-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KKbbTwn472HelTmi/lzPCc62hjzFKUu666LeNxo56H07KjsVd6qkTw8le0NJN/nH 9l7CfL2aKDi1cs0v9xTzkQ== 0001005477-99-000896.txt : 19990301 0001005477-99-000896.hdr.sgml : 19990301 ACCESSION NUMBER: 0001005477-99-000896 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981227 FILED AS OF DATE: 19990226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW YORK TIMES CO CENTRAL INDEX KEY: 0000071691 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 131102020 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-05837 FILM NUMBER: 99551476 BUSINESS ADDRESS: STREET 1: 229 W 43RD ST CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2125561234 MAIL ADDRESS: STREET 1: 229 W 43RD STREET CITY: NEW YORK STATE: NY ZIP: 10036 10-K 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ---------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 27, 1998 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 43d Street, New York, N.Y. 10036 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 556-1234 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ---------------- Class A Common Stock of $.10 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Not Applicable (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| The aggregate market value of Class A Common Stock held by non-affiliates as of February 24, 1999, was approximately $4.62 billion. As of such date, non-affiliates held 95,114 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 24, 1999, was as follows: 178,874,315 shares of Class A Common Stock and 849,520 shares of Class B Common Stock. Document incorporated by reference Part ---------------------------------- ---- Proxy Statement for the 1999 Annual Meeting of Stockholders............... III ================================================================================ INDEX TO THE NEW YORK TIMES COMPANY 1998 FORM 10-K ----------------- PART I Item No. Page - -------- ---- 1. Business............................................................ 1 Introduction...................................................... 1 Newspapers........................................................ 1 The New York Times.............................................. 1 Circulation.................................................... 1 Advertising.................................................... 2 Production and Distribution.................................... 2 Related Businesses............................................. 4 The Boston Globe................................................ 4 Circulation.................................................... 4 Advertising.................................................... 5 Production and Distribution.................................... 5 Regional Newspapers............................................. 6 New Ventures.................................................... 6 Broadcasting...................................................... 7 Magazines......................................................... 8 New Ventures.................................................... 8 Forest Products Investments and Other Joint Ventures.............. 8 Forest Product Investments...................................... 8 Other Joint Ventures............................................ 9 Raw Materials..................................................... 9 Competition....................................................... 9 Employees......................................................... 10 Labor Relations................................................. 10 2. Properties.......................................................... 11 3. Legal Proceedings................................................... 11 4. Submission of Matters to a Vote of Security Holders................. 12 Executive Officers of the Registrant.............................. 12 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................................................. 13 6. Selected Financial Data............................................. 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................... 13 8. Financial Statements and Supplementary Data......................... 14 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................ 14 PART III 10. Directors and Executive Officers of the Registrant.................. 14 11. Executive Compensation.............................................. 14 12. Security Ownership of Certain Beneficial Owners and Management...... 14 13. Certain Relationships and Related Transactions...................... 14 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..... 14 1 PART I ITEM 1. BUSINESS. INTRODUCTION The New York Times Company (the "Company") was incorporated on August 26, 1896, under the laws of the State of New York. The Company is a diversified media company including newspapers, television and radio stations, magazines, electronic information, and publishing and forest products investments. Financial information about industry segments is incorporated by reference to Note 17 to the Consolidated Financial Statements on page F-32 of this report. The Company currently classifies its businesses into the following segments: o Newspapers: The New York Times ("The Times"); The Boston Globe, a daily newspaper, and the Boston Sunday Globe (both editions, "The Globe"); 18 other daily and three non-daily newspapers in Alabama, California, Florida, Louisiana, North Carolina and South Carolina ("Regional Newspapers"); newspaper distributors in the New York City and Boston metropolitan areas; various newspaper on-line products; news, photo and graphics services and news and features syndication; TimesFax; The New York Times Index; and licensing of electronic databases and microform, CD-ROM products, and the trademarks and copyrights of The Times and The Globe. o Broadcasting: television stations WTKR(TV) in Norfolk, Virginia; WREG-TV in Memphis, Tennessee; KFOR-TV in Oklahoma City, Oklahoma; WNEP-TV in Scranton, Pennsylvania; WHO-TV in Des Moines, Iowa; WHNT-TV in Huntsville, Alabama; WQAD-TV in Moline, Illinois; and KFSM-TV in Fort Smith, Arkansas; and radio stations WQXR(FM) and WQEW(AM) in New York City. o Magazines: Golf Digest, Golf World and Golf Shop Operations. o Forest Products Investments and Other Joint Ventures: Minority equity interests in a Canadian newsprint company and a supercalendered paper manufacturing partnership in Maine, and a one-half interest in the International Herald Tribune. NEWSPAPERS The Newspaper Group segment consists of two categories: Newspapers (consisting of The Times, The Globe, 21 Regional Newspapers, newspaper distributors, and certain related businesses) and New Ventures (consisting of projects developed in electronic media by The Times, The Globe and the Regional Newspapers, as well as various new media investments). The New York Times Circulation The Times is a standard-size weekday (Monday through Friday) and Sunday newspaper which commenced publication in 1851. In 1997 The Times introduced a daily color New York edition with separate daily culture and sports sections, as well as other new features. The Times is circulated in each of the 50 states, the District of Columbia and worldwide. Approximately 61% of the weekday circulation is sold in the 31 counties that make up the greater New York City area, which includes New York City, Westchester and parts of upstate New York, Connecticut and New Jersey; 39% is sold elsewhere. On Sundays, approximately 58% of the circulation is sold in the greater New York City area and 42% elsewhere. According to reports of 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, 1998, of all seven-day United States newspapers, The Times's weekday circulation was the second largest and its Sunday circulation was the largest. 2 The Times's average weekday and Sunday circulations for the two 12-month periods ended September 30, 1998, as audited by ABC (except as indicated), are shown in the table below: Weekday Sunday ------- ------ (Thousands of copies) 1998 (unaudited).................................. 1,088.1 1,638.9 1997.............................................. 1,090.9 1,651.4 Approximately 58% of the weekday circulation and 53% of the larger Sunday circulation were sold through home and office delivery in 1998. During the year ended December 27, 1998, the average weekday circulation of The Times increased approximately 4,700 copies above 1997 to approximately 1,094,100 copies and the average Sunday circulation decreased by approximately 6,500 copies below 1997 to approximately 1,644,800 copies. Advertising Total advertising volume in The Times for the two years ended December 27, 1998, as measured by The Times, is shown in the table below. The "National" heading in the table below includes such categories as entertainment, financial, magazine and general advertising. Full Run ------------------------------ Preprint Retail National Classified Zoned Total(1) Copies Inches Inches Inches Inches Inches Distributed ------ ------- -------- ------ ------ --------- (Inches and Preprints in Thousands) 1998 587.2 1,392.7 996.9 1,019.6 3,996.4 343,070 1997 606.8 1,330.8 971.1 1,034.6 3,943.3 318,490 The table includes volume for The New York Times Magazine, which published 3,176 pages of advertising in 1998, compared with 3,116 pages in 1997. Advertising rates for The Times increased an average of 6% in January 1998, and 6% in January 1999. Based on recent data provided by Competitive Media Reporting, Inc., an independent agency that measures advertising sales volume and estimates advertising revenue, and The Times's internal analysis, The Times believes that it ranks first by a substantial margin in advertising revenue in the general weekday and Sunday newspaper field in the New York City metropolitan area. Production and Distribution Generally, The Times is printed at its production and distribution facilities in Edison, New Jersey, and College Point, New York. The Edison and College Point facilities print all sections of the weekday and Sunday newspapers (except The New York Times Magazine and the Sunday Television section) for distribution in the New York metropolitan area. Both facilities have the capacity to print in color and have modern, automated presses, packaging and distribution equipment. The Times has agreements with two commercial printing companies to print its Sunday Television section and The New York Times Magazine. - ---------- (1) All totals exclude preprint inches. 3 The editions of The Times distributed outside of the New York City area are printed under contract at the following sites: Region(1) Print Sites ------------------------------------------------------ Midwest Chicago, IL; Canton, OH ------------------------------------------------------ Northeast Boston, MA(2); Springfield, VA ------------------------------------------------------ Southeast Atlanta, GA; Ft. Lauderdale, FL; Lakeland, FL(3) ------------------------------------------------------ Southwest Austin, TX; Phoenix, AZ(4) ------------------------------------------------------ West Torrance and Concord, CA; Tacoma, WA ------------------------------------------------------ The Times currently has agreements with various newspapers and other delivery agents located in the United States and Canada to deliver The Times in their respective markets and, in some cases, to expand current markets. The agreements include various arrangements for delivery on Sundays and weekdays to homes and newsstands. A subsidiary of the Company, City & Suburban Delivery Systems, Inc. ("City & Suburban"), operates a wholesale newspaper distribution business that distributes The Times and other newspapers and periodicals in New York City, Long Island (New York), the counties of Westchester (New York) and Fairfield (Connecticut) and central and northern New Jersey. Approximately 86% of The Times's single-copy daily circulation and 73% of its single-copy Sunday circulation in the New York City metropolitan area are delivered to retail outlets by City & Suburban. Approximately 87% of The Times's daily home-delivered circulation and 90% of its Sunday home-delivered circulation in the New York City metropolitan area are delivered to depots by City & Suburban. - ---------- (1) Most advance sections of the Sunday newspaper distributed in these areas are printed at Edison, New Jersey, and College Point, New York. (2) At The Globe. (3) At the Company's regional newspaper, The Ledger. (4) Commenced in 1999. 4 Related Businesses Name Description of Business - -------------------------------------------------------------------------------- The New York Times Electronic Media Company: - -------------------------------------------------------------------------------- NYT Business Information Services Produces on-line computer databases and The New York Times Index, a print publication Licenses LEXIS/NEXIS, Dow Jones Business Information Services, UMI, The Dialog Corp., Online Computer Library Center and Reuters to store, market and distribute the Company's on-line computer databases Also licenses UMI to produce and sell The New York Times Index and The Times on microfilm and CD-ROM - -------------------------------------------------------------------------------- Consumer On-line Products The New York Times on America Online The New York Times on the Web (nytimes.com) New York Today (nytoday.com) The New York Times Learning Network (nytimes.com/learning) - -------------------------------------------------------------------------------- NYT Television Pursues certain programming ventures utilizing The Times and other content - -------------------------------------------------------------------------------- The New York Times News Services: - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- The Boston Globe The Globe is owned and published by the Company's subsidiary, Globe Newspaper Company, Inc. ("The Globe" may also be used to refer to Globe Newspaper Company, Inc.). Circulation The Globe is a standard-size weekday and Sunday newspaper which commenced publication in 1872, and was acquired by the Company in 1993. The Globe is distributed throughout New England, although its circulation is concentrated in the Boston metropolitan area. According to ABC reports, as of September 27, 1998, the weekday circulation of The Globe was the 14th largest of any weekday newspaper; circulation of the Sunday edition was the ninth largest of any Sunday newspaper published in the United States; and its weekday and Sunday circulation was the largest of all newspapers published in either Boston or New England. 5 The Globe's average weekday and Sunday paid circulation for the two 12-month periods ended March 29, 1998, and March 30, 1997, as audited by ABC, are shown in the table below: Weekday Sunday ------- ------ (Thousands of copies) 1998............................................. 474.9 754.0 1997............................................. 468.8 757.4 During the year ended December 27, 1998, the average weekday circulation of The Globe decreased approximately 5,000 copies below 1997 to approximately 469,800 copies and the average Sunday circulation decreased by approximately 9,700 copies below 1997 to approximately 745,500 copies. Approximately 73% of the weekday circulation and 63% of the larger Sunday circulation were sold through home or office delivery; the remainder were sold primarily on newsstands. Advertising The Globe's total advertising volume by category of advertising for the two years ended December 27, 1998, for all editions, as measured by The Globe, is set forth below: Full Run ------------------------------ Preprint Retail National Classified Zoned Total(1) Copies Inches Inches Inches Inches Inches Distributed ------ ------- -------- ------ ------ --------- (Inches and Preprints in Thousands) 1998 701.9 697.4 1,350.5 278.9 3,028.7 787,016 1997(2) 729.6 629.6 1,346.1 304.5 3,009.9 729,228 Advertising rates in each category of advertising were adjusted in 1998. The latest increase in certain retail advertising rates occurred on September 1, 1998. Increases in classified and national advertising rates were effective as of April 1, 1998, and July 1, 1998. These rate increases ranged from 3% to 5.5%. Based on information supplied by major daily newspapers published in New England and assembled by the New England Newspaper Association, Inc., for the 12-month period ending December 27, 1998, The Globe ranked first in advertising inches among all newspapers published in Boston and New England. Production and Distribution All editions of The Globe are printed and prepared for delivery at its main Boston plant or its Billerica, Massachusetts, satellite plant. Virtually all of The Globe's home-delivered circulation is delivered through The Globe's distribution subsidiary, Community Newsdealers, Inc. Direct single-copy distribution by The Globe and its subsidiary Retail Sales, Inc. accounted for 66% and 57% of the average weekday and Sunday single-copy distribution in 1998. - ---------- (1) All totals exclude preprint inches. (2) For comparability, 1997 has been restated to conform with the 1998 presentation. 6 Regional Newspapers The Company currently owns 18 daily and three non-daily smaller-city newspapers.
Daily Newspapers Non-Daily Newspapers - -------------------------------------------------------------------------- ----------------------------------------- The Gadsden Times (Ala.) The Gainesville Sun (Fla.) Marco Island Eagle (Fla.) The Tuscaloosa News (Ala.) The Ledger (Lakeland, Fla.) The News-Leader (Fernandina Beach, Fla.) Times Daily (Florence, Ala.) Daily World (Opelousas, La.) The News-Sun (Sebring/Avon Park, Fla.) Santa Barbara News-Press (Calif.) The Courier (Houma, La.) The Press Democrat (Santa Rosa, Calif.) The Daily Comet (Thibodaux, La.) Daily News (Palatka, Fla.) The Dispatch (Lexington, N.C.) Lake City Reporter (Fla.) Times-News (Hendersonville, N.C.) Sarasota Herald-Tribune (Fla.) Wilmington Morning Star (N.C.) Star-Banner (Ocala, Fla.) Spartanburg Herald-Journal (S.C.)
The Regional Newspapers' circulation for the years ended December 27, 1998, and December 28, 1997, is shown in the table below: Daily Weekday Non-Daily Sunday ------------- --------- ------ (Thousands of Copies) 1998 736.8 32.6 787.6 1997 733.4 33.0 788.7 Advertising volume, stated on the basis of six columns per page, was 16,073,900 inches in 1998, compared with 15,645,900 inches in 1997. Preprints distributed in 1998 were 1,082,712,000, compared with 1,013,200,000 in 1997. New Ventures The following businesses relating to Newspapers were classified by the Company as "New Ventures" during 1998: The New York Times on America Online, The New York Times on the Web, New York Today, The New York Times Learning Network, boston.com, CareerPath.com, various Regional Newspaper on-line and cable services, NYT Television, and the Company's investments in Classified Ventures, Inc., OVATION and Zip2 Corp. The New York Times on America Online, The New York Times on the Web, New York Today, The New York Times Learning Network and NYT Television are described above under "The New York Times -- Related Businesses." Boston Globe Electronic Publishing, Inc. operates The Globe's Web site boston.com, an Internet gateway to Boston and New England. The Times and The Globe have participated in the development of CareerPath.com, an employment database on the Internet. Several Regional Newspapers have created on-line services tailored to their local market interests and needs. The Sarasota Herald-Tribune operates a 24-hour local news cable television channel which reaches approximately 156,000 subscribers. The Company has investments in Classified Ventures, Inc., a national on-line network providing classified advertising through both nationally branded and local affiliate Web sites; OVATION, a visual and performing arts cable television network; and Zip2 Corp., a provider of software and on-line business systems designed to facilitate newspapers' efforts to capture on-line advertising revenue. Compaq Computer Corp. has agreed to purchase Zip2 Corp., and the Company expects to sell its interest in Zip2 Corp. in connection with this transaction. 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 ---------------------------------------------------------- WNEP-TV (Scranton, Penn.) August 1, 1999 ---------------------------------------------------------- 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 ---------------------------------------------------------- WQXR(FM) (New York, NY) June 1, 2006 WQEW(AM) (New York, NY) June 1, 2006 ---------------------------------------------------------- The Company anticipates that its present and 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 individual stations rather than networks), and compensation paid by the networks for carrying commercial network programs. Market's Network Station Nielsen Ranking(1) Affiliation Band ----------------------------------------------------- WTKR(TV) 40 CBS VHF ----------------------------------------------------- WREG-TV 43 CBS VHF ----------------------------------------------------- KFOR-TV 45 NBC VHF ----------------------------------------------------- WNEP-TV 51 ABC UHF(2) ----------------------------------------------------- WHO-TV 70 NBC VHF ----------------------------------------------------- WHNT-TV 81 CBS UHF(2) ----------------------------------------------------- WQAD-TV 90 ABC VHF ----------------------------------------------------- KFSM-TV 117 CBS VHF ----------------------------------------------------- The Company's two radio stations serve the New York City metropolitan area. WQXR(FM) is currently the only commercial classical music station serving this market, which is the nation's largest radio audience. In December 1998, the Company entered into a Time Brokerage Agreement with ABC, Inc., under which ABC, Inc. will provide substantially all of the programming for WQEW(AM) for an eight-year period. ABC, Inc. replaced WQEW's former format of American popular standards with Radio Disney, a national radio network for children age 12 and under. 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 A.C. Nielsen Company, a research company that measures audiences for television stations. (2) All other stations in this market are also in the UHF band. 8 MAGAZINES The Magazine Group segment consists of two categories: Magazines (including those publications set forth in the table below and related activities in the golf field) and New Ventures. As of December 27, 1998, the Company published the magazines listed in the chart below:
Percentage Percentage Increase Increase (Decrease) in (Decrease) in Average Advertising Subject/ Average Circulation Advertising Pages Magazine Frequency Audience Rate Base Circulation(1) Over 1997 Pages(2) Over 1997 - -------------------- ------------------ ---------- ------------ -------------- ----------- ----------- ------------- Golf Digest Monthly Golf 1,550,000 1,552,100 2.1 1,394 1.8 Golf World 46 issues per year Golf 150,000 158,400 6.6 1,283 (11.9) Golf Shop Operations 10 issues per year Golf trade 17,500(3) 17,900 (1.6) 1,053 (0.3)
