluted earnings per share was an increase in earnings per share of $.02 in 2002, $.12 in 2001 and $.09 in 2000 (see Note 15 of the Notes to the Consolidated Financial Statements).

The average number of diluted Class A and Class B common shares outstanding was 154.8 million in 2002, 160.1 million in 2001 and 171.6 million in 2000.

OPERATING SEGMENT INFORMATION

Revenues, Operating Profit and EBITDA

Consolidated revenues, operating profit and EBITDA for the three years ended December 29, 2002, by business segment, were as follows:

 

 

 

 

 

 

 

 

% Change

 

(In millions)

 

2002

 

2001

 

2000

 

02-01

 

01-00

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Newspapers

 

$

2,864.1

 

$

2,826.1

 

$

3,160.2

 

1.3

 

(10.6

)

Broadcast

 

155.8

 

140.9

 

160.3

 

10.6

 

(12.1

)

New York Times Digital

 

71.8

 

60.3

 

66.6

 

19.0

 

(9.4

)

Intersegment eliminations(A)

 

(12.7

)

(11.3

)

(13.1

)

(11.5

)

13.0

 

Total revenues

 

$

3,079.0

 

$

3,016.0

 

$

3,374.0

 

2.1

 

(10.6

)

Operating Profit (Loss):

 

 

 

 

 

 

 

 

 

 

 

Newspapers

 

$

531.6

 

$

389.0

 

$

677.6

 

36.7

 

(42.6

)

Broadcast

 

49.0

 

35.2

 

48.8

 

39.1

 

(27.9

)

New York Times Digital

 

8.3

 

(7.3

)

(70.0

)

*

 

89.5

 

Unallocated corporate expenses

 

(44.0

)

(42.5

)

(39.8

)

(3.6

)

(6.5

)

Total operating profit

 

$

544.9

 

$

374.4

 

$

616.6

 

45.5

 

(39.3

)

EBITDA:

 

 

 

 

 

 

 

 

 

 

 

Newspapers

 

$

659.5

 

$

550.3

 

$

842.6

 

19.8

 

(34.7

)

Broadcast

 

57.1

 

51.3

 

65.6

 

11.4

 

(21.8

)

New York Times Digital

 

15.6

 

0.1

 

(36.7

)

*

 

*

 

Unallocated corporate    expenses

 

(34.0

)

(33.6

)

(28.6

)

(1.5

)

(17.4

)

Net (loss)/income from joint ventures

 

(13.0

)

8.0

 

16.3

 

*

 

(50.8

)

Total EBITDA

 

$

685.2

 

$

576.1

 

$

859.2

 

18.9

 

(33.0

)

 

*Represents percentages greater than or equal to 100%.

(A)  Intersegment eliminations primarily include license fees between NYTD and other segments.

Newspaper Group

The Newspaper Group includes The Times, the New England Newspaper Group, which includes the Globe and the Worcester Telegram & Gazette (the “T&G”), 15 other newspapers (“Regional Newspapers”), a newspaper distributor, and various other news-related services.

 

 

 

 

 

 

 

 

% Change

 

(In millions)

 

2002

 

2001

 

2000

 

02-01

 

 

01-00

 

Revenues

 

$

2,864.1

 

$

2,826.1

 

$

3,160.2

 

 

1.3

 

 

(10.6

)

Operating Profit

 

$

531.6

 

$

389.0

 

$

677.6

 

 

36.7

 

 

(42.6

)

EBITDA

 

$

659.5

 

$

550.3

 

$

842.6

 

 

19.8

 

 

(34.7

)

 

 



F-8

Revenues increased to $2.9 billion in 2002, up 1.3% from $2.8 billion in 2001. Advertising revenues decreased 1.0% and circulation revenues increased 8.6% in 2002 compared with 2001. Advertising revenues decreased primarily due to lower volume and circulation revenues were higher due to price increases at The Times and the Globe.

The Newspaper Group’s operating profit in 2002 increased 36.7% to $531.6 million compared with $389.0 million in 2001. As adjusted, operating profit increased 6.7% to $544.1 million in 2002 compared with $509.9 million in 2001. The increase was mainly related to higher circulation revenues, partially offset by a decrease in advertising revenues and an increase in total costs and expenses.

Revenues declined to $2.8 billion in 2001, down 10.6% from $3.2 billion in 2000. Excluding revenues from the divested Regionals and the effect of the additional week, total Newspaper Group revenues decreased 8.2% compared with 2000. The decrease was due to lower advertising revenues across the entire group principally attributable to a slowing U.S. economy. The decrease in advertising revenues was partially offset by higher circulation revenues due to price increases at The Times and the Globe.

The Newspaper Group’s operating profit in 2001 declined 42.6% to $389.0 million compared with $677.6 million in 2000. As adjusted, operating profit declined 28.6% to $509.9 million in 2001 compared with $713.7 million in 2000. The decrease was mainly related to lower advertising revenue, partly offset by a decrease in total costs and expenses as well as an increase in circulation revenue.

Advertising, circulation and other revenue for the three years ended December 29, 2002, by division of the Newspaper Group, were as follows:

 

 

 

 

 

 

 

 

% Change

 

(In millions)