New Ventures The Magazine Group offers various golf and travel information and excerpts from its publications on the World Wide Web. In February 1998 the Company sold the assets of Golf Digest Information Systems, Inc. FOREST PRODUCTS INVESTMENTS AND OTHER JOINT VENTURES The Company has ownership interests in one newsprint mill and one supercalendered paper mill (the "Forest Products Investments") and the International Herald Tribune. Forest Products Investments The Company has a 49% equity interest in a Canadian newsprint company, Donohue Malbaie Inc. ("Malbaie"). The other 51% is owned by Donohue, Inc. ("Donohue"), a publicly-traded Canadian company whose voting shares are controlled by Quebecor, a Canadian publishing company. Malbaie purchases pulp from Donohue and manufactures newsprint from this raw material on the paper machine it owns within the Donohue paper mill at Clermont, Quebec. Malbaie is wholly dependent upon Donohue for its pulp. In 1998 Malbaie produced 207,000 metric tons of newsprint, 72,000 tons of which were sold to the Company, with the balance sold to Donohue for resale. The Company has an equity interest in a partnership operating a supercalendered paper mill in Maine, Madison Paper Industries ("Madison"). The Company's interest in Madison is 40%. Madison produces supercalendered paper at its facility in Madison, Maine. Madison purchases all of its wood from local suppliers, mostly under long-term contracts. In 1998 Madison produced 175,000 metric tons, 11,000 tons of which were sold to the Company. The debt of Malbaie and Madison is not guaranteed by the Company. Malbaie and Madison are subject to comprehensive environmental protection laws, regulations and orders of provincial, federal, state and local authorities of Canada or the United States (the "Environmental Laws"). The Environmental Laws impose effluent and emission limitations and require Malbaie and Madison to obtain, and operate in compliance with the conditions of, permits and other governmental authorizations ("Governmental Authorizations"). Malbaie and Madison follow policies and operate monitoring programs to ensure compliance with applicable Environmental Laws and Governmental Authorizations and to minimize exposure to environmental liabilities. Various regulatory authorities - ---------- (1) As reported by the publisher to ABC or the Business Publications Association. (2) As reported by the publisher to Publisher's Information Bureau ("PIB"); or, in the case of Golf Shop Operations, as calculated by the publisher using the same methodology as for PIB. (3) For this trade publication, the average print order is disclosed as the applicable measure for advertisers. 9 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 The Company and The Washington Post Company each own a one-half interest in the International Herald Tribune S.A.S., which publishes the International Herald Tribune. The newspaper is edited in Paris and printed in Athens, Bologna, Frankfurt, Hong Kong, Jakarta, Kuala Lumpur, London, Marseille, New York, Paris, Singapore, Tel Aviv, The Hague, Tokyo, Toulouse and Zurich. RAW MATERIALS The primary raw materials used by the Company are newsprint and supercalendered and coated paper. Neither the Company nor any of its businesses is dependent on any one supplier of paper. In 1998 and 1997, the Company used the following types and quantities of paper (all amounts in metric tons): Coated, Supercalendered Publication Newsprint and Other Paper ----------------------------------------------------------- 1998 1997 1998 1997 ----------------------------------------------------------- The Times(1) 312,000 295,000 22,000 22,000 ----------------------------------------------------------- The Globe(1) 141,000 141,000 5,000 5,000 ----------------------------------------------------------- Regional Newspapers 98,500 94,000 -- -- ----------------------------------------------------------- Magazine Group -- -- 9,900 14,500(2) ----------------------------------------------------------- TOTAL 551,500 530,000 36,900 41,500 ----------------------------------------------------------- The paper used by The Times, The New York Times Magazine, The Globe, the Regional Newspapers and the magazines published by the Magazine Group was purchased under long-term contracts with unrelated suppliers and related suppliers in which the Company holds equity interests (see "Forest Products Investments"). COMPETITION The Times competes with newspapers of general circulation in New York City and its suburbs. The Times also competes in varying degrees with national publications such as The Wall Street Journal and USA Today and with magazines, television, radio, the Internet and other media. In 1998, Competitive Media Reporting, Inc., an independent agency that measures advertising sales volume and estimates advertising revenue, classified The Times as a national newspaper. The Regional Newspapers and the International Herald Tribune compete with a variety of other advertising media in their respective markets. The Globe competes with other daily, weekly and national newspapers distributed in Boston, its neighboring suburbs and the greater New England region, including, among others, The Boston Herald (weekday and Sunday). The Globe also competes with other communications media, such as direct mail, magazines, radio, the Internet and television (including cable television). - ---------- (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) Includes coated paper used by six magazines sold in November 1997. 10 The magazines published by the Company compete directly with other golfing publications as well as with general interest magazines and other media, primarily broadcast and cable television. All of the Company's television stations compete directly with other television stations in their respective markets and with other video services, such as cable network programming carried on local cable systems and, to a lesser extent, with the Internet. WQXR(FM) competes for listeners with WNYC(FM) (a non-commercial station) for the classical music audience and for listeners and revenues with many adult-audience commercial radio stations and other media in New York City and surrounding suburbs. The New York Times Syndicate's operations compete with several other syndicated features and supplemental news services. EMPLOYEES As of December 27, 1998, the Company had approximately 13,200 full-time equivalent employees. The Times 5,000 The Globe 3,300 Regional Newspapers 3,500 Broadcast Group 800 Magazine Group 300 Corporate/Shared Service Center 300 ------ Total Company 13,200 ====== Labor Relations Approximately 3,615 full-time equivalent employees of The Times and City & Suburban are represented by 16 unions. The Times has collective bargaining agreements effective through March 30, 2000, with all of its production unions, except for the New York Newspaper Printing Pressmen's Union (which contract expires on March 30, 2005, and covers approximately 450 employees), and with all of its non-production unions, except for the Newspaper Guild of New York, the International Association of Machinists and the International Union of Operating Engineers (which contracts expire on March 30, 2003, and cover approximately 1,740 employees), and the International Brotherhood of Electricians (which contract expires on March 30, 1999, and covers approximately five employees). City & Suburban has collective bargaining agreements effective through March 30, 2000, with its sole production union and with two of its three non-production unions. City & Suburban's contract with the United Auto Workers (covering approximately 10 employees in this non-production union) expired in May 1995; the parties are continuing to negotiate a successor contract. The agreements described above set wages through their terms except: the Newspaper and Mail Deliverers' Union agreements with The Times and City & Suburban, covering approximately 650 production employees, do not set wage increases for the 1996-2000 period; the Typographers' Union agreement with The Times, covering approximately 50 production employees, does not set wages for the 1996-2000 period; and the Pressman's Union agreement with The Times, covering approximately 450 production employees, does not set wages for the 2001-2005 period. Wages for these time periods are subject to negotiation, and if the negotiations are unsuccessful, are submitted to binding arbitration for resolution. Approximately 2,100 full-time equivalent employees of The Globe are represented by 12 unions. On December 28, 1997, The Globe's labor agreement with the Boston Globe Employees Association, an affiliate of The Newspaper Guild 11 representing non-production employees, expired. Negotiations are continuing and The Globe expects them to be completed in 1999. In 1998 The Globe concluded its negotiations with Boston Mailers Union No. 1 for a six-year contract effective January 1, 1996, through December 31, 2001. Eight other production unions have contracts that expired December 31, 1998. Negotiations have commenced for successor contracts. The Globe expects to conclude these negotiations during 1999. Two other production unions have contracts that continue to be in effect with expiration dates of December 31, 2001 (subject to a wage reopener effective December 31, 1998) and December 31, 2006. The Company cannot predict the timing or the outcome of the various negotiations described above. Two other entities owned by the Company (The Press Democrat and WQXR(FM)) also have collective bargaining agreements covering certain of their employees. 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 27, 1998, are listed below. General Character Approximate Area in Approximate Area in of Property Square Feet (Owned) Square Feet (Leased) - -------------------------------------------------------------------------- NEWSPAPER PUBLISHING: - -------------------------------------------------------------------------- Printing plants, business and editorial offices, garages and warehouse space located in: - -------------------------------------------------------------------------- New York, NY 714,000 107,500 - -------------------------------------------------------------------------- College Point, NY -- 515,000(1) - -------------------------------------------------------------------------- Edison, NJ -- 1,300,000(2) - -------------------------------------------------------------------------- Boston, MA 652,000 -- - -------------------------------------------------------------------------- Billerica, MA 290,000 -- - -------------------------------------------------------------------------- Westwood, MA 115,000 -- - -------------------------------------------------------------------------- Other locations 1,324,600 548,000 - -------------------------------------------------------------------------- BROADCASTING - -------------------------------------------------------------------------- Business offices, studios and transmitters at various locations 324,820 25,000 - -------------------------------------------------------------------------- MAGAZINE PUBLISHING 87,000 34,500 - -------------------------------------------------------------------------- TOTAL 3,507,420 2,530,000 - -------------------------------------------------------------------------- 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 position or results of operations of the Company. - ---------- (1) The Company is leasing a 31-acre site in College Point, New York, where its printing and distribution plant is located, and has the option to purchase the property at any time prior to the end of the lease in 2019. (2) The Edison production and distribution facility is occupied pursuant to a long-term lease with renewal and purchase options. 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. Executive Officers of the Registrant
Employed By Registrant Position(s) As Of Name Age Since February 26, 1999 - -------------------------- --- ----------- ------------------------------------------------------------- Corporate Officers Arthur Sulzberger, Jr. 47 1978 Chairman (since 1997) and Publisher of The Times (since 1992) Russell T. Lewis 51 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 49 1984 Vice Chairman and Senior Vice President (since 1997); Vice President, Operations Development (1996 to 1997); Executive Vice President, Sports/Leisure Magazines and Publisher of Tennis (1994 to 1995); Executive Vice President and General Manager of Women's Magazines (1991 to 1994) Cynthia H. Augustine 41 1986(2) Senior Vice President (since 1998), Human Resources; Partner in Sabin, Bermant and Gould LLP (1994 to 1998) John M. O'Brien 56 1960 Senior Vice President and Chief Financial Officer (since 1998); Senior Vice President (1996 to 1998), Operations; Executive Vice President (1992 to 1996) and Deputy General Manager (1991 to 1996) of The Times Solomon B. Watson IV 54 1974 Senior Vice President (since 1996); Vice President (1990 to 1996); General Counsel (since 1989) Laura J. Corwin 53 1980 Vice President (since 1997); Secretary (since 1989) and Corporate Counsel (1993 to 1997) Stuart Stoller 43 1996 Vice President and Corporate Controller (since 1996); Controller of Coopers and Lybrand L.L.P. (1995); Senior Vice President, Control and Accounting, of R. H. Macy & Co., Inc. ("Macy's") (1993 to 1995) Ellen Taus 40 1996 Vice President (since 1998) and Treasurer (since 1997); Assistant Treasurer (1996 to 1997); Independent Financial and Transition Consultant (1994 to 1996); Vice President, Corporate Finance, of Macy's (1992 to 1994)
- ---------- (1) Mr. Lewis left the Company in 1973 and returned in 1977. (2) Ms. Augustine left the Company in 1993 and returned in 1998. 13
Employed By Registrant Position(s) As Of Name Age Since February 26, 1999 - -------------------------- --- ----------- ------------------------------------------------------------- Operating Unit Executives Leonard P. Forman 53 1974(1) President and Chief Executive Officer, The New York Times Company Magazine Group, Inc. (since 1998); Senior Vice President (1996-1998), Corporate Development, New Ventures and Electronic Businesses; President and Chief Executive Officer of NYNEX/Newsday electronic service joint venture (1995); Chief Operating Officer of the Newspaper Association of America (1992 to 1994) Stephen Golden 51 1967(2) Vice President, Forest Products, Health, Safety and Environmental Affairs (since 1992); President of the Company's Forest Products Group (since 1994) C. Frank Roberts 55 1970 Vice President, Broadcasting (since 1986); President, The New York Times Company Broadcast Group (since 1985) Janet L. Robinson 48 1993 President and General Manager of The Times (since 1996); Senior Vice President, Advertising of The Times (1995-1996); Vice President (1993-1995) and Director (1994-1995) of Advertising of The Times Benjamin B. Taylor 52 1993 Chairman and Chief Executive Officer of Globe Newspaper Company, Inc. (since 1998) and Publisher of The Boston Globe (since 1997); President of The Globe (1993-1997) James C. Weeks 56 1971 President, The New York Times Company Regional Newspaper Group (since 1993); Executive Vice President, Operations, Regional Newspaper Group (1988 to 1993)
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information required by this item appears at page F-35 of this Form 10-K. ITEM 6. SELECTED FINANCIAL DATA. The information required by this item appears at page F-1 of this Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item appears at pages F-3 to F-12 of this Form 10-K. - ---------- (1) Mr. Forman left the Company in 1986 and returned in 1996. (2) Mr. Golden left the Company in 1969 and returned in 1974. 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item appears at pages F-13 to F-34 and page F-36 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 section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" on page 7 and pages 9 to 13, but only up to and not including the section entitled "Certain Information About the Board of Directors," of the Company's Proxy Statement for the 1999 Annual Meeting of Stockholders. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is incorporated by reference to pages 15 to 19, but only up to and not including the section entitled "Performance Presentation," of the Company's Proxy Statement for the 1999 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated by reference to pages 1 to 9, but only up to and not including the section entitled "Proposal Number 1-Election of Directors," of the Company's Proxy Statement for the 1999 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is incorporated by reference to the section on pages 12 and 13 entitled "Interest of Directors in Certain Transactions of the Company" and pages 16 to 19, but only up to and not including the section entitled "Performance Presentation," of the Company's Proxy Statement for the 1999 Annual Meeting of Stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A) DOCUMENTS FILED AS PART OF THIS REPORT (1) Financial Statements and Supplemental Schedules (a) The Consolidated Financial Statements of the Company are filed as part of this Form 10-K and are set forth on pages F-13 to F-34. The report of Deloitte & Touche LLP, Independent Public Accountants, dated January 27, 1999, is set forth on page F-35 of this Form 10-K. 15 (b) The following additional consolidated financial information is filed as part of this Form 10-K and should be read in conjunction with the Consolidated Financial Statements set forth on pages F-13 to F-34. Schedules not included with this additional consolidated financial information have been omitted either because they are not applicable or because the required information is shown in the Consolidated Financial Statements at the aforementioned pages. Page ---- Ratio of Earnings to Fixed Charges........................ Exhibit 12 Independent Auditors' Consent............................. Exhibit 23 Consolidated Schedules for the Three Years Ended December 27, 1998: II--Valuation and Qualifying Accounts.................. S-1 Separate financial statements and supplemental schedules of associated companies accounted for by the equity method are omitted in accordance with the provisions of Rule 3-09 of Regulation S-X. (2) Exhibits (2.1) Agreement and Plan of Merger, dated as of June 11, 1993, as amended by the First Amendment dated as of August 12, 1993, by and among the Company, Sphere, Inc. and Affiliated Publications, Inc. ("API") (filed as Exhibit 2 to the Form S-4 Registration Statement, Registration No. 33-50043, on August 23, 1993, and included as Annex I to the Joint Proxy Statement/Prospectus included in such Registration Statement (schedules omitted--the Company agrees to furnish a copy of any schedule to the Securities and Exchange Commission upon request), and incorporated by reference herein). (3.1) Certificate of Incorporation as amended and restated to reflect amendments effective June 19, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (3.2) By-laws as amended through May 21, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (4) The Company agrees to furnish to the Commission upon request a copy of any instrument with respect to long-term debt of the Company and any subsidiary for which consolidated or unconsolidated financial statements are required to be filed, and for which the amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. (9.1) Globe Voting Trust Agreement, dated as of October 1, 1993, as amended effective October 1, 1995 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.1) The Company's Executive Incentive Compensation Plan as amended through December 20, 1990 (filed as an Exhibit to the Company's Form 10-K dated March 1, 1991, and incorporated by reference herein). (10.2) The Company's 1991 Executive Stock Incentive Plan, as amended through April 16, 1998 (filed as an Exhibit to the Company's Form 10-Q dated May 7, 1998, and incorporated by reference herein). (10.3) The Company's 1991 Executive Cash Bonus Plan, as amended through April 16, 1998 (filed as an Exhibit to the Company's 10-Q dated May 7, 1998, and incorporated by reference herein). (10.4) The Company's Non-Employee Directors' Stock Option Plan, as amended through February 19, 1998 (filed as an Exhibit to the Company's Form 10-Q dated May 7, 1998, and incorporated by reference herein). 16 (10.5) The Company's Supplemental Executive Retirement Plan, as amended and restated through January 1, 1993 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.6) Amendment No. 1, dated May 1, 1997, to the Company's Supplemental Executive Retirement Plan (filed as an Exhibit to the Company's Form 10-Q dated March 30, 1997, and incorporated by reference herein). (10.7) Lease (short form) between the Company and Z Edison Limited Partnership, dated April 8, 1987 (filed as an Exhibit to the Company's Form 10-K dated March 27, 1988, and incorporated by reference herein). (10.7.1) Amendment to Lease between the Company and Z Edison Limited Partnership, dated May 14, 1997 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.7.2) Second Amendment to Lease between the Company and Z Edison Limited Partnership, dated June 30, 1998 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.8) Agreement of Lease, dated as of December 15, 1993, between The City of New York, Landlord, and the Company, Tenant (as successor to New York City Economic Development Corporation (the "EDC"), pursuant to an Assignment and Assumption of Lease With Consent, made as of December 15, 1993, between the EDC, as Assignor, to the Company, as Assignee) (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.9) Funding Agreement #1, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.10) Funding Agreement #2, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.11) Funding Agreement #3, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.12) Funding Agreement #4, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.13) New York City Public Utility Service Power Service Agreement, made as of May 3, 1993, between The City of New York, acting by and through its Public Utility Service, and The New York Times Newspaper Division of the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.14) Employment Agreement, dated May 19, 1993, between API, Globe Newspaper Company and William O. Taylor (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.15) API's 1989 Stock Option Plan (filed as Annex F-1 to API's Proxy Statement-Joint Prospectus, dated as of April 28, 1989, contained in API's Registration Statement on Form S-4 (Registration Statement No. 33-28373) declared effective April 28, 1989, and incorporated by reference herein). (10.16) Globe Newspaper Company, Inc. Supplemental Executive Retirement Plan, as amended effective December 16, 1998. (10.17) API's 1990 Stock Option Plan (Restated 1991) (filed as Exhibit 1 to API's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1991 (Commission File No. 1-10251), and incorporated by reference herein). 17 (10.18) The Company's Deferred Executive Compensation Plan, as amended effective December 28, 1998, and January 1, 1999. (10.19) The New York Times Designated Employees Deferred Earnings Plan, as amended effective December 28, 1998, and January 1, 1999. (10.20) 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). (10.21) Distribution Agreement, dated as of September 24, 1998, by and among the Company, Morgan Stanley & Co., Incorporated, Chase Securities Inc. and Salomon Smith Barney Inc. (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.22) Exchange Rate Agency Agreement, dated as of September 24, 1998, by and between the Company and Morgan Stanley Dean Witter (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.23) Calculation Agent Agreement, dated as of September 24, 1998, by and between the Company and The Chase Manhattan Bank (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (12) Ratio of Earnings to Fixed Charges. (21) Subsidiaries of the Company. (23) Consent of Deloitte & Touche LLP. (27) Financial Data Schedules. (B) REPORTS ON FORM 8-K The Company filed a report on Form 8-K dated September 24, 1998, reporting the filing of the Company's Registration Statement on Form S-3 relating to the issuance by the Company from time to time of its unsecured debt securities consisting of notes, debentures or other evidences of indebtedness at an aggregate initial offering price of $300,000,000 or, if applicable, the equivalent thereof in one or more foreign currencies or currency units. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 26, 1999 (Registrant) THE NEW YORK TIMES COMPANY By: /s/ LAURA J. CORWIN ----------------------------------------------- Laura J. Corwin, Vice President and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- ARTHUR OCHS SULZBERGER Chairman Emeritus, Director February 26, 1999 ARTHUR SULZBERGER, JR. Chairman, Director (Principal February 26, 1999 Executive Officer) RUSSELL T. LEWIS Chief Executive Officer, February 26, 1999 President and Director MICHAEL GOLDEN Vice Chairman, Senior Vice February 26, 1999 President and Director JOHN F. AKERS Director February 26, 1999 BRENDA C. BARNES Director February 26, 1999 RICHARD L. GELB Director February 26, 1999 ROBERT A. LAWRENCE Director February 26, 1999 ELLEN R. MARRAM Director February 26, 1999 JOHN M. O'BRIEN Senior Vice President and February 26, 1999 Chief Financial Officer (Principal Financial Officer) CHARLES H. PRICE II Director February 26, 1999 GEORGE L. SHINN Director February 26, 1999 DONALD M. STEWART Director February 26, 1999 STUART STOLLER Vice President, Corporate February 26, 1999 Controller (Principal Accounting Officer) JUDITH P. SULZBERGER Director February 26, 1999 WILLIAM O. TAYLOR Director February 26, 1999 THE NEW YORK TIMES COMPANY Appendix 1998 Financial Report - -------------------------------------------------------------------------------- Contents Page - -------------------------------------------------------------------------------- Selected Financial Data F-1 Management's Discussion and Analysis F-3 Consolidated Statements of Income F-13 Consolidated Balance Sheets F-14 Consolidated Statements of Cash Flows F-16 Consolidated Statements of Stockholders' Equity F-18 Notes to the Consolidated Financial Statements F-19 Independent Auditors' Report F-35 Management's Responsibilities Report F-35 Market Information F-35 Quarterly Information F-36 Ten-Year Supplemental Financial Data F-38 F-1 - -------------------------------------------------------------------------------- SELECTED FINANCIAL DATA
Years Ended ----------------------------------------------------------------------------- December 27, December 28, December 29, December 31, ------------- ------------- ------------- ------------------------- (In thousands, except per share and employee data) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ REVENUES AND INCOME Revenues $2,936,705 $2,866,418 $2,628,271 $2,428,124 $2,396,517 Operating profit 515,220 455,102 173,280 232,749 210,899 Income before income taxes and extraordinary item 505,520 437,365 197,909 233,839 388,736 Extraordinary item, net of tax - debt extinguishment(1) (7,716) -- -- -- -- Net income 278,914 262,301 84,534 135,860 213,349 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL POSITION Property, plant and equipment - net $1,326,196 $1,366,931 $1,358,029 $1,266,609 $1,158,751 Total assets 3,465,109 3,623,183 3,539,871 3,389,704 3,137,631 Long-term debt and capital lease obligations 597,818 535,428 636,632 637,873 523,196 Common stockholders' equity 1,531,470 1,729,297 1,623,523 1,610,437 1,543,539 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OF COMMON STOCK(2) Basic earnings per share Earnings before extraordinary item $1.52 $1.36 $ .43 $ .70 $1.02 Extraordinary item, net of tax - debt extinguishment(1) (.04) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income $1.48 $1.36 $ .43 $ .70 $1.02 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share Earnings before extraordinary item $1.49 $1.33 $ .43 $ .70 $1.02 Extraordinary item, net of tax - debt extinguishment(1) (.04) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income $1.45 $1.33 $ .43 $ .70 $1.02 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends $ .37 $ .32 $ .29 $ .28 $ .28 Common stockholders' equity $8.11 $8.96 $ 8.34 $ 8.31 $7.42 - ------------------------------------------------------------------------------------------------------------------------------------ KEY RATIOS (see notes on F-2) Operating profit to revenues 18% 16% 11% 10% 9% Return on average common stockholders' equity 17% 15% 10% 8% 7% Return on average total assets 8% 7% 5% 4% 3% Long-term debt and capital lease obligations to total capitalization 28% 24% 28% 28% 25% Current assets to current liabilities .83 .92 .74 .92 .92 - ------------------------------------------------------------------------------------------------------------------------------------ FULL-TIME EQUIVALENT EMPLOYEES 13,200 13,100 12,800 12,300 12,800 - ------------------------------------------------------------------------------------------------------------------------------------
All earnings per share amounts for special items on the following page are the same for basic and diluted earnings per share unless otherwise noted. (1) See Note 8 of the Notes to the Consolidated Financial Statements. (2) All share and per-share information is presented on a post two-for-one split basis. The split was effective on June 17, 1998. F-2 The following transactions are not reflected in the respective year for income amounts used in the applicable key ratio calculations presented above: In 1998 the Company recorded an $8 million after-tax extraordinary item in connection with the Company's repurchase of $78 million of its $150 million, 8.25% notes due in 2025 (see Note 8 of the Notes to the Consolidated Financial Statements). In addition, the Company recorded an $8 million pre-tax gain ($5 million after-tax) from the satisfaction of a post-closing requirement related to the 1997 sale of assets of the Company's tennis, sailing and ski magazines. The Company also recorded a $5 million pre-tax gain ($3 million after-tax) from the sale of equipment. These items reduced earnings per share by $.01. In 1997 the Company recorded an $18 million favorable tax adjustment resulting from the completion of the Company's federal income tax audits for periods through 1992 (see Note 9 of the Notes to the Consolidated Financial Statements). In addition, the Company recorded aggregate pre-tax gains totaling $10 million ($6 million after-tax) from the sale of assets of the Company's tennis, sailing and ski magazines and certain other properties, net of the exit costs associated with the shutdown of a golf-related business (see Note 2 of the Notes to the Consolidated Financial Statements). The Company also recorded a $10 million pre-tax noncash charge ($6 million after-tax) relating to the adoption of Emerging Issues Task Force Issue No. 97-13, Accounting for Costs Incurred in Connection with a Consulting Contract or an Internal Project That Combines Business Process Reengineering and Information Technology Transformation ("EITF 97-13") (see Note 3 of the Notes to the Consolidated Financial Statements). These items increased earnings per share by $.09. In 1996 the Company recorded a $127 million pre-tax noncash charge ($95 million after-tax) relating to Statement of Financial Accounting Standards No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of ("SFAS 121 charge") (see Note 4 of the Notes to the Consolidated Financial Statements). The Company also recorded pre-tax gains totaling $33 million ($18 million after-tax) from the sale of a building and the realization of a gain contingency from the disposition of a paper mill in a prior year (see Note 2 of the Notes to the Consolidated Financial Statements). These items reduced basic earnings per share by $.40 and diluted earnings per share by $.39. In 1995 the Company recorded a pre-tax gain of $11 million ($5 million after-tax) from the sale of several small regional newspapers (see Note 2 of the Notes to the Consolidated Financial Statements). This gain increased earnings per share by $.03. In 1994 the Company recorded a net pre-tax gain of $201 million ($103 million after-tax) from the sale of its Women's Magazines Division and U.K. golf publications, and the disposition of a minority interest in a Canadian paper mill. This gain increased basic and diluted earnings per share by $.50 and $.49. F-3 MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW In 1998 newspapers contributed 91% of the Company's $2.94 billion in revenues, while broadcast accounted for 5% and magazines for 4%. Advertising revenues accounted for 71% of the Company's total revenues in 1998, circulation revenues made up 23%, and newspaper distribution operations and database royalties made up the balance. Newsprint is the major component of the Company's cost of raw materials. Newsprint market prices in 1998 increased over the prior year, although they did not rise to the levels of 1996. Newsprint prices are expected to soften in 1999 from 1998 levels. Below is an analysis of the Company's operating costs for the year ended December 27, 1998. CONSOLIDATED OPERATING EXPENSE COMPONENTS [The following table was depicted as a bar graph in the printed materials.] [GRAPHIC OMITTED] Wages and Benefits 41% Raw Materials 15% Other Operating Costs 36% Depreciation & Amortization 8% RESULTS OF OPERATIONS CONSOLIDATED RESULTS The Company's consolidated financial results for 1998, 1997 and 1996 were as follows: - -------------------------------------------------------------------------------- % Change --------------- (In millions, 1998 1997 1996 98-97 97-96 except per share data) - -------------------------------------------------------------------------------- Revenues $ 2,937 $ 2,866 $ 2,628 2.5% 9.1% - -------------------------------------------------------------------------------- Operating profit $ 515 $ 455 $ 173 13.2% N/A - -------------------------------------------------------------------------------- Net Income before special items $ 283 $ 249 $ 187 13.7% 33.2% Special items (4) 13 (102) N/A N/A - -------------------------------------------------------------------------------- Total $ 279 $ 262 $ 85 6.5% N/A - -------------------------------------------------------------------------------- Diluted earnings per share before special items $ 1.48 $ 1.26 $ .94 17.5% 34.0% Special items (.03) .07 (.51) N/A N/A - -------------------------------------------------------------------------------- Total $ 1.45 $ 1.33 $ .43 9.0% N/A - -------------------------------------------------------------------------------- Revenues were $2.94 billion in 1998, up from $2.87 billion in 1997. The 1997 revenues were up 9.1% from $2.63 billion in 1996. Revenues in all three years improved mostly as a result of higher advertising rates and volume. On a comparable basis, adjusted for acquisitions and dispositions, revenues increased 4.3% in 1998 and 7.2% in 1997. For an explanation of special items, see "Special Items" section below. All references to earnings per share in this Management's Discussion and Analysis are to diluted earnings per share and reflect a two-for-one stock split. The split was effective on June 17, 1998. Operating profit for 1998 increased 13.2% to $515 million from $455 million in 1997, mainly due to higher advertising revenues at the Newspaper Group and tighter cost controls throughout the Company, despite higher newsprint expense. In 1997 operating profit rose to $455 million from $173 million in 1996. Operating profit for 1997, exclusive of special items, rose to $474 million from $344 million in 1996. The improvement in operating profit was mainly due to higher advertising revenues and lower newsprint expense in the Newspaper Group and the continuing strong performance of KFOR-TV in Oklahoma City, Oklahoma, and WHO-TV in Des Moines, Iowa, which the Company acquired in 1996. F-4 The Company's consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) for 1998 increased 10.9% to $724 million, excluding all special items except costs associated with work force reductions ("Buyouts"). Excluding all special items, EBITDA rose 10.3% to $730 million for 1998. For 1997, EBITDA rose to $653 million from $466 million in 1996 excluding all special items except Buyouts. EBITDA for 1997, excluding all special items, was $662 million compared with $510 million in 1996. EBITDA is presented because it is a widely accepted indicator of funds available to service debt, although it is not a measure of liquidity or of financial performance under generally accepted accounting principles ("GAAP"). The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. OPERATING EXPENSES Consolidated operating expenses were as follows:
- ---------------------------------------------------------------------------------------------------------- Increase/ (Decrease) % Change ---------------------------------- (In millions) 1998 1997 1996 98-97 97-96 - ---------------------------------------------------------------------------------------------------------- Production costs Raw materials $ 354 $ 323 $ 363 9.6% (11.0%) Wages and benefits 598 605 558 (1.2%) 8.4% Other 509 484 440 5.2% 10.0% - ---------------------------------------------------------------------------------------------------------- Total production costs 1,461 1,412 1,361 3.5% 3.7% - ---------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses 960 999 967 (3.9%) 3.3% - ---------------------------------------------------------------------------------------------------------- Impairment loss -- -- 127 N/A N/A - ---------------------------------------------------------------------------------------------------------- Total $ 2,421 $ 2,411 $ 2,455 .4% (1.8%) - ----------------------------------------------------------------------------------------------------------
Production costs for 1998 rose 3.5% to $1.5 billion. This increase was mainly due to higher newsprint expense offset by lower costs as a result of certain divested properties. In 1997 production costs increased 3.7% to $1.4 billion. That increase was primarily due to higher salary and payroll-related costs and depreciation expenses associated with new production facilities, partly offset by lower newsprint expense. Selling, general and administrative ("SGA") expenses for 1998 decreased 3.9% to $1 billion from 1997 as a result of lower compensation costs and the disposition of six magazines and other properties. In 1997 SGA expenses increased 3.3% over 1996. SGA expenses for 1997, exclusive of Buyouts and the EITF 97-13 charge (see Note 3 of the Notes to the Consolidated Financial Statements), increased 6.2% to $980 million from $923 million in 1996, exclusive of Buyouts. The impairment loss in 1996 is related to the SFAS 121 charge of $127 million (see Note 4 of the Notes to the Consolidated Financial Statements). OTHER ITEMS Joint Ventures Income from Joint Ventures increased to $21 million in 1998 from $14 million in 1997. The increase was primarily due to higher selling prices for paper at the two mills in which the Company has equity interests. In 1997 Income from Joint Ventures decreased to $14 million from $18 million in 1996. The decrease resulted from lower paper prices and the disposition in December 1996 of a new venture that had operated at a loss. Interest Expense Net interest expense, which appears in the Company's Consolidated Statements of Income as the line item "Interest Expense-net," increased to $43 million in 1998 from $42 million in 1997. The increase is primarily the result of a reduction in capitalized interest, offset by lower interest expense on long-term borrowings. In 1997 net interest expense increased to $42 million from $26 million in 1996. The increase was primarily a result of lower capitalization of interest expense associated with the construction of the Company's College Point and Lakeland printing plants. Total interest income and capitalized interest were $4 million in 1998, $8 million in 1997 and $24 million in 1996. Taxes The Company's annual effective tax rates were 43.3% in 1998, 44.1% in 1997 and 44.7% in 1996. The effective tax rates exclude the tax effects of special items in the applicable year. The decline in the effective tax rate was primarily attributable to lower state and local taxes and lower levels of non-deductible items associated with acquisitions. EARNINGS PER SHARE Diluted earnings per share in 1998 were $1.48, up 17.5% from $1.26 in 1997, excluding special items. The improvement was primarily due to stronger advertising revenues in the Newspaper Group, which resulted from higher rates and volume, and tighter cost controls throughout the Company. Diluted earnings per share in 1997 were up 34.0% from $.94 in 1996, excluding special items. Diluted earnings per share as reported in the Company's Consolidated Statements of Income were $1.45 in 1998, $1.33 in 1997 and $.43 in 1996. The improvement was mainly due to revenue gains in all three business segments (newspapers, broadcast and magazines) and the SFAS 121 charge in 1996. The basic weighted average Class A and Class B common shares outstanding were 189 million in 1998, 193 million in 1997 and 195 million in 1996. The diluted weighted average Class A and Class B common shares outstanding were 193 million in 1998, 197 million in 1997 and 197 million in 1996. F-5 SPECIAL ITEMS Over the past three years, the Company has realized gains on the disposition of certain assets and favorably settled a federal tax audit. The Company also recorded expenses for noncash accounting charges, Buyouts and a debt extinguishment (see Note 8 of the Notes to the Consolidated Financial Statements). These items were as follows: 1998 These special items reduced net income by $4 million and earnings per share by $.03. o An $8 million after-tax extraordinary charge in connection with the Company's repurchase of $78 million of its $150 million, 8.25% notes due in 2025. This charge reduced earnings per share by $.04. o An $8 million pre-tax gain from the satisfaction of a post-closing requirement related to the 1997 sale of the Company's assets of its tennis, sailing and ski magazines. This gain increased earnings per share by $.02. o A $5 million pre-tax gain from the sale of equipment. This gain increased earnings per share by $.01. o A $5 million pre-tax charge for Buyouts. This charge reduced earnings per share by $.02. 1997 These special items increased net income by $13 million and earnings per share by $.07. o An $18 million after-tax gain resulting from a favorable tax adjustment from the completion of the Company's federal income tax audits for periods through 1992. This gain increased earnings per share by $.09. o A $10 million pre-tax gain from the sale of assets of the Company's tennis, sailing and ski magazines and certain other properties. This gain increased earnings per share by $.03. o A $10 million pre-tax charge resulting from a noncash charge relating to the adoption of EITF 97-13. This charge reduced earnings per share by $.03. o A $9 million pre-tax charge for Buyouts. This charge reduced earnings per share by $.02. 1996 These special items reduced net income by $102 million and basic and diluted earnings per share by $.53 and $.51. o A $127 million pre-tax charge resulting from a noncash charge relating to the SFAS 121 charge. This charge reduced basic and diluted earnings per share by $.49 and $.48. o A $25 million pre-tax gain from the realization of a gain contingency from the disposition of an investment in a paper mill in a prior year. This gain increased earnings per share by $.07. o An $8 million pre-tax gain from the sale of the Company's 110 Fifth Avenue building. This gain increased earnings per share by $.02. o A $44 million pre-tax charge for Buyouts. This charge reduced basic and diluted earnings per share by $.13 and $.12. F-6 OPERATING SEGMENT INFORMATION REVENUES AND OPERATING PROFIT Consolidated revenues, EBITDA and operating profit by business segment were as follows: - -------------------------------------------------------------------------------- % Change ------------------ (In millions) 1998 1997 1996 98-97 97-96 - -------------------------------------------------------------------------------- Revenues Newspapers $ 2,665 $ 2,557 $ 2,348 4.2% 8.9% Broadcast 151 144 119 4.9% 21.0% Magazines 121 165 161 (26.7%) 2.5% - -------------------------------------------------------------------------------- Total revenues $ 2,937 $ 2,866 $ 2,628 2.5% 9.1% - -------------------------------------------------------------------------------- EBITDA Newspapers $ 644 $ 594 $ 444 8.4% 33.8% Broadcast 63 57 45 10.5% 26.7% Magazines 18 21 19 (14.3%) 10.5% - -------------------------------------------------------------------------------- Total Segment EBITDA $ 725 $ 672 $ 508 7.9% 32.3% - -------------------------------------------------------------------------------- Operating Profit Newspapers $ 478 $ 435 $ 180 9.9% N/A Broadcast 45 39 31 15.4% 25.8% Magazines 22 28 25 (21.4%) 12.0% Unallocated corporate expenses (30) (47) (63) 36.2% 25.4% - -------------------------------------------------------------------------------- Total operating profit $ 515 $ 455 $ 173 13.2% N/A - -------------------------------------------------------------------------------- Newspaper Group The Newspaper Group includes The New York Times (the "Times"), The Boston Globe (the "Globe"), 21 regional newspapers (the "Regionals"), newspaper distributors, a news service, a features syndicate, TimesFax, licensing operations of the Times, databases/microfilm and New Ventures. New Ventures include, among other things, projects developed in electronic media. - -------------------------------------------------------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- Revenues Newspapers $ 2,642 $ 2,541 $ 2,339 New Ventures 23 16 9 - -------------------------------------------------------------------------------- Total Revenues $ 2,665 $ 2,557 $ 2,348 - -------------------------------------------------------------------------------- EBITDA Newspapers $ 656 $ 600 $ 455 New Ventures (12) (6) (11) - -------------------------------------------------------------------------------- Total EBITDA $ 644 $ 594 $ 444 - -------------------------------------------------------------------------------- Operating Profit (Loss) Newspapers $ 491 $ 442 $ 196 New Ventures (13) (7) (16) - -------------------------------------------------------------------------------- Total Operating Profit $ 478 $ 435 $ 180 - -------------------------------------------------------------------------------- The Newspaper Group's operating profit for 1998 rose to $478 million, compared with $435 million in 1997. The improvement stemmed from higher advertising revenues and improved cost containment, despite an increase of 12.9% in newsprint expense. The Company's average cost of newsprint rose 8.8% and consumption increased 4.1%. Revenues grew to $2.67 billion in 1998, up 13.6 % from $2.35 billion in 1996. In 1996 operating profit was $335 million, excluding the SFAS 121 charge and Buyouts. The increases in revenues for the past three years were primarily due to higher advertising rates and volume and a slight increase in circulation revenues. Other revenue was flat in 1998 compared with 1997. However, other revenue increased 25.2% in 1997 as the Times expanded its wholesale newspaper delivery operations. Operating profit for 1997 included a favorable 15% decrease in newsprint expense compared with 1996, exclusive of LIFO adjustments. Advertising, circulation and other revenue, by major product of the Newspaper Group, were as follows: - -------------------------------------------------------------------------------- % Change ------------------ (In millions) 1998 1997 1996 98-97 97-96 - -------------------------------------------------------------------------------- The New York Times Advertising $1,059 $ 989 $ 881 7.0% 12.3% Circulation 442 428 418 3.3% 2.4% Other 141 142 113 (0.7%) 25.7% - -------------------------------------------------------------------------------- Total $1,642 $1,559 $1,412 5.3% 10.4% - -------------------------------------------------------------------------------- The Boston Globe Advertising $ 449 $ 441 $ 402 1.8% 9.7% Circulation 133 134 132 (0.7%) 1.5% Other 8 8 5 N/A N/A - -------------------------------------------------------------------------------- Total $ 590 $ 583 $ 539 1.2% 8.2% - -------------------------------------------------------------------------------- Regional Newspapers Advertising $ 342 $ 323 $ 308 5.9% 4.9% Circulation 77 78 76 (1.3%) 2.6% Other 14 14 13 N/A 7.7% - -------------------------------------------------------------------------------- Total $ 433 $ 415 $ 397 4.3% 4.5% - -------------------------------------------------------------------------------- Total Newspaper Group Advertising $1,850 $1,753 $1,591 5.5% 10.2% Circulation 652 640 626 1.9% 2.2% Other 163 164 131 (0.6%) 25.2% - -------------------------------------------------------------------------------- Total $2,665 $2,557 $2,348 4.2% 8.9% - -------------------------------------------------------------------------------- F-7 Advertising volume for the Times, the Globe and the Regionals was as follows: - -------------------------------------------------------------------------------- % Change ------------------ (Inches in thousands, preprints in thousands of copies) 1998 1997 1996 98-97 97-96 - -------------------------------------------------------------------------------- The New York Times Retail 587 607 620 (3.3%) (2.1%) National 1,393 1,331 1,230 4.7% 8.2% Classified 997 971 918 2.7% 5.8% Zoned 1,019 1,034 1,000 (1.5%) 3.4% - -------------------------------------------------------------------------------- Total 3,996 3,943 3,768 1.3% 4.6% - -------------------------------------------------------------------------------- Preprints 343,070 318,490 296,839 7.7% 7.3% - -------------------------------------------------------------------------------- The Boston Globe Retail 702 730 765 (3.8%) (4.6%) National 697 630 555 10.6% 13.5% Classified 1,351 1,346 1,295 0.4% 3.9% Zoned 279 304 304 (8.2%) N/A - -------------------------------------------------------------------------------- Total 3,029 3,010 2,919 0.6% 3.1% - -------------------------------------------------------------------------------- Preprints 787,016 729,228 686,628 7.9% 6.2% - -------------------------------------------------------------------------------- Regional Newspaper Retail 7,884 7,830 7,933 0.7% (1.3%) National 253 275 240 (8.0%) 14.6% Classified 476 454 479 4.8% (5.2%) Zoned 7,461 7,087 6,951 5.3% 2.0% - -------------------------------------------------------------------------------- Total 16,074 15,646 15,603 2.7% 0.3% - -------------------------------------------------------------------------------- Preprints 1,082,712 1,013,200 928,765 6.9% 9.1% - -------------------------------------------------------------------------------- Circulation for the Times, the Globe and the Regionals was as follows: - -------------------------------------------------------------------------------- Weekday Sunday (Copies in thousands) 1998 % Change 1998 % Change - -------------------------------------------------------------------------------- Average Circulation The New York Times 1,094 .5% 1,645 (.4%) The Boston Globe 470 (1.1%) 746 (1.3%) Regional Newspapers 737 .5% 788 (.1%) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Weekday Sunday (Copies in thousands) 1997 % Change 1997 % Change - -------------------------------------------------------------------------------- Average Circulation The New York Times 1,089 (1.2%) 1,651 (1.7%) The Boston Globe 475 .6% 755 (1.0%) Regional Newspapers 733 .5% 789 (0.2%) - -------------------------------------------------------------------------------- In 1998 the Times took several steps to improve the quality and levels of its home delivery circulation base. Circulation growth expanded due to improved availability in major markets across the nation. The Times started to realize the benefits of this strategy as daily circulation increased in 1998 and the decline on Sunday slowed. The Times and the Globe also added new sections and made improvements in delivery service to attract new readers and retain existing ones. Broadcast Group The Broadcast Group is comprised of eight network-affiliated television stations and two radio stations. - -------------------------------------------------------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- Revenues $151 $ 144 $119 - -------------------------------------------------------------------------------- EBITDA 63 57 45 - -------------------------------------------------------------------------------- Operating Profit $ 45 $ 39 $ 31 - -------------------------------------------------------------------------------- The Broadcast Group's operating profit was $47 million in 1998, $39 million in 1997 and $31 million in 1996, excluding Buyouts. Revenues were $151 million in 1998, $144 million in 1997 and $119 million in 1996. Revenues and operating profit rose in 1998 mainly due to political advertising generated by mid-term elections and referendums, the Winter Olympics and stringent cost controls. The revenue and operating profit increases in 1997 were principally due to the strong performance of KFOR-TV in Oklahoma City, Oklahoma, and WHO-TV in Des Moines, Iowa. F-8 Magazine Group This group consists of Golf Digest, Golf World and Golf Shop Operations, related activities in the golf field and new ventures such as on-line magazine services. - -------------------------------------------------------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- Revenues Magazines $ 114 $ 153 $ 150 Non-Compete Agreement 6 10 10 New Ventures 1 2 1 - -------------------------------------------------------------------------------- Total Revenues $ 121 $ 165 $ 161 - -------------------------------------------------------------------------------- EBITDA Magazines $ 19 $ 28 $ 26 New Ventures (1) (7) (7) - -------------------------------------------------------------------------------- Total EBITDA $ 18 $ 21 $ 19 - -------------------------------------------------------------------------------- Operating Profit (Loss) Magazines $ 17 $ 26 $ 23 Non-Compete Agreement 6 10 10 New Ventures (1) (8) (8) - -------------------------------------------------------------------------------- Total Operating Profit $ 22 $ 28 $ 25 - -------------------------------------------------------------------------------- The Magazine Group's operating profit declined in 1998 to $22 million from $28 million in 1997 and $25 million in 1996. On a comparable basis, excluding divestitures and income from a non-compete agreement, revenues in 1998 exceeded 1997 and 1996. Consolidation in the golf industry and a very competitive advertising environment adversely affected the Group's performance in 1998. Additionally, the benefits of the non-compete agreement expired in July 1998. In 1998 operating profit was also negatively impacted by a charge for Buyouts but benefited from lower New Venture losses. In 1997 the Company completed the sale of the assets of its tennis, sailing and ski magazines and exited its new venture in the tee-time reservation business. The Magazine Group's operating results include 11 months in 1997 and a full year in 1996 of the tennis, sailing and ski magazines (see Note 2 of the Notes to the Consolidated Financial Statements). LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $451 million in 1998, compared with $450 million in 1997. Operating cash flow was primarily used for share repurchases, capital expenditures, debt repayment and dividends. Net cash used in investing activities was $56 million in 1998, compared with $117 million in 1997. The decrease of $61 million in 1998 was mainly due to lower capital expenditures. Net cash used in financing activities was $466 million in 1998, compared with $265 million in 1997. The increase of $201 million in 1998 was primarily related to stock repurchases and the repurchase of the Company's debentures, partly offset by an increase in commercial paper outstanding (see Note 8 of the Notes to the Consolidated Financial Statements). Cash generated from the Company's operations and from external sources should be adequate to cover working capital needs, stock repurchases, planned capital expenditures, dividend payments to stockholders and other cash requirements. The ratio of current assets to current liabilities was .83 at December 27, 1998, and .92 at December 28, 1997. The decrease in the ratio of current assets to current liabilities is primarily related to lower short-term investments at December 27, 1998. Long-term debt and capital lease obligations, as a percentage of total capitalization, were 28% at December 27, 1998, and 24% at December 28, 1997. FINANCING The Company currently maintains $300 million in revolving credit agreements, which require, among other matters, specified level of stockholders' equity. The amount of stockholders' equity over the required levels was $600 million at December 27, 1998, compared with $936 million at December 28, 1997. The decrease in the level of unrestricted stockholders' equity is mainly due to the Company's stock repurchase program. In July 1998, the Company renewed its $100 million revolving credit agreement, which had a maturity of July 1998, through July 1999. The remaining $200 million revolving credit agreement expires in July 2002. The Company had $124 million in commercial paper outstanding with an annual weighted average interest rate of 5.3% and an average of 41 days to maturity at December 27, 1998. No such borrowings were outstanding at December 28, 1997. On August 21, 1998, the Company filed a $300 million shelf registration statement on Form S-3 with the Securities and Exchange Commission for unsecured debt securities that may be issued by the Company from time to time. The registration statement became effective August 28, 1998. On September 24, 1998, the Company filed a prospectus supplement to allow the issuance of up to $300 million in medium-term notes. On October 8, 1998, the Company issued $49.5 million under the medium-term note program. These notes mature on October 8, 2003, and pay interest semi-annually at a rate of 5%. On December 4, 1998, the Company issued an additional $49.5 million under this program at a semi-annual interest rate of 5.625% due on December 4, 2008. The proceeds were utilized to pay down borrowings under the Company's commercial paper program. F-9 In October 1993 the Company issued $200 million of senior notes. Five-year notes totaling $100 million were due in October 1998 while the remaining $100 million notes are due in April 2000. On October 28, 1998, the Company repaid $100 million due on its five-year senior notes. The Company's tender offer for any and all of its $150 million of outstanding publicly held 8.25% debentures due March 15, 2025, expired on April 2, 1998. The debenture holders tendered $78 million of the outstanding debentures. The Company financed the purchase of the debentures with available cash and through its existing commercial paper facility. By replacing higher rate long-term borrowings with lower-rate short-term alternatives, the Company expects to reduce interest expense and generate a positive return on a net present value basis. Total cash paid in connection with the tender offer was approximately $89 million. The Company incurred a charge to operations in 1998 of $14 million ($8 million after-tax) in connection with this debt extinguishment (see Note 8 of the Notes to the Consolidated Financial Statements). The Company's total long-term debt, including capital leases, was $600 million at December 27, 1998, and $639 million at December 28, 1997. The increase is primarily attributable to the issuance of medium-term notes and an increase in capitalized lease obligations as a result of amendments to the Company's lease for the Edison facility, offset by the Company's debt tender offer described above. CAPITAL EXPENDITURES The Company estimates that capital expenditures for 1999 will range from $90 million to $100 million, compared with $82 million in 1998 and $160 million in 1997. The 1998 Capital Expenditures exclude amounts related to the Company's Edison facility lease renegotiations (see Note 15 of the Notes to the Consolidated Financial Statements). DEPRECIATION AND AMORTIZATION The Company expects that depreciation and amortization expense will be $195 million to $200 million for 1999, compared with $188 million in 1998 and $174 million in 1997. YEAR 2000 READINESS DISCLOSURE The Company has evaluated the potential impact of the situation commonly known as the "Year 2000 problem." The Year 2000 problem, which is common to most corporations, concerns the ability of information systems, primarily computer software programs, to properly recognize and process date-sensitive information related to the Year 2000. THE COMPANY'S STATE OF READINESS In April 1997 the Company began to identify all of its Year 2000 concerns for all facets of its operations. A Year 2000 Program Office was established, and a detailed inventory of all systems issues required to be addressed in connection with the Year 2000 was created. Information was gathered for each system including: o location o type of system and its relative importance o probable method and cost of remediation and o targeted start and end dates for addressing Year 2000 issues. This inventory includes systems to: o create the Company's publications o operate the Company's production and distribution facilities o operate the Company's broadcast stations o operate the Company's business and financial applications and o control facility and infrastructure areas (building systems, utilities, security systems, etc.). The systems identified in the inventory were further categorized into five priority classifications: o Shutdown -- highest priority. If these systems (e.g., editorial systems, presses, and utilities) were to fail, the Company's ability to continue its operations would be seriously impaired. Approximately 9% of the identified systems are in this category. o Impractical Workaround -- If these systems were to fail, the available alternatives are too expensive to implement. Approximately 9%. o Costly Workaround -- If these systems were to fail, a feasible but costly alternative exists. Approximately 28%. o Additional But Manageable Cost -- If these systems fail, an alternative solution exists at a moderate cost. Approximately 22%. o No Impact -- Little if any consequence to the business if these systems fail. Approximately 32%. F-10 By October 1997 the Company had completed the inventory phase and turned its attention to the remediation phase. Target dates for each item in the inventory were identified and are continually monitored to ensure timely resolution of the issues. The remediation strategy involves a mix of purchasing new systems, modifying existing systems, retiring obsolete systems and confirming vendor compliance. As of January 31, 1999, 85% of all systems had been remediated and tested. Testing systems for Year 2000 compliance includes the use of dates that simulate transactions and environments, both prior and subsequent to the Year 2000, including specific testing for leap year. The Company has communicated with most of its suppliers and other vendors, and is contacting its significant advertisers, seeking assurances that they will be Year 2000 compliant. Although there is no certainty that any major business partner will function without disruption in the Year 2000, the Company's goal is to obtain detailed information about its advertisers' and suppliers' Year 2000 plans and to identify those companies that could pose a significant risk of failure. The Company will make alternate arrangements where necessary. Generally, the Company is not dependent on a single source for any products or services, except for products or services supplied by public utilities. In the event a significant supplier or other vendor is unable to provide products or services to the Company due to a Year 2000 failure, the Company believes it has adequate alternate sources for such products or services. There is no guarantee, however, that such alternate products or services would be available at the same terms and conditions or that the Company would not experience some adverse effects as a result of switching to alternate sources. THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES To date, the Company has identified total estimated costs in connection with the Year 2000 problem of between $15 million and $20 million. This estimate does not include systems previously scheduled for replacement without regard to the Year 2000 issue. Of this amount, approximately $10 million will be for systems replacements involving capital outlays (which are not deducted as an expense on the Company's Consolidated Statements of Income). The remaining amount is being deducted as an expense on the Company's Consolidated Statements of Income through 1999. Approximately 75% of this expense total is attributable to the use of currently available internal resources. The cost of the Company's Year 2000 remediation efforts is being funded with cash flows from operations. RISKS OF YEAR 2000 ISSUES With respect to its internal operations, those over which the Company has direct control, the Company believes that all of its critical systems (i.e., those categorized in the shutdown or impractical workaround categories described above) will be remediated and tested by the end of the second quarter of 1999. Like most large business enterprises, the Company is reliant upon certain critical vendors. Certain of these vendors have yet to provide a Year 2000 compliant product, while services that are provided by certain other vendors cannot be tested (i.e., power and telecommunications). The Company believes the possibility of critical vendor failures to be remote based on the information supplied to date by such critical vendors. CONTINGENCY PLANS The Company's Year 2000 strategies include contingency planning, encompassing business continuity both within the Company and in the external business environment. The planning effort encompasses all critical Company areas. The Company's contingency planning for the Year 2000 will address a variety of scenarios that could occur. Because of the Company's extensive efforts to formulate and carry out an effective Year 2000 remediation program, the Company believes that such remediation will be completed on a timely basis and should effectively minimize any disruption to the Company's operations due to Year 2000 issues. The Company does not expect Year 2000 issues to have a material effect on its results of operations, liquidity or financial condition. NEW ACCOUNTING PRONOUNCEMENT In June 1998 the Financial Accounting Standard's Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"), which is effective for all quarters of fiscal years beginning after June 15, 1999. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Unless the entity can treat the derivative as a hedge according to certain criteria, the entity may be required to deduct any changes in the derivative's fair value from its operating income. The adoption of SFAS 133 is not expected to have a material effect on the Company's Consolidated Financial Statements. F-11 FACTORS THAT COULD AFFECT OPERATING RESULTS This Form 10-K contains forward-looking statements. Additional written and oral forward-looking statements may be made by the Company from time to time in Securities and Exchange Commission ("SEC") filings and otherwise. The Company cautions readers that results predicted by forward-looking statements, including, without limitation, those relating to the Company's: o future business prospects o revenues o working capital o liquidity o capital needs o interest costs and o income are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. The risks and uncertainties include those listed below as well as other risks and factors identified from time to time in the Company's filings with the SEC. ADVERTISING REVENUES Advertising is the Company's most significant source of revenue. Competition from other forms of media available in the Company's various markets, including direct marketing, affects the Company's ability to attract and retain advertisers and to increase advertising rates. Advertising could be negatively affected by an economic downturn in any of the Company's markets. Advertising revenues cause the Company's quarterly consolidated results to vary by season. Second-quarter and fourth-quarter advertising volume is higher than first- and third-quarter volume since economic activity tends to be lower after the holidays and in the summer. National and local economic conditions, particularly in the New York City and Boston metropolitan regions, affect the levels of the Company's retail, national and most particularly, classified advertising revenue. Structural changes in the retail environment may also depress the level of display advertising revenue. CIRCULATION REVENUES Circulation is a significant source of revenue for the Company. Circulation revenue and the Company's ability to achieve price increases for its products are affected by competition from other publications and other forms of media available in the Company's various markets. Circulation could also be negatively affected by an economic downturn in the Company's markets, including, but not limited to, the New York City or Boston metropolitan regions. Decreased consumer spending on discretionary items like newspapers and magazines and the decreasing number of newspaper readers among young people could also negatively affect circulation. PAPER PRICES Newsprint and magazine paper are the Company's most important raw material and represent a significant portion of the Company's operating costs. The Company's operating results could be adversely affected to the extent that such historically volatile raw material prices increase materially. LABOR RELATIONS Advances in technology and other factors have allowed the Company to lower costs by reducing the size of its work force. There is no assurance that the Company will continue to be able to reduce costs in this way. A significant portion of the Company's employees are unionized and the Company's results could be adversely affected if labor negotiations were to restrict its ability to maximize the efficiency of its operations. In addition, if the Company experienced labor unrest, its ability to produce and deliver its largest products could be impaired. NEW PRODUCTS IN NEW MARKETS There are substantial uncertainties associated with the Company's efforts to develop new products and services for evolving markets. The success of these ventures will be determined by the Company's efforts, and in some cases by those of its partners, fellow investors and licensees. Initial timetables for the introduction and development of new products or services may not be achieved and price/profitability targets may not prove feasible. External factors, such as the development of competitive alternatives and market response, may cause new markets to move in unanticipated directions. Because of the potential threat to the Company's traditional sources of revenue (particularly classified advertising and circulation) posed by on-line competition, the Company may seek to develop its own on-line products, which may incur losses. The Company may also consider the acquisition of specific properties or business that fall outside its preferred parameters if it deems such properties sufficiently attractive. PRODUCT PORTFOLIO; ACQUISTIONS From time to time, the Company evaluates the various components of its portfolio of products and may, as a result, buy or sell different properties. Such acquisitions or divestitures may affect the Company's costs, revenues and profitability. Acquisitions involve risks, including difficulties in integrating acquired operations, diversions of management resources, debt incurred in financing such acquisitions and unanticipated problems and liabilities. F-12 TELEVISION BROADCASTING The Company's television stations are subject to continuing technology and regulatory developments that may affect their future profitability. The advent of digital broadcasting is one such development. The Federal Communications Commission ("FCC") adopted rules in 1997 under which all television stations are required to change to a new system of digital broadcasting. The direct hardware cost of this change will be substantial and the new digital stations are unlikely to produce significant additional revenue until consumers have purchased a substantial number of digital television receivers. Additionally, the new digital transmission systems to be used by television stations, cable systems and direct broadcast satellites could greatly increase the number of electronic video services with which the Company's stations compete. YEAR 2000 A discussion of the Company's plans and assessments with respect to the Year 2000 problem is included above in this Management's Discussion and Analysis section. The Company is undertaking a remediation program to address issues related the Year 2000 problem. While the Company does not expect Year 2000 issues to have a material effect on results of operations, liquidity or financial conditions, the Company cannot guarantee that the Year 2000 problem will not disrupt operations or adversely affect its financial results. The Company is dealing with the issues arising from this problem on a timely and systematic basis. The foregoing list of factors should not be construed as exhaustive or as any admission regarding the adequacy of disclosure made by the Company. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. MARKET RISK The Company's qualitative and quantitative market risk is principally associated with market interest rate fluctuations related to its debt obligations. Any such market risk is not considered significant by the Company. F-13 CONSOLIDATED STATEMENTS OF INCOME
Years Ended --------------------------------------------- December 27, December 28, December 29, (In thousands, except per share data) 1998 1997 1996 - ----------------------------------------------------------------------------------------------- REVENUES Advertising $ 2,073,540 $ 1,999,844 $ 1,811,411 Circulation 678,784 672,662 659,818 Other 184,381 193,912 157,042 - ----------------------------------------------------------------------------------------------- Total 2,936,705 2,866,418 2,628,271 - ----------------------------------------------------------------------------------------------- COSTS AND EXPENSES Production costs Raw materials 354,085 323,285 363,503 Wages and benefits 598,508 604,924 557,543 Other 509,051 484,057 440,038 - ----------------------------------------------------------------------------------------------- Total 1,461,644 1,412,266 1,361,084 Selling, general and administrative expenses 959,841 999,050 967,144 Impairment loss -- -- 126,763 - ----------------------------------------------------------------------------------------------- Total 2,421,485 2,411,316 2,454,991 - ----------------------------------------------------------------------------------------------- OPERATING PROFIT 515,220 455,102 173,280 Income from Joint Ventures 21,014 13,990 18,223 Interest expense, net 43,333 42,115 26,430 Net gain on dispositions of assets 12,619 10,388 32,836 - ----------------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 505,520 437,365 197,909 Income taxes 218,890 175,064 113,375 - ----------------------------------------------------------------------------------------------- Income before extraordinary item 286,630 262,301 84,534 Extraordinary item, net of tax 7,716 -- -- - ----------------------------------------------------------------------------------------------- NET INCOME $ 278,914 $ 262,301 $ 84,534 - ----------------------------------------------------------------------------------------------- Average number of common shares outstanding(1) Basic 188,762 193,040 194,586 Diluted 192,846 197,150 196,884 - ----------------------------------------------------------------------------------------------- Basic earnings per share(1) Earnings before extraordinary item $ 1.52 $ 1.36 $ .43 Extraordinary item, net of tax (.04) -- -- - ----------------------------------------------------------------------------------------------- Net income $ 1.48 $ 1.36 $ .43 - ----------------------------------------------------------------------------------------------- Diluted earnings per share(1) Earnings before extraordinary item $ 1.49 $ 1.33 $ .43 Extraordinary item, net of tax (.04) -- -- - ----------------------------------------------------------------------------------------------- Net income $ 1.45 $ 1.33 $ .43 - ----------------------------------------------------------------------------------------------- Dividends per share(1) $ .37 $ .32 $ .29 - -----------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. (1) All share and per share information is presented on a post two-for-one split basis. The split was effective on June 17, 1998 F-14 CONSOLIDATED BALANCE SHEETS
December 27, December 28, (In thousands) 1998 1997 - --------------------------------------------------------------------------------------- ASSETS - --------------------------------------------------------------------------------------- CURRENT ASSETS Cash and short-term investments (at cost which approximates market: 1998 - none; 1997 - $72,516) $ 35,991 $ 106,820 Accounts receivable (net of allowances: 1998 - $34,364; 1997 - $25,887) 331,933 331,287 Inventories 32,287 32,134 Deferred income taxes 40,612 44,203 Other current assets 81,153 85,555 - --------------------------------------------------------------------------------------- Total current assets 521,976 599,999 - --------------------------------------------------------------------------------------- INVESTMENT IN JOINT VENTURES 122,273 133,054 - --------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land 71,935 71,515 Buildings, building equipment and improvements 818,811 793,311 Equipment 1,307,869 1,317,446 Construction and equipment installations in progress 24,885 52,933 - --------------------------------------------------------------------------------------- Total - at cost 2,223,500 2,235,205 Less accumulated depreciation 897,304 868,274 - --------------------------------------------------------------------------------------- Property, plant and equipment - net 1,326,196 1,366,931 - --------------------------------------------------------------------------------------- INTANGIBLE ASSETS ACQUIRED Costs in excess of net assets acquired 1,204,021 1,204,021 Other intangible assets acquired 428,974 428,474 - --------------------------------------------------------------------------------------- Total 1,632,995 1,632,495 Less accumulated amortization 305,422 254,790 - --------------------------------------------------------------------------------------- Intangible assets acquired - net 1,327,573 1,377,705 - --------------------------------------------------------------------------------------- MISCELLANEOUS ASSETS 167,091 145,494 - --------------------------------------------------------------------------------------- Total $3,465,109 $3,623,183 - ---------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. F-15
December 27, December 28, (In thousands, except share data) 1998 1997 - ------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES Commercial paper outstanding $ 124,100 $ -- Accounts payable 163,783 189,580 Accrued payroll and other related liabilities 87,265 103,511 Accrued expenses 169,705 175,501 Unexpired subscriptions 81,080 82,621 Current portion of long-term debt and capital lease obligations 1,867 104,033 - ------------------------------------------------------------------------------------------------------ Total current liabilities 627,800 655,246 - ------------------------------------------------------------------------------------------------------ OTHER LIABILITIES Long-term debt 513,695 490,237 Capital lease obligations 84,123 45,191 Deferred income taxes 165,268 170,869 Other 542,753 532,343 - ------------------------------------------------------------------------------------------------------ Total other liabilities 1,305,839 1,238,640 - ------------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY(1) Serial preferred stock of $1 par value - authorized 200,000 shares - none issued -- -- Common stock of $.10 par value Class A - authorized 300,000,000 shares; issued: 1998 - 185,763,418; 1997 - 226,567,580 (including treasury shares: 1998 - 5,000,000; 1997 - 34,159,486) 18,575 22,656 Class B - convertible - authorized 849,602 shares; issued: 1998 - 849,602; 1997 - 1,129,488 (including treasury shares: 1998 - none and 1997 - 279,886) 86 114 Additional paid-in capital -- 761,982 Accumulated other comprehensive income (loss) - foreign currency translation adjustments (2,609) (1,510) Retained earnings 1,677,469 1,491,655 Common stock held in treasury, at cost (162,051) (545,600) - ------------------------------------------------------------------------------------------------------ Total stockholders' equity 1,531,470 1,729,297 - ------------------------------------------------------------------------------------------------------ Total $ 3,465,109 $ 3,623,183 - ------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. (1) All share and per share information is presented on a post two-for-one split basis. The split was effective on June 17, 1998. F-16 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended ---------------------------------------------- December 27, December 28, December 29, (In thousands) 1998 1997 1996 - --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 278,914 $ 262,301 $ 84,534 Adjustments to reconcile net income to net cash provided by operating activities Depreciation Amortization 135,240 128,427 108,787 Impairment loss 52,997 45,470 39,090 Business process/technology reengineering charge -- -- 126,763 Equity in operations of Joint Ventures -- 10,100 -- Cash distributions and dividends from Joint Ventures (21,014) (18,476) (21,713) Net gain on dispositions 18,192 14,982 16,957 Deferred income taxes (12,619) (10,388) (32,836) Changes in operating assets and liabilities, net of (2,010) (26,559) (6,005) acquisitions/dispositions Accounts receivable - net (646) (29,216) (24,192) Inventories (153) 1,152 9,036 Other current assets 4,402 (4,927) (25,821) Accounts payable (25,797) 31,279 14,919 Accrued payroll and accrued expenses (22,042) (8,559) 81,118 Unexpired subscriptions (1,541) 4,359 8,093 Other - net 47,538 49,741 46,351 - --------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 451,461 449,686 425,081 - --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from dispositions 23,661 39,727 16,878 Businesses acquired, net of cash acquired -- -- (246,805) Additions to property, plant and equipment (81,578) (160,168) (206,834) Other investing proceeds 14,725 10,560 24,815 Other investing payments (12,974) (6,782) (8,843) - --------------------------------------------------------------------------------------------------------- Net cash used in investing activities (56,166) (116,663) (420,789) - --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Commercial paper borrowings (repayments) 124,100 (45,500) 45,500 Long-term obligations Increase 98,433 -- -- Reduction (177,141) (3,847) (3,377) Capital shares Issuance 38,941 9,930 5,358 Repurchase (480,857) (162,615) (48,631) Dividends paid to stockholders (69,600) (61,865) (55,532) Preferred stock redemption -- (1,753) -- Other financing proceeds -- 344 51 - --------------------------------------------------------------------------------------------------------- Net cash used in financing activities (466,124) (265,306) (56,631) - --------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and short-term investments (70,829) 67,717 (52,339) Cash and short-term investments at the beginning of the year 106,820 39,103 91,442 - --------------------------------------------------------------------------------------------------------- Cash and short-term investments at the end of the year $ 35,991 $ 106,820 $ 39,103 - ---------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements and Supplemental Disclosures to Consolidated Statements of Cash Flows. F-17 SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended ----------------------------------------------- December 27, December 28, December 29, (In thousands) 1998 1997 1996 - ------------------------------------------------------------------------------------------- NONCASH INVESTING AND FINANCING TRANSACTIONS Businesses acquired Fair value of assets acquired $ 268,319 Assets forgiven (9,833) Liabilities assumed and incurred (11,681) - ------------------------------------------------------------------------------------------- Cash paid $ 246,805 - ------------------------------------------------------------------------------------------- Issuance of common shares 34,667 30,561 23,155 - ------------------------------------------------------------------------------------------- CASH FLOW INFORMATION Cash payments during the year for Interest (net of amount capitalized) $ 49,025 $ 39,122 $ 24,367 - ------------------------------------------------------------------------------------------- Income taxes $ 177,261 $ 169,115 $ 133,871 - -------------------------------------------------------------------------------------------
Amounts in these statements of cash flows are presented on a cash basis and may differ from those shown in other sections of the Consolidated Financial Statements. The Company renegotiated its lease agreement for its Edison facility, extending the capitalized lease commitment for an additional 10 years. Accordingly, the capitalized lease value was increased to $78 million, with a corresponding increase to $78 million of the capital lease obligation (see Note 15 of the Notes to the Consolidated Financial Statements). During 1996 federal tax authorities issued a favorable ruling on matters affecting the Globe that had originated prior to its acquisition in 1993. As a result, accrued federal taxes were reduced by $25 million. The $25 million was excluded from income and was applied as a reduction of goodwill (see Note 9 of the Notes to the Consolidated Financial Statements). F-18 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - --------------------------------------------------------------------------------
Capital Stock ---------------------------- Accumulated Common Other Stock Additional Comprehensive Held in (In thousands, except share and 5 1/2 % Class A Class B Paid-in Income Retained Treasury, per share data) Preference Common Common Capital (Loss) Earnings at cost Total - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, JANUARY 1, 1996 $1,753 $ 21,790 $114 $607,618 $(107) $1,262,217 $(281,195) $1,612,190 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income Net Income 84,534 84,534 Foreign currency translation adjustments (69) (69) - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income 84,465 Dividends, preference - $5.50 per share (96) (96) Dividends, common - $.285 per share (55,436) (55,436) Issuance of shares Retirement units, etc. - 32,254 Class A shares (271) 383 112 Employee stock plan - 1,934,250 Class A shares 729 22,707 23,436 Stock options - 1,016,444 Class A shares 334 43,761 (39,702) 4,393 Stock conversions - 1,320 shares Purchase of stock - 2,789,800 Class A shares (43,839) (43,839) Proceeds from the sale of put options 51 51 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 29, 1996 1,753 22,124 114 651,888 (176) 1,291,219 (341,646) 1,625,276 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income Net income 262,301 262,301 Foreign currency translation adjustments (1,334) (1,334) - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income 260,967 Dividends, preference - $4.125 per share (72) (72) Dividends, common - $.32 per share (61,793) (61,793) Issuance of shares Retirement units, etc. - 17,190 Class A shares 202 202 404 Employee stock plan - 1,598,570 Class A shares 8,335 18,730 27,065 Stock options - 2,161,926 Class A shares 532 101,304 (77,423) 24,413 Stock awards - 7,700 Class A shares (91) 91 -- Stock conversions - 7,030 shares Purchase of stock - 5,932,000 Class A shares (145,554) (145,554) Preferred stock redemption (1,753) (1,753) Proceeds from the sale of put options 344 344 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 28, 1997 -- 22,656 114 761,982 (1,510) 1,491,655 (545,600) 1,729,297 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income Net income 278,914 278,914 Foreign currency translation adjustments (1,099) (1,099) - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income 277,815 Dividends, common - $.37 per share (69,600) (69,600) Issuance of shares Retirement units, etc. - 152,866 Class A shares (1,088) 1,898 810 Employee stock plan - 1,427,273 Class A shares (3,764) 35,802 32,038 Stock options - 1,559,185 Class A shares 339 76,295 (61,433) 15,201 Purchase of stock - 14,784,000 Class A shares (454,091) (454,091) Treasury stock retirement - 44,478,000 shares (4,420) (28) (833,425) (23,500) 861,373 -- - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 27, 1998 -- $18,575 $86 -- $(2,609) $1,677,469 $(162,051) $1,531,470 - ------------------------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements. All share and per share information is presented on a post two-for-one split basis. The split was effective on June 17, 1998. F-19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The New York Times Company (the "Company") is engaged in diversified activities in the communications field. The Company's principal businesses are newspapers, magazines and broadcasting. The Company also has equity interests in a Canadian newsprint mill and a supercalendered paper mill. The Company's major source of revenue is advertising from its newspaper business. The newspapers operate in the Northeast, Southeast and California markets. Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company after elimination of intercompany items. Fiscal Year The Company changed its fiscal year-end to the last Sunday in December beginning with the fiscal year ended December 29, 1996. Inventories Inventories are stated at the lower of cost or current market value. Inventory cost is generally based on the last-in, first-out ("LIFO") method for newsprint and magazine paper and the first-in, first-out ("FIFO") method for other inventories. Investments Investments in which the Company has at least a 20%, but not more than 50%, interest are accounted for under the equity method. Non-equity interests below 20% are accounted for under the cost method. The fair value of these investments approximate cost. Property, Plant and Equipment Property, plant and equipment is stated at cost; and depreciation is computed by the straight-line method over estimated service lives. The Company capitalizes interest costs as part of the cost of constructing major facilities and equipment. Intangible Assets Acquired Cost in excess of net assets acquired is primarily the excess of cost over the fair market value of tangible net assets acquired. Each quarter the Company evaluates whether there has been a permanent impairment in any of its intangible assets, including goodwill. An impairment in value is considered to have occurred when the undiscounted future operating cash flows generated by the acquired businesses are not sufficient to recover the carrying values of the intangible assets. If it is determined that an impairment in value has occurred, the excess of the purchase price over the net assets acquired and intangible assets will be written down to the present value of the future operating cash flows to be generated by the acquired businesses. The excess costs that arose from acquisitions after October 31, 1970, are being amortized by the straight-line method mainly over 40 years. The remaining portion ($13 million), which arose from acquisitions before November 1, 1970, is not being amortized since management believes there has been no decrease in value. Other intangible assets acquired consist primarily of advertiser and subscriber relationships and mastheads, which are being amortized over their remaining lives, ranging from five to 40 years for various software licenses and a life of 40 years for mastheads on various acquired properties. Subscription Revenues and Costs Proceeds from subscriptions and related costs, principally agency commissions, are deferred at the time of sale and are included in the Consolidated Statements of Income on a pro rata basis over the terms of the subscriptions. Foreign Currency Translation The assets and liabilities of foreign companies are translated at year-end exchange rates. Results of operations are translated at average rates of exchange in effect during the year. The resulting translation adjustment is included as a component of the Consolidated Statements of Stockholders' Equity and in the Stockholders' Equity section of the Consolidated Balance Sheets, in the caption "Accumulated other comprehensive income (loss) - foreign currency translation adjustments. Earnings Per Share The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share ("EPS") (see Note 6). Basic EPS is calculated by dividing net earnings available to common shares by weighted average common shares outstanding. Diluted EPS is calculated similarly, except that it includes the dilutive effect of the assumed exercise of securities, including the effect of shares issuable under the Company's incentive plans (see Note 13). All per share amounts included in the footnotes are the same for basic and diluted earnings per share unless otherwise noted. EPS for years prior to 1998 gives effect to the two-for-one stock split effective on June 17, 1998. Cash and Short-Term Investments For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Investment Tax Credits The Company uses the deferred method of accounting for investment tax credits. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from these estimates. F-20 New Accounting Pronouncements In the first quarter of 1998 the Company adopted the provisions of the Statement of Financial Standards SFAS No. 130, Reporting Comprehensive Income. Comprehensive Income for the Company includes foreign currency translation adjustments in addition to net income as reported in the Company's Consolidated Statements of Stockholders' Equity and in the Stockholders' Equity section of the Company's Consolidated Balance Sheets. In 1998 the Company adopted the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 requires the reporting of financial and descriptive information about a company's reportable operating segments. Operating segments are components of an enterprise's separate financial information that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance of that component. The statement requires reporting segment profit or loss, certain specific revenue and expense items, and segment assets. In addition, SFAS 131 requires that companies report information about revenues derived from its products or services. The adoption of SFAS 131 did not have a material effect on the Company's Consolidated Financial Statements (see Note 17). In the fourth quarter of 1998 the Company adopted the provisions of SFAS No. 132, Employer's Disclosures about Pensions and Other Postretirement Benefits ("SFAS 132"). SFAS 132 standardizes the disclosure requirements for pension and other postretirement benefits, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures. SFAS 132 did not change the measurement or recognition of pension or other postretirement benefits. The adoption of SFAS 132 did not have a material effect on the Company's Consolidated Financial Statements (see Notes 11 and 12). In March 1998 the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance on expensing versus capitalization of software-related costs incurred for internal use, as well as the amortization of capitalized software costs. SOP 98-1 requires computer software costs that are incurred in the preliminary project stage to be expensed as incurred. The Company adopted the provisions of SOP 98-1 in 1998. The Company capitalized $8 million of costs as a result of the adoption of SOP 98-1. The improvement to net income in 1998 was $4 million or $.02 per share. In April 1998 the AICPA issued Statement of Position No. 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that companies expense start-up costs and organization costs as they are incurred. The Company's accounting practices are currently in compliance with SOP 98-5. In June 1998 the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which is effective for all quarters of fiscal years beginning after June 15, 1999. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Unless the entity can treat the derivative as a hedge according to certain criteria, the entity may be required to reflect any changes in the derivative's fair value from its operating income. The adoption of SFAS 133 is not expected to have a material effect on the Company's Consolidated Financial Statements. - -------------------------------------------------------------------------------- 2. ACQUISITIONS/DISPOSITIONS Acquisitions In July 1996 the Company acquired KFOR-TV in Oklahoma City (OK), and WHO-TV in Des Moines (IA). The aggregate cost of the acquisition was $234 million, of which $233 million was paid in cash and the balance represented accrued liabilities. The purchases resulted in increases in intangible assets of $197 million (consisting primarily of network affiliation agreements, Federal Communications Commission licenses and other intangible assets), property, plant and equipment of $29 million, other assets of $10 million and other assumed liabilities of $2 million. In 1996 the Company acquired newspaper distribution businesses that distribute The New York Times, other newspapers and periodicals throughout the New York City metropolitan area. The aggregate cost of these acquisitions was $32 million, of which $14 million was paid in cash, $10 million in notes and accounts receivable which were forgiven and the balance in assumed and accrued liabilities. The purchase resulted in increases in intangible assets of $30 million (consisting primarily of a customer list) and accounts receivable and equipment of $2 million. These acquisitions have been accounted for by the purchase method. The Consolidated Financial Statements include the operating results of these acquisitions after their respective dates of acquisition. If the foregoing acquisitions had occurred on January 1, 1996, they would not have had a material impact on the results of operations in 1996. Dispositions During the second quarter of 1998 the Company recorded an $8 million pre-tax gain from the satisfaction of a post-closing requirement related to the 1997 sale of assets of the Company's tennis, sailing and ski magazines (see below). This gain increased earnings per share by $.02. F-21 During the first quarter of 1998, the Company recorded a $5 million pre-tax gain resulting from the sale of equipment. The gain increased earnings per share by $.01. In November 1997 the Company sold the assets of its tennis, sailing and ski businesses and certain small properties, and exited a golf-related business. These transactions resulted in a $10 million net pre-tax gain. This gain increased earnings per share by $.03. In 1997 the Company sold its NYT Custom Publishing division and a printing facility which had closed. These sales did not have a material effect on the Company's Consolidated Financial Statements. In connection with the divestiture of a newsprint mill in 1991, the Company made a loan commitment of up to $27 million to the new owners of the mill. At December 31, 1995, the commitment was fully funded. In 1996 the Company received the funds to satisfy this loan. As a result of the repayment, the Company recorded a $25 million pre-tax gain resulting from the realization of a gain contingency from the divestiture of the mill. This gain increased earnings per share by $.07. In June 1996 the Company sold its 110 Fifth Avenue building in New York City, which the Women's Magazine Division had occupied. The sale resulted in an $8 million pre-tax gain. This gain increased earnings per share by $.02. - -------------------------------------------------------------------------------- 3. BUSINESS PROCESS/TECHNOLOGY REENGINEERING CHARGE In the fourth quarter of 1997, the Company recorded a pre-tax noncash accounting charge of $10 million ($6 million after-tax, or $.03 per share) as a result of adopting the provisions of Emerging Issues Task Force No. 97-13, Accounting for Costs Incurred in Connection with a Consulting Contract or an Internal Project that Combines Business Process Rengineering and Information Technology Transformation. This charge related to certain expenses associated with the Company's business process/technology reengineering program. This charge had no impact on the Company's 1997 cash flow. - -------------------------------------------------------------------------------- 4. IMPAIRMENT LOSS In September 1996 the Company recorded a noncash accounting charge related to an impairment of certain long-lived assets as required by SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of ("SFAS 121 charge"), which was principally the accounting policy used by the Company in prior years. As a result of the Company's strategic review process, analyses were prepared to determine if there was impairment of any long-lived asset. Certain assets, primarily in the Newspaper Group, met the test for impairment. These assets were associated with three small regional newspapers, certain wholesale distribution operations and a printing facility. The revised carrying values of these assets were generally calculated on the basis of discounted estimated future cash flows and resulted in a pre-tax noncash charge of $127 million ($95 million after-tax, or $.49 basic earnings per share and $.48 diluted earnings per share). The SFAS 121 charge had no effect on the Company's 1996 cash flow and will not affect its ability to generate cash flow in the future. As a result of the SFAS 121 charge, depreciation and amortization expense related to these assets will decrease in future periods. However, in conjunction with the review for impairment, the estimated lives of certain of the Company's long-lived assets were reviewed. This review resulted in the acceleration of amortization expense for certain intangible assets. In the aggregate, the changes to depreciation and amortization expense are not expected to have a material effect on net income in the future. - -------------------------------------------------------------------------------- 5. INVESTMENT IN JOINT VENTURES Investment in Joint Ventures consists of equity ownership interests in two paper mills ("Forest Products Investments"), the International Herald Tribune S.A.S. ("IHT"), and the operations of a new venture, which ceased operations in December 1996. The results of the IHT and the new venture are not material to the operations of the Company. The Forest Products Investments consist of a Canadian newsprint company, Donohue Malbaie Inc. ("Malbaie"), and a partnership operating a supercalendered paper mill in Maine, Madison Paper Industries ("Madison") (with Malbaie, the "Paper Mills"). The equity interest in Malbaie represents a 49% ownership interest. The Company and Myllykoski Oy, a Finnish paper manufacturing company, are partners through subsidiary companies in Madison. The partners' interests in the net assets of Madison at any time will depend on their capital accounts, as defined, at such time. Through an 80%-owned subsidiary, the Company's share of Madison's profits and losses is 40%. The Company received distributions from Madison of $8 million in 1998, $10 million in 1997 and $6 million in 1996. Loans to Madison by the 80%-owned subsidiary of the Company totaled $2 million in 1996. Loan repayments were $15 million in 1998 and $2 million in 1997. No contributions were made to Madison in 1998, 1997 or 1996. The Company received distributions from Malbaie of $10 million in 1998, $5 million in 1997 and $11 million in 1996. No loans or contributions were made to Malbaie in 1998, 1997, or 1996. F-22 The current portion of debt of the Paper Mills included in current liabilities in the table below was $6 million at December 27, 1998, and $.1 million at December 27, 1997. The debt of the Paper Mills is not guaranteed by the Company. Condensed combined balance sheets of the Paper Mills were as follows: Condensed Combined Balance Sheets of Paper Mills - --------------------------------------------------------------- December 27, December 28, (In thousands) 1998 1997 - --------------------------------------------------------------- Current assets $ 61,129 $ 67,023 Less current liabilities 38,970 31,817 - --------------------------------------------------------------- Working capital 22,159 35,206 Fixed assets, net 203,114 215,427 Long-term debt -- (99) Deferred income taxes and other (60,403) (96,168) - --------------------------------------------------------------- Net assets $164,870 $154,366 - --------------------------------------------------------------- During 1998, 1997 and 1996 the Company's Newspaper Group purchased newsprint and supercalendered paper from the Paper Mills at competitive prices. Such purchases aggregated approximately $79 million for 1998, $74 million for 1997 and $80 million for 1996. Condensed combined income statements of the Paper Mills were as follows: - ------------------------------------------------------------------------------- Condensed Combined Income Statements of Paper Mills - ------------------------------------------------------------------------------ (In thousands) 1998 1997 1996 - ------------------------------------------------------------------------------ Net sales and other income $248,611 $234,290 $268,654 Costs and expenses 188,665 196,415 203,120 - ------------------------------------------------------------------------------ Income before taxes 59,946 37,875 65,534 Income tax expense 8,826 5,577 9,635 - ------------------------------------------------------------------------------ Net income $ 51,120 $ 32,298 $ 55,899 - ------------------------------------------------------------------------------ The condensed combined financial information of the Paper Mills excludes the income tax effects attributable to Madison. Such tax effects (see Note 9) have been included in the Company's Consolidated Financial Statements. - -------------------------------------------------------------------------------- 6. EARNINGS PER SHARE Basic and diluted earnings per share, which include the effect of the two-for-one stock split effective on June 17, 1998, for the years ended December 27,1998, December 28, 1997, and December 29, 1996, were as follows:
- ------------------------------------------------------------------------------------------------------- (In thousands, except per share data) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------- Basic earnings per share computation Numerator Net income $278,914 $262,301 $ 84,534 Less cumulative preference stock dividends -- 72 96 - ------------------------------------------------------------------------------------------------------- Income available to common stockholders $278,914 $262,229 $ 84,438 Denominator Average number of common shares outstanding 188,762 193,040 194,586 - ------------------------------------------------------------------------------------------------------- Basic earnings per share $ 1.48 $ 1.36 $ 0.43 - ------------------------------------------------------------------------------------------------------- Diluted earnings per share computation Numerator Net income $278,914 $262,301 $ 84,534 Less cumulative preference stock dividends -- 72 96 - ------------------------------------------------------------------------------------------------------- Income available to common stockholders $278,914 $262,229 $ 84,438 Denominator Average number of common shares outstanding 188,762 193,040 194,586 Incremental shares for assumed exercise of securities 4,084 4,110 2,298 - ------------------------------------------------------------------------------------------------------- Total shares 192,846 197,150 196,884 - ------------------------------------------------------------------------------------------------------- Diluted earnings per share $ 1.45 $ 1.33 $ 0.43 - -------------------------------------------------------------------------------------------------------
F-23 Outstanding stock options to purchase common stock with an exercise price greater than the average market price of common stock were not included in the computation of diluted earnings per share. The balance of such options were 1,168,000 in 1998, 2,195,000 in 1997 and 2,167,000 in 1996. The incremental shares for assumed exercise of securities was determined using the treasury stock method, which assumes repurchases of Company stock with proceeds of the stock option exercises as required. - -------------------------------------------------------------------------------- 7. INVENTORIES Inventories as shown in the accompanying Consolidated Balance Sheets were as follows: - --------------------------------------------------------------------------- December 27, December 28, (In thousands) 1998 1997 - --------------------------------------------------------------------------- Newsprint and magazine paper $27,705 $27,694 Work-in-process, etc. 4,582 4,440 - --------------------------------------------------------------------------- Total $32,287 $32,134 - --------------------------------------------------------------------------- Inventories are stated at the lower of cost or current market value. Cost was determined utilizing the LIFO method for 88% of inventory in 1998 and 88% for 1997. The replacement cost of inventory was approximately $38 million at December 27, 1998, and $36 million at December 28, 1997. - -------------------------------------------------------------------------------- 8. DEBT Long-term debt consists of the following: - ----------------------------------------------------------------------------- December 27, December 28, (In thousands) 1998 1997 - ----------------------------------------------------------------------------- 5.50% - 5.77% Senior Notes due $100,000 $200,000 1998 and 2000(a) 7.625% Notes due 2005, net of 245,599 245,001 unamortized debt costs of $4,461 in 1998, and $4,999 in 1997, effective interest rate 7.996%(b) 8.25% Debentures due 2025 (due 69,647 145,236 2005 at option of Company), net of unamortized debt costs of $2,253 in 1998 and $4,764 in 1997, effective interest rate 8.553%(b) 5%-5.625% Medium Term Notes 98,449 -- due 2003 and 2008, net of unamortized debt costs of $551(c) - ----------------------------------------------------------------------------- Total notes and debentures 513,695 590,237 - ----------------------------------------------------------------------------- Less current portion -- 100,000 - ----------------------------------------------------------------------------- Total long-term debt $513,695 $490,237 - ----------------------------------------------------------------------------- (a) In October 1993 the Company issued senior notes totaling $200 million with interest payable semi-annually. Five-year notes totaling $100 million were issued at an annual rate of 5.50%, and the remaining $100 million were issued as six and one-half year notes at an annual rate of 5.77%. In October 1998 $100 million due on the five-year notes was paid. (b) In March 1995 the Company completed a public offering of $400 million of unsecured notes and debentures. The offering consisted of 10-year notes aggregating $250 million maturing March 15, 2005, at an annual rate of 7.625% and 30-year debentures aggregating $150 million maturing March 15, 2025, at an annual rate of 8.25%. The debentures are callable after ten years. Interest is payable semi-annually on March 15 and September 15 on both the notes and the debentures. The net proceeds from the offering were used to repay the principal balance of $162 million of 11.85% notes due March 31, 1995, $50 million of 9.34% notes due July 15, 1995, and indebtedness outstanding under the Company's commercial paper program. The remaining net proceeds were used for general corporate purposes. The Company's tender offer for any and all of its $150 million of outstanding publicly held 8.25% debentures due March 15, 2025, expired on April 2, 1998. The debenture holders tendered $78 million of the outstanding debentures. The Company financed the purchase of the debentures with available cash and through its existing commercial paper facility. By replacing higher rate long-term borrowings with lower-rate short-term alternatives, the Company expects to reduce interest expense and generate a positive return on a net present value basis. Total cash paid in connection with the tender offer was $89 million. The Company recorded an extraordinary charge in 1998 of $14 million ($8 million net of tax or $.04 per share) in connection with this debt extinguishment. (c) On August 21, 1998, the Company filed a $300 million shelf registration on Form S-3 with the Securities and Exchange Commission for unsecured debt securities that may be issued by the Company from time to time. The registration statement became effective August 28, 1998. On September 24, 1998, the Company filed a prospectus supplement to allow the issuance of up to $300 million in medium-term notes. On October 8, 1998, the Company issued $49.5 million, and on December 4, 1998, the Company issued an additional $49.5 million, under the medium-term note F-24 program. The two $49.5 million notes mature on October 8, 2003, and December 4, 2008, and pay interest semi-annually at an average rate of 5.3%. The proceeds were utilized to pay down borrowings under the Company's commercial paper program. Based on borrowing rates currently available for debt with similar terms and average maturities, the fair value of long-term debt, excluding the current portion, was $556 million at December 27, 1998, and $532 million at December 28, 1997. In July 1996 the Company entered into a $100 million revolving credit agreement and a $200 million revolving credit agreement with a group of banks (the "Revolvers"). The Revolvers replaced existing revolving credit agreements aggregating $170 million. The $100 million Revolver was renewed in July 1998 and has been extended through July 1999; and the $200 million Revolver, which had an original maturity of July 2001, has been extended through July 2002, at which time any outstanding borrowings would be payable. The $100 million Revolver provides for an annual facility fee of 0.04%. The $200 million Revolver provides for an annual facility fee of 0.06% based on the Company's current credit rating. In July 1996 the Company increased its ability to issue commercial paper from $200 million to $300 million, which is supported by the Company's Revolvers. Borrowings are in the form of unsecured notes sold at a discount with maturities ranging up to 270 days. At December 27, 1998, the Company had $124 million in commercial paper outstanding with an annual weighted average interest rate of 5.3% and an average of 41 days to maturity. No such borrowings were outstanding at December 28, 1997. The Revolvers permit borrowings, which bear interest at the Company's option (i) for domestic borrowings: based on the certificates of deposit rate, the Federal Funds rate, a prime rate or a quoted rate; or (ii) for Eurodollar borrowings: based on the LIBOR rate, plus various margins based on the Company's credit rating. The Revolvers include provisions that require, among other matters, specified levels of stockholders' equity. The amount of stockholders' equity in excess of the required levels was $600 million at December 27, 1998. The aggregate face amount of maturities of long-term debt over the next five years are as follows: 1999, none; 2000, $100 million; 2001, none; 2002, none; 2003, $50 million; and $372 million, thereafter. Interest expense, net as shown in the accompanying Consolidated Statements of Income were as follows: - -------------------------------------------------------------------------------- (In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Interest expense $47,100 $50,433 $50,333 Capitalized interest (173) (5,394) (19,574) Interest income (3,594) (2,924) (4,329) - -------------------------------------------------------------------------------- Interest expense, net $43,333 $42,115 $26,430 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 9. INCOME TAXES Income tax expense for each of the years presented is determined in accordance with SFAS No. 109, Accounting for Income Taxes. The reasons for the variance between the effective tax rate on income before income taxes and the federal statutory rate (exclusive of a favorable tax adjustment of $18 million in fiscal 1997 resulting from the completion of the Company's federal income tax audits for periods through 1992, the impairment loss in fiscal 1996 and gains on dispositions in each period) are presented on the following page. The components of income tax expense as shown in the Consolidated Statements of were as follows: - ------------------------------------------------------------------------------- (In thousands) 1998 1997 1996 - ------------------------------------------------------------------------------- Current tax expense Federal $180,583 $146,550 $ 90,886 State, local, foreign 40,317 55,073 28,494 - ------------------------------------------------------------------------------- Total Current Expense 220,900 201,623 119,380 - ------------------------------------------------------------------------------- Deferred tax expense Federal (10,529) (24,102) 6,076 State, local, foreign 8,519 (2,457) (12,081) - ------------------------------------------------------------------------------- Total Deferred Benefit (2,010) (26,559) (6,005) - ------------------------------------------------------------------------------- Income tax expense $218,890 $175,064 $113,375 - ------------------------------------------------------------------------------- F-25
- ------------------------------------------------------------------------------------------------------------------------ (In thousands) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------ % of % of % of Amount Pretax Amount Pretax Amount Pretax - ------------------------------------------------------------------------------------------------------------------------ Tax at federal statutory rate $172,515 35.0% $149,442 35.0% $102,143 35.0% Increase (decrease) State and local taxes -- net 30,696 6.2 32,837 7.7 14,310 4.9 Amortization of nondeductible intangible assets acquired 9,510 1.9 9,892 2.3 12,856 4.4 Other -- net 704 .2 (3,832) (.9) 1,026 .4 - ------------------------------------------------------------------------------------------------------------------------ Subtotal 213,425 43.3% 188,339 44.1% 130,335 44.7% - ------------------------------------------------------------------------------------------------------------------------ Impairment loss -- -- (32,264) - ------------------------------------------------------------------------------------------------------------------------ Favorable tax adjustment -- (18,000) -- - ------------------------------------------------------------------------------------------------------------------------ Dispositions 5,465 4,725 15,304 - ------------------------------------------------------------------------------------------------------------------------ Income tax expense $218,890 $175,064 $113,375 - ------------------------------------------------------------------------------------------------------------------------
Tax expense in 1998 was reduced by $1 million ($2 million before federal tax effect) due to a reduction in the valuation allowance attributable to state net operating loss tax benefits. Tax expense in 1996 was reduced by $6 million ($9 million before federal tax effect) due to a reduction in the valuation allowance attributable to state net operating loss tax benefits. Other state and local operating loss tax benefits further reduced 1996 tax expense by $3 million. During 1996 federal tax authorities issued a favorable ruling on matters affecting the Globe, which had originated prior to its acquisition in 1993. As a result, accrued federal taxes were reduced by $25 million relating to a pre-acquisition tax contingency. This contingency was predominately related to pre-acquisition net operating loss carryforwards. The remainder of the reduction is related to other pre-acquisition tax contingencies. In accordance with SFAS 109, this tax benefit was excluded from income and was applied as a reduction of goodwill. Income tax benefits, which related to the exercise of options and the employee stock purchase plan, reduced current taxes payable and increased additional paid-in capital by $32 million in 1998, $39 million in 1997 and $4 million in 1996. At December 27, 1998, tax loss carryforwards included only state tax loss benefits. The benefits are attributable to tax operating losses totaling $5 million at December 27, 1998. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives ranging from one to 15 years. The principal portion of these tax loss carryforwards are likely to expire unused. Accordingly, the Company has valuation allowances amounting to $4 million as of December 27, 1998. The Company generated $16 million in investment tax credits in the state of New York in connection with the construction of its College Point facility in 1997. The unused investment tax credit carryforward at December 27, 1998, was $5 million, which the Company has the ability to utilize for 15 years. For financial statement purposes, the Company has selected the deferred method of accounting for investment tax credits, and therefore will amortize the $16 million tax benefit over the average useful life of the assets. The Internal Revenue Service has completed its examination of federal income tax returns for all years through 1992. Examinations of the tax returns for the years 1993 through 1995 are in process. Management is of the opinion that any assessments resulting from these examinations will not have a material effect on the Consolidated Financial Statements. The components of the net deferred tax liabilities recognized on the respective Consolidated Balance Sheets were as follows: - ------------------------------------------------------------------------------- December 27, December 28, (In thousands) 1998 1997 - ------------------------------------------------------------------------------- Deferred Tax Assets Retirement, postemployment and deferred compensation plans $184,359 $ 174,069 Accruals for other employee benefits, compensation, insurance and other 51,499 33,244 Accounts receivable allowances 25,278 26,561 Other 43,727 38,690 - ------------------------------------------------------------------------------- Total deferred tax assets 304,863 272,564 Valuation allowance (3,749) (5,268) - ------------------------------------------------------------------------------- Net deferred tax assets 301,114 267,296 - ------------------------------------------------------------------------------- Deferred Tax Liabilities Property, plant and equipment 261,176 230,712 Intangible assets 105,204 98,076 Investments in Joint Ventures 42,644 42,057 Other 16,746 23,117 - ------------------------------------------------------------------------------- Total deferred tax liabilities 425,770 393,962 - ------------------------------------------------------------------------------- Net deferred tax liability 124,656 126,666 - ------------------------------------------------------------------------------- Amounts included in Other current assets 40,612 44,203 - ------------------------------------------------------------------------------- Deferred income tax liability $165,268 $170,869 - ------------------------------------------------------------------------------- Income tax benefits related to foreign currency translation adjustments which were included in "Accumulated other comprehensive income (loss) - foreign translation adjustments" in the Company's Consolidated Balance Sheets and Consolidated Statements of Stockholders' Equity were $1 million in both 1998 and 1997 and $.1 million in 1996. The accumulated tax benefit was $2 million at December 27, 1998, and $1 million at December 28, 1997. F-26 - -------------------------------------------------------------------------------- 10. VOLUNTARY STAFF REDUCTIONS In 1998 the Company recorded pre-tax charges of $5 million related to voluntary staff reductions. These charges reduced earnings per share by $.02. In 1997 and 1996, the Company recorded pre-tax charges of $9 million and $44 million. These charges reduced earnings per share by $.02 in 1997. In 1996 these charges reduced basic earnings per share by $.13 and diluted earnings per share by $.12. At December 27, 1998, $23 million and at December 28, 1997, $25 million of these charges were unpaid. This balance will be principally paid within one year. - -------------------------------------------------------------------------------- 11. PENSION PLANS The Company sponsors several pension plans and makes contributions to several others in connection with collective bargaining agreements, including a joint-Company union plan and a number of joint-industry union plans. These plans cover substantially all employees. The Company-sponsored pension plans provide participating employees with retirement benefits in accordance with benefit provision formulas, which are based on years of service and final average or career pay and, where applicable, employee contributions. In 1996 the Company merged the assets of two of the plans. Retirement benefits are also provided under supplemental unfunded pension plans. In accordance with SFAS No. 132, Employer's Disclosures about Pensions and Other Postretirement Benefits, the components of net periodic pension cost for all Company-sponsored pension plans were as follows: - ------------------------------------------------------------------------------ (In thousands) 1998 1997 1996 - ------------------------------------------------------------------------------ Service cost $ 22,093 $ 19,645 $ 20,984 Interest cost 51,367 48,734 45,353 Expected return on plan assets (44,521) (40,164) (37,313) Recognized actuarial loss 958 1,006 2,864 Amortization of prior service cost 433 433 433 Amortization of transition obligation 637 637 637 - ------------------------------------------------------------------------------ Net periodic pension cost $ 30,967 $ 30,291 $ 32,958 - ------------------------------------------------------------------------------ Assumptions used in the actuarial computations were as follows: - -------------------------------------------------------------------------------- 1998 1997 1996 - -------------------------------------------------------------------------------- Discount rate 6.75% 7.25% 7.75% Rate of increase in compensation levels 5.00% 5.50% 5.50% Expected long-term rate of return on assets 8.75% 8.75% 8.75% - -------------------------------------------------------------------------------- In connection with collective bargaining agreements, the Company contributes to several other pension plans, including a joint Company-union plan and a number of joint industry-union plans. Contributions are determined as a function of hours worked or period earnings. Pension cost for these plans was $23 million in 1998, $22 million in 1997, and $21 million in 1996. The changes in benefit obligation and plan assets at September 30, 1998, and 1997, were as follows: - ------------------------------------------------------------------------------- (In thousands) 1998 1997 - ------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at prior measurement date $ 723,497 $ 627,874 Service cost 22,093 19,645 Interest cost 51,367 48,734 Plan participants' contribution 226 172 Actuarial loss 44,665 61,222 Special termination benefits 824 -- Benefits paid (29,448) (34,150) - ------------------------------------------------------------------------------- Benefit obligation at current measurement date 813,224 723,497 - ------------------------------------------------------------------------------- Change in plan assets Fair value of plan assets at prior measurement date 620,562 505,643 Actual return on plan assets (18,939) 142,410 Employer contribution 5,754 6,487 Plan participants' contributions 226 172 Benefits paid (29,448) (34,150) - ------------------------------------------------------------------------------- Fair value of plan assets at current measurement date 578,155 620,562 - ------------------------------------------------------------------------------- Funded status (235,069) (102,936) Unrecognized actuarial (gain) loss 50,904 (56,344) Unrecognized transition obligation 1,009 1,646 Unrecognized prior service cost 2,515 2,948 Contribution paid after measurement date 1,461 1,263 - ------------------------------------------------------------------------------- Net amount recognized $ (179,180) $ (153,423) - ------------------------------------------------------------------------------- The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $711 million, $577 million, and $482 million as of December 27, 1998; $120 million, $82 million, and none as of December 28, 1997. Additional termination benefits were provided to certain Globe mechanical union employees who retired during 1998. The offer gave rise to a special charge to earnings of $.8 million under SFAS No. 88, Employers Accounting for Settlements and Curtailments of Deferred Benefit Plans and for Termination Benefits. F-27 A minimum liability of $7 million relating to the unfunded status of the plans was recorded in Other Liabilities -- Other and a related intangible asset of an equal amount recorded in Miscellaneous Assets in the Company's Consolidated Balance Sheets as of December 28, 1997. The financial statement effects of the Company's Supplemental Employee Retirement Plans were included in the tables above. The primary portion of the Company's net obligation under these plans is included in Other Liabilities -- Other on the Company's Consolidated Balance Sheets. The amount of cost recognized for employer sponsored defined contribution pension plans for the year ended December 27, 1998, was $12 million, December 28, 1997, was $10 million and December 29, 1996, was $9 million. - -------------------------------------------------------------------------------- 12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS The Company provides health and life insurance benefits to retired employees (and their eligible dependents) who are not covered by any collective bargaining agreements if the employee meets specified age and service requirements. In accordance with SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, the Company accrues the costs of such benefits during the employee's active years of service. Net periodic postretirement cost was as follows: - -------------------------------------------------------------------------------- (In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Components of net periodic benefit cost Service cost $ 4,129 $ 3,680 $ 3,682 Interest cost 8,822 8,581 8,250 Recognized actuarial gain (852) (1,535) (699) Amortization of prior service cost (2,132) (1,659) (1,668) - -------------------------------------------------------------------------------- Net periodic postretirement benefit cost $ 9,967 $ 9,067 $ 9,565 - -------------------------------------------------------------------------------- The Company's policy is to fund the above-mentioned plans as claims and premiums are paid. For 1998 the accumulated postretirement benefit obligation was determined using a discount rate of 6.75%, an estimated increase in compensation levels of 5.0% and a health care cost trend rate of between 8.5% and 7.5% for 1998, grading down to 5.0% in the year 2008. For 1997 the accumulated postretirement benefit obligation was determined using a discount rate of 7.25%, an estimated increase in compensation levels of 5.5% and a health care cost trend rate of between 9.25% and 8.0% for 1997, grading down to 5.0% in the year 2008. For 1996 the accumulated postretirement benefit obligation was determined using a discount rate of 7.75%, an estimated increase in compensation levels of 5.5% and a health care cost trend rate of between 10.0% and 8.5% for 1996, grading down to 5.0% in the year 2008. A one-percentage point change in assumed health care cost trend rates would have the following effects in 1998: - ---------------------------------------------------------------- One-Percentage One-Percentage (In thousands) Point Increase Point Decrease - ---------------------------------------------------------------- Effect on total service and interest cost for 1998 $ 2,296 $ (1,926) Effect on accumulated postretirement benefit obligation as of December 27, 1998 $ 20,888 $ (17,834) - ---------------------------------------------------------------- The accrued postretirement benefit liability and the change in benefit obligation at September 30 in each year were as follows: - ------------------------------------------------------------------------------ (In thousands) 1998 1997 - ------------------------------------------------------------------------------ Change in benefit obligation Benefit obligation at prior measurement date $ 127,420 $ 114,125 Service cost 4,129 3,680 Interest cost 8,822 8,580 Actuarial loss 9,195 4,789 Amendments (6,050) -- Benefits paid (3,367) (3,754) - ------------------------------------------------------------------------------ Benefit obligation at current measurement date 140,149 127,420 - ------------------------------------------------------------------------------ Change in plan assets Fair value of plan assets at prior measurement date -- -- Employer contribution 3,367 3,754 Benefits paid (3,367) (3,754) - ------------------------------------------------------------------------------ Fair value of plan assets at current measurement date -- -- - ------------------------------------------------------------------------------ Funded status (140,149) (127,420) Unrecognized actuarial gain (16,253) (26,677) Unrecognized prior service cost (14,577) (10,186) Contribution paid after measurement date 609 878 - ------------------------------------------------------------------------------ Net amount recognized $ (170,370) $ (163,405) - ------------------------------------------------------------------------------ In connection with collective bargaining agreements, the Company contributes to several welfare plans, including a joint Company-union plan and a number of joint industry-union plans. Contributions are determined as a function of F-28 hours worked or period earnings. Portions of these contributions, which cannot be disaggregated, related to postretirement benefits for plan participants. Total contributions to these welfare funds were $27 million in 1998, $27 million in 1997, and $25 million in 1996. The primary portion of the Company's net obligation under these plans is included in other non-current liabilities on the Company's consolidated balance sheets. In accordance with SFAS No. 112, Employers' Accounting for Postemployment Benefits, the Company accrues the cost of certain benefits provided to former or inactive employees after employment but before retirement (such as workers' compensation, disability benefits and health care continuation coverage) during the employee's active years of service. - -------------------------------------------------------------------------------- 13. EXECUTIVE AND NON-EMPLOYEE DIRECTORS' INCENTIVE PLANS Under the Company's 1991 Executive Stock Incentive Plan and 1991 Executive Cash Bonus Plan (together, the "1991 Executive Plans"), the Board of Directors may authorize incentive compensation awards and grant stock options to key employees of the Company. Awards may be granted in cash, restricted and unrestricted shares of the Company's Class A Common Stock, retirement units (stock equivalents) or such other forms as the Board of Directors deems appropriate. Under the 1991 Executive Plans, stock options of up to 40 million shares of Class A Common Stock may be granted and stock awards of up to two million shares of Class A Common Stock may be made. In adopting the 1991 Executive Plans, shares previously available for issuance of retirement units and stock options under prior plans are no longer available for future awards. Retirement units are payable in Class A Common Stock generally over a period of 10 years following retirement. Stock options currently outstanding were granted under the Company's 1984 Stock Option Plan and the 1991 Executive Plans. The Plans provide for granting of both incentive and non-qualified stock options principally at an option price per share of 100% of the fair market value of the Class A Common Stock on the date of grant. These options have a term of 10 years, and become exercisable in annual periods ranging from one year to four years from the date of grant. Payment upon exercise of an option may be made in cash, with previously-acquired shares, or with shares (valued at fair market value), which would be otherwise issued on the exercise of the option or any combination thereof. Under the Company's Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), non-qualified options with 10-year terms are granted annually to each non-employee director of the Company. The 1997 annual grant increased the number of shares of Class A Common Stock a director may purchase from the Company from 2,000 to 4,000 shares at the fair market value of such shares at the date of grant. Options for an aggregate of 500,000 shares of Class A Common Stock may be granted under the Directors' Plan. Changes in the Company's stock options for period ended December 27, 1998, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ 1998 1997 1996 ------------------------------- --------------------------------- -------------------------------- Weighted Weighted Weighted Number of Average Number of Average Number of Average (Shares in thousands) Options Exercise Price Options Exercise Price Options Exercise Price - ------------------------------------------------------------------------------------------------------------------------------------ Options outstanding, beginning of year 19,585 $18 20,738 $14 20,014 $12 Granted 4,505 34 4,436 32 4,338 19 Exercised (3,513) 13 (5,316) 12 (3,344) 12 Forfeited (260) 18 (273) 8 (270) 14 - ------------------------------------------------------------------------------------------------------------------------------------ Options outstanding, end of year 20,317 $23 19,585 $18 20,738 $14 - ------------------------------------------------------------------------------------------------------------------------------------ Options exercisable, end of year 10,045 $16 9,278 $13 10,558 $12 - ------------------------------------------------------------------------------------------------------------------------------------
F-29 The Company's stock options outstanding at December 27, 1998, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ (In thousands) Options Outstanding Options Exercisable --------------------------------------------------------- ------------------------------------------ Weighted Average Number Remaining Weighted Remaining Number Weighted Average Exercise Price Ranges of Options Contractual Life Exercise Price of Options Exercise Price - ------------------------------------------------------------------------------------------------------------------------------------ $ 5-10 260 3 years $ 8 260 $ 8 $10-15 4,736 5 years 12 4,736 12 $15-20 6,475 8 years 17 3,846 17 $20-35 8,846 9 years 33 1,203 32 - ------------------------------------------------------------------------------------------------------------------------------------ 20,317 $23 10,045 $ 16 - ------------------------------------------------------------------------------------------------------------------------------------
The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to accounting for its stock option and employee stock purchase plans (see Note 14) ("Employee Stock-Based Plans"). Accordingly, no compensation cost has been recognized for the aforementioned plans. The weighted average fair values for stock option grants were $9.35 in 1998, $9.26 in 1997 and $5.47 in 1996. The weighted average values for employer stock purchase plan ("ESPP") rights were $6.67 in 1998, $4.41 in 1997 and $2.91 in 1996. The weighted average values were estimated at the date of grant using the Black Scholes Option Valuation model and the following assumptions:
- ----------------------------------------------------------------------------------------------------------------------------- Stock Options ESPP Rights ---------------------------------- --------------------------------------- 1998 1997 1996 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------- Risk-free interest rate 4.34% 5.72% 6.14% 5.15% 5.45% 5.47% Expected life 5 years 5 years 5 years 1.1 years 1.1 years 1.2 years Expected volatility 24.90% 22.62% 23.84% 24.90% 22.62% 21.22% Expected dividend yield 1.08% 1.05% 1.56% 1.39% 1.66% 2.0% - -----------------------------------------------------------------------------------------------------------------------------
Had compensation cost for the Employee Stock-Based Plans been determined over the vesting period based on the fair value at the grant date for awards under those plans, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
- ----------------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 ----------------------------- ----------------------------- -------------------------- (In thousands, except per share data) As reported Pro forma As reported Pro forma As reported Pro forma - ----------------------------------------------------------------------------------------------------------------------------------- Net Income $ 278,914 $ 257,803 $ 262,301 $ 249,582 $ 84,534 $ 76,889 Basic earnings per share $ 1.48 $ 1.37 $ 1.36 $ 1.29 $ .43 $ .40 Diluted earnings per share $ 1.45 $ 1.34 $ 1.33 $ 1.27 $ .43 $ .39 - -----------------------------------------------------------------------------------------------------------------------------------
The pro forma effect for 1998, 1997 and 1996 on the amounts presented above is not representative of the pro forma effect in future years because it does not take into account pro forma compensation expense related to grants made prior to 1995. - -------------------------------------------------------------------------------- 14. CAPITAL STOCK The 5 1/2% cumulative prior preference stock was redeemable at the option of the Company on 30-days notice at par plus accrued dividends and was entitled to an annual dividend of $5.50 payable quarterly. The Company redeemed all outstanding shares of its 5 1/2% cumulative prior preference stock at October 1, 1997, at par value at a cost of $2 million. The serial preferred stock was subordinate to the 5 1/2% cumulative prior preference stock. The Board of Directors is authorized to set the distinguishing characteristics of each series prior to issuance, including the granting of limited or full voting rights; however, the consideration received must be at least $100 per share. No shares of serial preferred stock have been issued. The Class A and Class B Common Stock are entitled to equal participation in the event of liquidation and in dividend declarations. The Class B Common Stock is convertible at the holders' option on a share-for-share basis into Class A shares. As provided for in the Certificate of Incorporation, the Class A Common Stock has limited voting rights, including the right to elect 30% of the directors of the Board, and the Class A and F-30 Class B Common Stock have the right to vote together on reservation of Company stock for stock options and other stock-related plans, on the ratification of the selection of independent certified public accountants and, in certain circumstances, on acquisitions of the stock or assets of other companies. Otherwise, except as provided by the laws of the State of New York, all voting power is vested solely and exclusively in the holders of the Class B Common Stock. At the April 1996 annual meeting of the Company's Class A and B Common Shareholders, an amendment to the 1991 Executive Stock Incentive Plan was approved to reserve an additional 20 million shares of Class A Common Stock for issuance thereunder pursuant to the exercise of stock options. The Company spent $454 million in 1998 and $146 million in 1997 to repurchase shares of Class A Common Stock. The Company repurchased 15 million shares in 1998 at an average cost of $31 per share and 3 million shares in 1997 at an average cost of $25 per share. During the period from December 28, 1998, through January 27, 1999, the Company spent $47 million to repurchase 1.4 million shares of Class A Common Stock at an average price of $34 per share. As of January 27, 1999, the remaining amount of repurchase authorizations from the Company's Board of Directors is $300 million. Under the authorizations, purchases may be made from time to time either in the open market or through private transactions. Purchases may be suspended from time to time or discontinued. Stock repurchases under this program exclude shares reacquired in connection with taxes due from optionees on certain exercises under the Company's stock option plans at a cost of $27 million in 1998. Had the 1998 stock repurchases occurred as of January 1, 1998, the impact on earnings per share would have been reduced by $.04 per share. For 1997 and 1996 the impact on earnings per share would have been immaterial. In June 1998 the Company retired from treasury 17 million Class A shares and 140,000 Class B shares. As a result of this retirement, treasury stock and Additional Paid-In Capital were both reduced by $539 million. In December 1998 the Company retired from treasury an additional 10 million Class A shares. This retirement resulted in a reduction of $322 million in treasury stock, $296 million in Additional Paid-In Capital and $26 million in Retained Earnings. In addition to the Company's stock repurchase program, the Company sells equity options in private placements that entitle the holder, upon exercise, to sell shares of Class A Common Stock to the Company at a specified price. In 1997 put options for 400,000 shares were issued for $.3 million in premiums, which were accounted for as a part of Additional Paid-In Capital. In 1998 no put options were issued. All put options have expired. Shares of Class A Common Stock reserved for issuance were as follows: - ---------------------------------------------------------------- December 27, December 28, (Shares in thousands) 1998 1997 - ---------------------------------------------------------------- Stock Options Outstanding 20,317 19,585 Available 11,256 15,383 - ---------------------------------------------------------------- Employee Stock Purchase Plan Available 4,444 5,872 - ---------------------------------------------------------------- Voluntary Conversion of Class B Common Stock Available 1,129 1,129 - ---------------------------------------------------------------- Retirement Units Outstanding 157 318 Available 1,933 1,933 - ---------------------------------------------------------------- Total Outstanding 20,474 19,903 Available 18,754 24,309 - ---------------------------------------------------------------- Under the 1999 Offering of the ESPP, eligible employees may purchase Class A Common Stock through payroll deductions during the 1999 plan year at the lower of $21.70 per share (85% of the average market price on October 1, 1998) or 85% of the average market price on November 29, 1999. Between 35 to 46% of eligible employees have participated in the ESPP in the last three years. Under the ESPP, the Company issued 1.4 million shares in 1998, 1.6 million shares in 1997 and 1.9 million shares in 1996. - -------------------------------------------------------------------------------- 15. COMMITMENTS AND CONTINGENT LIABILITIES Operating Leases Such lease commitments are primarily for office space and equipment. Certain office space leases provide for rent adjustments relating to changes in real estate taxes and other operating expenses. Rental expense amounted to $29 million in 1998, $30 million in 1997 and $30 million in 1996. The approximate minimum rental commitments under noncancelable leases at December 27, 1998, were as follows: 1999, $7 million; 2000, $6 million; 2001, $4 million; 2002, $3 million; 2003, $3 million and $8 million thereafter. Capital Leases In 1994 the Company recorded a $5 million capital lease for 31 acres of City-owned land in College Point, New York City, on which the Company has completed building a printing and distribution facility. The Company has the option to purchase the property at any time prior to the end of F-31 the lease in 2019. Under the terms of the lease agreement with the City of New York, the Company receives various tax and energy cost reductions. The Company also has a long-term lease for a building and site in Edison, NJ. The lease provides the Company with certain early cancellation rights, as well as renewal and purchase options. For financial reporting purposes, the Edison lease has been classified as a capital lease; accordingly, an asset of $57 million (included in buildings, building equipment and improvements) was recorded at December 28, 1997. In May 1998 the Company renegotiated its lease for this property to extend its commitment for an additional 10 years through 2018. Accordingly, the Company increased its capitalized asset and corresponding liability to $78 million. Future minimum lease payments for all capital leases, and the present value of the minimum lease payments at December 27, 1998, are as follows: - ------------------------------------------------------------ (In thousands) Amount - ------------------------------------------------------------ 1999 $ 7,781 2000 7,474 2001 7,281 2002 7,057 2003 6,956 Later years 140,650 - ------------------------------------------------------------ Total minimum lease payments 177,199 Less imputed interest (91,209) - ------------------------------------------------------------ Present value of net minimum lease payments including current maturities $ 85,990 - ------------------------------------------------------------ Other There are various legal actions that have arisen in the ordinary course of business and are now pending against the Company. These actions are generally for amounts greatly in excess of the payments, if any, that may be required to be made. It is the opinion of management after reviewing these actions with legal counsel to the Company that the ultimate liability that might result from these actions would not have a material adverse effect on the consolidated financial statements. - -------------------------------------------------------------------------------- 16. RECLASSIFICATIONS For comparability, certain 1997 and 1996 amounts have been reclassified to conform with the 1998 presentation. F-32 - -------------------------------------------------------------------------------- 17. SEGMENT INFORMATION Operating segments represent components of the Company's business that are evaluated regularly by key management in assessing performance and resource allocation. The Company has determined that its reportable segments consist of its Newspaper, Broadcast and Magazine Groups. The Newspaper Group is comprised of the following operating segments, each of which has its own management: The New York Times, The Boston Globe, and 21 regional newspapers. The economic characteristics, products, services, production process, customer type and distribution methods for the operating segments of the Newspaper Group are substantially similar and have therefore been aggregated as a reportable segment. The Broadcast and Magazine Groups are managed separately and have different economic characteristics from those of the Newspaper Group, and are therefore shown as separate reportable segments. Revenues from individual customers, revenues between business segments, and revenues, operating profit and identifiable assets of foreign operations are not significant. The following are the Company's reportable operating segments: Newspaper Group The New York Times, The Boston Globe, 21 regional newspapers, newspaper distributors, a news service, a features syndicate, TimesFax, licensing operations of The New York Times databases/microfilm and New Ventures. New Ventures include, among other things, projects developed in electronic media. Broadcast Group Eight network-affiliated television stations and two radio stations. Magazine Group Three golf publications, related activities in the golf industry and New Ventures, such as on-line magazine services. The Company's Statements of Income on a segment basis were as follows:
- ------------------------------------------------------------------------------------------------------------------------------- Years Ended ----------------------------------------------------------- December 27, December 28, December 29, (In thousands) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------- REVENUES Newspapers $2,664,396 $2,557,080 $2,348,592 Broadcast 151,175 144,506 118,608 Magazines 121,134 164,832 161,071 - ------------------------------------------------------------------------------------------------------------------------------- Total $2,936,705 $2,866,418 $2,628,271 - ------------------------------------------------------------------------------------------------------------------------------- OPERATING PROFIT (LOSS) Newspapers $ 477,782 $ 434,057 $ 179,611 Broadcast 45,120 39,368 30,596 Magazines 22,110 28,332 24,778 Unallocated corporate expenses (29,792) (46,655) (61,705) - ------------------------------------------------------------------------------------------------------------------------------- Total 515,220 455,102 173,280 - ------------------------------------------------------------------------------------------------------------------------------- Income from Joint Ventures 21,014 13,990 18,223 Interest expense, net 43,333 42,115 26,430 Net gain on dispositions of assets 12,619 10,388 32,836 - ------------------------------------------------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 505,520 437,365 197,909 Income taxes 218,890 175,064 113,375 - ------------------------------------------------------------------------------------------------------------------------------- Income before extraordinary item 286,630 262,301 84,534 Extraordinary item, net of tax - debt extinguishment 7,716 -- -- - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 278,914 $ 262,301 $ 84,534 - -------------------------------------------------------------------------------------------------------------------------------
F-33 Newspaper Group operating profit includes Buyouts of $3 million for 1998, $8 million for 1997 and $31.9 million for 1996. The 1998 Broadcast Group operating profit includes a charge of $2 million for Buyouts; 1996 includes a charge of $300,000 for Buyouts in this group. The 1998 Magazine Group operating profit includes a charge of $3 million for Buyouts. The 1996 operating profit includes the noncash SFAS 121 charge for the Newspaper Group of $126 million and for the Magazine Group of $1 million (see Note 4). Broadcast Group amounts for 1996 were affected by the acquisitions of new television stations (see Note 2). Magazine Group amounts include the amortization of the income relating to a $40 million non-compete agreement associated with the disposition of the Women's Magazines Division. The benefit under this agreement, amounting to $40 million, was recognized on a straight-line basis over four years ending in July 1998. Amortization of this income was $6 million in 1998, $10 million in 1997 and $10 million in 1996. The Magazine Group amounts for 1998 were affected by the sale of the assets of the tennis, sailing and ski magazines (see Note 2). Unallocated corporate expenses include Buyouts of $1 million for 1997 and $12 million for 1996. Unallocated corporate expenses for 1997 also include a $10 million noncash charge related to the adoption of EITF 97-13 (see Note 3). Revenues from individual customers, revenues between business segments, and revenues, operating profit and identifiable assets of foreign operations are not significant. Advertising, circulation and other revenue, by major product of the Newspaper Group, were as follows: - -------------------------------------------------------------------------------- % Change ------------------ (In millions) 1998 1997 1996 98-97 97-96 - -------------------------------------------------------------------------------- The New York Times Advertising $1,059 $ 989 $ 881 7.0% 12.3% Circulation 442 428 418 3.3% 2.4% Other 141 142 113 (0.7%) 25.7% - -------------------------------------------------------------------------------- Total $1,642 $1,559 $1,412 5.3% 10.4% - -------------------------------------------------------------------------------- The Boston Globe Advertising $ 449 $ 441 $ 402 1.8% 9.7% Circulation 133 134 132 (0.7%) 1.5% Other 8 8 5 N/A N/A - -------------------------------------------------------------------------------- Total $ 590 $ 583 $ 539 1.2% 8.2% - -------------------------------------------------------------------------------- Regional Newspapers Advertising $ 342 $ 323 $ 308 5.9% 4.9% Circulation 77 78 76 (1.3%) 2.6% Other 14 14 13 N/A 7.7% - -------------------------------------------------------------------------------- Total $ 433 $ 415 $ 397 4.3% 4.5% - -------------------------------------------------------------------------------- Total Newspaper Group Advertising $1,850 $1,753 $1,591 5.5% 10.2% Circulation 652 640 626 1.9% 2.2% Other 163 164 131 (0.6%) 25.2% - -------------------------------------------------------------------------------- Total $2,665 $2,557 $2,348 4.2% 8.9% - -------------------------------------------------------------------------------- F-34 The Company's segment depreciation and amortization, capital expenditures and identifiable assets reconciled to consolidated amounts were as follows: - -------------------------------------------------------------------------------- Years Ended --------------------------------------------- December 27, December 28, December 29, (In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- DEPRECIATION AND AMORTIZATION Newspapers $ 166,485 $ 160,192 $ 138,630 Broadcast 17,662 17,919 14,161 Magazines (4,361) (7,330) (7,320) Corporate 8,099 2,764 2,054 Investment in Joint Ventures 352 352 352 - -------------------------------------------------------------------------------- Total $ 188,237 $ 173,897 $ 147,877 - -------------------------------------------------------------------------------- CAPITAL EXPENDITURES* Newspapers $ 54,178 $ 117,346 $ 179,762 Broadcast 4,331 7,225 4,438 Magazines 631 3,205 2,554 Corporate 22,438 32,392 20,080 - -------------------------------------------------------------------------------- Total $ 81,578 $ 160,168 $ 206,834 - -------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Newspapers $ 2,669,290 $ 2,711,180 $ 2,733,243 Broadcast 387,764 409,742 406,053 Magazines 62,147 56,236 92,632 Corporate 223,635 312,971 170,688 Investment in Joint Ventures 122,273 133,054 137,255 - -------------------------------------------------------------------------------- Total $ 3,465,109 $ 3,623,183 $ 3,539,871 - -------------------------------------------------------------------------------- * Capital expenditures exclude additions to capitalized leases for the Edison Facility in 1998 (see Note 15 of the Notes to the Consolidated Financial Statements). F-35 INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS AND STOCKHOLDERS OF THE NEW YORK TIMES COMPANY We have audited the accompanying consolidated balance sheets of The New York Times Company as of December 27, 1998 and December 28, 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 27, 1998. Our audits also include the financial statement schedule listed in the Index at Item 14a. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The New York Times Company as of December 27, 1998 and December 28, 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 27, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. New York, New York January 27, 1999 MANAGEMENT'S RESPONSIBILITIES REPORT The Company's consolidated financial statements were prepared by management who is responsible for their integrity and objectivity. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and, as such, include amounts based on management's best estimates and judgments. Management is further responsible for maintaining a system of internal accounting control, designed to provide reasonable assurance that the Company's assets are adequately safeguarded and that the accounting records reflect transactions executed in accordance with management's authorization. The system of internal control is continually reviewed for its effectiveness and is augmented by written policies and procedures, the careful selection and training of qualified personnel and a program of internal audit. The consolidated financial statements were audited by Deloitte & Touche LLP, independent auditors. Their audit was conducted in accordance with generally accepted auditing standards and their report is shown on this page. The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with the independent auditors, internal auditors and management to discuss specific accounting, financial reporting and internal control matters. Both the independent auditors and the internal auditors have full and free access to the Audit Committee. Each year the Audit Committee selects, subject to ratification by stockholders, the firm which is to perform audit and other related work for the Company. - -------------------------------------------------------------------------------- MARKET INFORMATION - -------------------------------------------------------------------------------- The Class A Common Stock is listed on the New York Stock Exchange. Prior to September 25, 1997, the Class A Common Stock was listed on the American Stock Exchange. The Class B Common Stock is unlisted and is not actively traded. The number of security holders of record as of January 27, 1999, was as follows: Class A Common Stock: 11,597; Class B Common Stock: 38. The market price range of Class A Common Stock was as follows: - -------------------------------------------------------------------------- Quarter Ended 1998 1997 - -------------------------------------------------------------------------- High Low High Low March $34.13 31.13 $23.94 $18.19 June 38.72 33.25 25.88 20.00 September 40.69 26.25 27.66 22.78 December 35.81 20.50 33.25 25.00 Year 40.69 20.50 33.25 18.19 - -------------------------------------------------------------------------- F-36 QUARTERLY INFORMATION (UNAUDITED)
First Quarter Second Quarter Third Quarter Fourth Quarter Year ----------------------------------------------------------------------------------------- (In millions, except per share data) 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 723 $692 $ 749 $722 $ 683 $683 $ 782 $ 769 $2,937 $2,866 - ---------------------------------------------------------------------------------------------------------------------- Costs and expenses Production costs Raw materials 88 75 89 78 83 78 94 92 354 323 Wages and benefits 154 158 147 149 140 146 158 152 599 605 Other 122 113 122 118 135 126 130 127 509 484 - ---------------------------------------------------------------------------------------------------------------------- Total production costs 364 346 358 345 358 350 382 371 1,462 1,412 Selling, general and administrative expenses 243 245 246 250 224 242 247 262 960 999 - ---------------------------------------------------------------------------------------------------------------------- Operating profit 116 101 145 127 101 91 153 136 515 455 Income from Joint Ventures 5 1 4 3 5 3 7 7 21 14 Interest expense, net 10 8 10 11 10 12 13 11 43 42 Net gain on dispositions of assets 5 -- 8 -- -- -- -- 10 13 10 - ---------------------------------------------------------------------------------------------------------------------- Earnings before taxes and extraordinary item 116 94 147 119 96 82 147 142 506 437 Income taxes 51 42 64 34 41 36 63 63 219 175 - ---------------------------------------------------------------------------------------------------------------------- Earning before extraordinary item 65 52 83 85 55 46 84 79 287 262 Extraordinary item, net of tax(1) -- -- (8) -- -- -- -- -- (8) -- - ---------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 65 $ 52 $ 75 $ 85 $ 55 $ 46 $ 84 $ 79 $ 279 $ 262 - ---------------------------------------------------------------------------------------------------------------------- Average number of common shares outstanding(2) Basic 193 196 192 192 189 192 182 192 189 193 Diluted 197 199 196 196 192 196 186 197 193 197 - ---------------------------------------------------------------------------------------------------------------------- Basic earnings per share(2) Earnings before extraordinary item $ .34 $.26 $ .43 $.44 $ .29 $.24 $ .46 $ .41 $ 1.52 $ 1.36 Extraordinary item, net of tax(1) -- -- (.04) -- -- -- -- -- (.04) -- - ---------------------------------------------------------------------------------------------------------------------- Net income $ .34 $.26 $ .39 $.44 $ .29 $.24 $ .46 $ .41 $ 1.48 $ 1.36 - ---------------------------------------------------------------------------------------------------------------------- Diluted earnings per share(2) Earnings per share before extraordinary item $ .33 $.26 $ .42 $.43 $ .29 $.24 $ .45 $ .40 $ 1.49 $ 1.33 Extraordinary item, net of tax(1) -- -- (.04) -- -- -- -- -- (.04) -- - ---------------------------------------------------------------------------------------------------------------------- Net income $ .33 $.26 $ .38 $.43 $ .29 $.24 $ .45 $ .40 $ 1.45 $ 1.33 - ---------------------------------------------------------------------------------------------------------------------- Dividends per share(2) $.085 $.08 $.095 $.08 $.095 $.08 $.095 $.085 $ .37 $ .32 - ----------------------------------------------------------------------------------------------------------------------
All earnings per share amounts for special items below are the same basic and diluted earnings per share unless otherwise noted. (1) See Note 8 of the Notes to the Consolidated Financial Statements. (2) All share and per-share information is presented on a post two-for-one split basis. The split was effective on June 17, 1998. F-37 The 1998 and 1997 quarters do not equal the respective year-end amounts for earnings per share due to the weighted average number of shares outstanding used in the computations for the respective periods. Per share amounts for the respective quarters and years have been computed using the average number of common shares outstanding as presented in the table on the proceeding page. The Company's largest source of revenue is advertising, which influences the pattern of the Company's quarterly consolidated revenues and is seasonal in nature. Traditionally, second-quarter and fourth-quarter advertising volume is higher than that which occurs in the first- and third-quarters. Advertising volume tends to be less in these quarters primarily because economic activity is lower in the post holiday season and summer periods. Quarterly trends are also affected by the overall economy and economic conditions that may exist in specific markets served by each of the Company's business segments. First-quarter 1998 results include a $5 million pre-tax gain ($.01 per share) from the sale of equipment. Second-quarter 1998 results include an $8 million after-tax extraordinary item in connection with a debt extinguishment (see Note 8). In addition, 1998 results include an $8 million pre-tax gain on the sale of assets of the Company's tennis, sailing and ski magazines. Fourth-quarter 1998 results include a $5 million pre-tax charge ($.02 per share) for Buyouts. First-quarter 1997 results included a $2.5 million pre-tax charge ($.01 earnings per share) for Buyouts. Second-quarter 1997 results included an $18 million favorable adjustment ($.09 earning per share) resulting from the completion of the Company's federal income tax audits for periods through 1992. Fourth-quarter 1997 results included a $10 million aggregate pre-tax gain ($.03 per share) resulting from the sale of the assets of the tennis, sailing and ski businesses and certain small properties, net of the exit costs associated with the shutdown of a golf-related business. Fourth-quarter 1997 results also included a $10 million pre-tax noncash charge ($.03 per share) relating to EITF 97-13 and a $6 million pre-tax charge ($.03 earning per share) for Buyouts. F-38 TEN-YEAR SUPPLEMENTAL FINANCIAL DATA
Years Ended December ----------------------------------------------------------------------------------------- (In millions, except per share data) 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 - ----------------------------------------------------------------------------------------------------------------------------------- Revenues and Income Revenues $2,937 $2,866 $2,628 $2,428 $2,397 $2,057 $1,810 $1,737 $1,808 $1,797 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Profit 515 455 173 233 211 126 88 93 129 168 - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Joint Ventures 21 14 18 15 5 (53) (9) (9) 8 (11) - ----------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from continuing operations 287 262 85 136 213 6 (11) 47 65 68 Discontinued operations -- -- -- -- -- -- -- -- -- 199 Extraordinary item (1) (8) -- -- -- -- -- -- -- -- -- Net cumulative effect of accounting changes -- -- -- -- -- -- (34) -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 279 $ 262 $ 85 $ 136 $ 213 $ 6 $ (45) $ 47 $ 65 $ 267 - ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Total assets $3,465 $3,623 $3,540 $3,390 $3,138 $3,215 $1,995 $2,128 $2,150 $2,188 Long-term debt and capital lease obligations 598 535 637 638 523 460 207 213 319 337 Common stockholders' equity 1,531 1,729 1,623 1,610 1,544 1,599 1,000 1,073 1,056 1,064 - ----------------------------------------------------------------------------------------------------------------------------------- Basic earnings per share(2) Continuing operations $ 1.52 1.36 .43 .70 1.02 .04 (.07) .30 .42 .44 Discontinued operations -- -- -- -- -- -- -- -- -- 1.26 Extraordinary item (1) (.04) -- -- -- -- -- -- -- -- -- Net cumulative effect of accounting changes -- -- -- -- -- -- (.22) -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 1.48 $ 1.36 $ .43 $ .70 $ 1.02 $ .04 $ (.29) $ .30 $ .42 $ 1.70 - ----------------------------------------------------------------------------------------------------------------------------------- Diluted earnings per share (2) Continuing operations $ 1.49 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.06) $ .30 $ .42 $ .43 Discontinued operations -- -- -- -- -- -- -- -- -- 1.26 Extraordinary item (1) (.04) -- -- -- -- -- -- -- -- -- Net cumulative effect of accounting Changes -- -- -- -- -- -- (.22) -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 1.45 $ 1.33 $ .43 $ .70 $ 1.02 $ .04 $ (.28) $ .30 $ .42 $ 1.69 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends $ .37 $ .32 $ .29 $ .28 $ .28 $ .28 $ .28 $ .28 $ .27 $ .25 Common stockholders' equity $ 8.11 $ 8.96 $ 8.34 $ 8.31 $ 7.42 $ 9.46 $ 6.36 $ 6.92 $ 6.90 $ 6.82 - ----------------------------------------------------------------------------------------------------------------------------------- Shares Outstanding(2) Class A and Class B Common 182 193 195 195 196 214 159 157 154 156 - ----------------------------------------------------------------------------------------------------------------------------------- Market Price (end of year)(2) $35.31 $32.03 $19.25 $14.81 $11.06 $13.13 $13.19 $11.81 $10.31 $13.19 - -----------------------------------------------------------------------------------------------------------------------------------
All references to earnings per share are the same for basic and diluted unless noted otherwise. (1) See Note 8 of the Notes to the Consolidated Financial Statements. (2) All share and per-share information is presented on a post-two-for-one split basis. The split was effective on June 17, 1998. F-39 All earnings per share amounts for special items below are the same for basic and diluted earnings per share unless otherwise noted. 1998 Results included: a $5 million pre-tax gain ($.01 earnings per share) from the sale of equipment; a $8 million extraordinary charge ($.04 per share) in connection with the Company's repurchase of $78 million of its $150 million, 8.25% notes due in 2025; an $8 million pre-tax gain ($.02 earnings per share) from the satisfaction of a post-closing requirement related to the 1997 sale of assets of the Company's tennis, sailing and ski magazines; $5 million pre-tax charge ($.02 per share) for Buyouts. 1997 Results included: a $10 million pre-tax gain ($.03 per share) resulting from the sale of the Company's assets of its tennis, sailing and ski magazines and certain small properties, net of the exit costs associated with the shutdown of a golf-related business; a $10 million pre-tax noncash accounting charge ($.03 per share) related to EITF 97-13; an $9 million pre-tax charge ($.02 per share) for Buyouts; an $18 million ($.09 per share) favorable tax adjustment. 1996 Results included: a $127 million pre-tax noncash accounting charge ($.49 basic earnings per share, $.48 diluted earnings per share) related to SFAS 121; $44 million pre-tax charge ($.13 basic per share, $.12 diluted earnings per share) for Buyouts; a $25 million pre-tax gain ($.07 per share) resulting from the realization of a gain contingency from the disposition of a paper mill in a prior year; $8 million pre-tax gain ($.02 per share) on the sale of an office building. 1995 Results included: a net pre-tax gain of $11 million ($.03 per share) from the sales of several small newspapers; a $10 million pre-tax charge ($.03 per share) for Buyouts. 1994 Results included: a net pre-tax gain of $201 million ($.50 basic earnings per share, $.49 diluted earnings per share) from the sales of the Women's Magazines Division and U.K. golf publications, and the disposition of a minority interest in a newsprint mill. 1993 Results included: a pre-tax $4 million charge ($.01 per share) for rate adjustments due to a severe snowstorm; a $4 million ($.02 per share) of additional tax expense for remeasurement of deferred tax balances due to the enactment of the Revenue Reconciliation Act of 1993; $1 million ($.01 per share) of additional tax expense due to the Revenue Reconciliation Act of 1993 which increased the federal corporate income tax rate; a $3 million pre-tax gain ($.01 per share) from the sale of assets; a $35 million of pre-tax charges ($.12 per share) for Buyouts; a pre-tax noncash charge of $47 million ($.28 per share) to write down a joint venture investment. 1992 Results included: a $54 million pre-tax loss ($.24 per share) on the closing of The Gwinnett Daily News (GA); a $3 million pre-tax gain ($.01 per share) from the sale of assets; a $28 million pre-tax charge ($.10 per share) for Buyouts; a $21 million pre-tax charge ($.08 per share) for labor disruptions, training and start-up costs at Edison. Net cumulative effect of accounting changes ($.22 per share) includes the change in methods of accounting for income taxes, postretirement benefits other than pensions and postemployment benefits. 1991 Results included: a $20 million pre-tax charge ($.08 per share) for Buyouts at the Times; the reversal of a provision for income taxes of $10 million ($.06 per share) for a favorable tax settlement. 1989 Results included: an after-tax gain of $193 million ($1.26 per share) from the sale of the Company's cable television operation; a $30 million ($.11 per share) before tax charge for costs related to anticipated voluntary union staff reductions at The New York Times newspaper; a pre-tax charge of $27 million ($.17 per share) for a valuation reserve against the Company's investment in a paper mill (since sold). S-1 THE NEW YORK TIMES COMPANY VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended December 27, 1998
(In thousands) - ------------------------------------------------------------------------------------------------------------------ Column A Column B Column C Column D Column E - ------------------------------------------------------------------------------------------------------------------ Additions Deductions for charged to purposes for Balance at costs and which Balance beginning expenses or accounts at end of Description of period revenues were set up period - ------------------------------------------------------------------------------------------------------------------ Year Ended December 27, 1998 Deducted from assets to which they apply Uncollectible accounts $20,889 $36,221 $28,964 $28,146 Returns and allowances, etc 4,998 6,242 5,022 6,218 - ------------------------------------------------------------------------------------------------------------------ Total $25,887 $42,463 $33,986 $34,364 - ------------------------------------------------------------------------------------------------------------------ Year Ended December 28, 1997 Deducted from assets to which they apply Uncollectible accounts $24,359 $22,423 $25,893 $20,889 Returns and allowances, etc 6,953 8,997 10,952 4,998 - ------------------------------------------------------------------------------------------------------------------ Total $31,312 $31,420 $36,845 $25,887 - ------------------------------------------------------------------------------------------------------------------ Year Ended December 29, 1996 Deducted from assets to which they apply Uncollectible accounts $18,942 $23,526 $18,109 $24,359 Returns and allowances, etc 6,923 10,324 10,294 6,953 - ------------------------------------------------------------------------------------------------------------------ Total $25,865 $33,850 $28,403 $31,312 - ------------------------------------------------------------------------------------------------------------------
EXHIBIT INDEX (2.1) Agreement and Plan of Merger, dated as of June 11, 1993, as amended by the First Amendment dated as of August 12, 1993, by and among the Company, Sphere, Inc. and Affiliated Publications, Inc. ("API") (filed as Exhibit 2 to the Form S-4 Registration Statement, Registration No. 33-50043, on August 23, 1993, and included as Annex I to the Joint Proxy Statement/Prospectus included in such Registration Statement (schedules omitted--the Company agrees to furnish a copy of any schedule to the Securities and Exchange Commission upon request), and incorporated by reference herein). (3.1) Certificate of Incorporation as amended and restated to reflect amendments effective June 19, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (3.2) By-laws as amended through May 21, 1998 (filed as an Exhibit to the Company's Form 10-Q dated August 11, 1998, and incorporated by reference herein). (4) The Company agrees to furnish to the Commission upon request a copy of any instrument with respect to long-term debt of the Company and any subsidiary for which consolidated or unconsolidated financial statements are required to be filed, and for which the amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. (9.1) Globe Voting Trust Agreement, dated as of October 1, 1993, as amended effective October 1, 1995 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.1) The Company's Executive Incentive Compensation Plan as amended through December 20, 1990 (filed as an Exhibit to the Company's Form 10-K dated March 1, 1991, and incorporated by reference herein). (10.2) The Company's 1991 Executive Stock Incentive Plan, as amended through April 16, 1998 (filed as an Exhibit to the Company's Form 10-Q dated May 7, 1998, and incorporated by reference herein). (10.3) The Company's 1991 Executive Cash Bonus Plan, as amended through April 16, 1998 (filed as an Exhibit to the Company's 10-Q dated May 7, 1998, and incorporated by reference herein). (10.4) The Company's Non-Employee Directors' Stock Option Plan, as amended through February 19, 1998 (filed as an Exhibit to the Company's Form 10-Q dated May 7, 1998, and incorporated by reference herein). (10.5) The Company's Supplemental Executive Retirement Plan, as amended and restated through January 1, 1993 (filed as an Exhibit to the Company's Form 10-K dated March 11, 1996, and incorporated by reference herein). (10.6) Amendment No. 1, dated May 1, 1997, to the Company's Supplemental Executive Retirement Plan (filed as an Exhibit to the Company's Form 10-Q dated March 30, 1997, and incorporated by reference herein). (10.7) Lease (short form) between the Company and Z Edison Limited Partnership, dated April 8, 1987 (filed as an Exhibit to the Company's Form 10-K dated March 27, 1988, and incorporated by reference herein). (10.7.1) Amendment to Lease between the Company and Z Edison Limited Partnership, dated May 14, 1997 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.7.2) Second Amendment to Lease between the Company and Z Edison Limited Partnership, dated June 30, 1998 (filed as an Exhibit to the Company's Form 10-Q dated November 10, 1998, and incorporated by reference herein). (10.8) Agreement of Lease, dated as of December 15, 1993, between The City of New York, Landlord, and the Company, Tenant (as successor to New York City Economic Development Corporation (the "EDC"), pursuant to an Assignment and Assumption of Lease With Consent, made as of December 15, 1993, between the EDC, as Assignor, to the Company, as Assignee) (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.9) Funding Agreement #1, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.10) Funding Agreement #2, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.11) Funding Agreement #3, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.12) Funding Agreement #4, dated as of December 15, 1993, between the EDC and the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.13) New York City Public Utility Service Power Service Agreement, made as of May 3, 1993, between The City of New York, acting by and through its Public Utility Service, and The New York Times Newspaper Division of the Company (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.14) Employment Agreement, dated May 19, 1993, between API, Globe Newspaper Company and William O. Taylor (filed as an Exhibit to the Company's Form 10-K dated March 21, 1994, and incorporated by reference herein). (10.15) API's 1989 Stock Option Plan (filed as Annex F-1 to API's Proxy Statement-Joint Prospectus, dated as of April 28, 1989, contained in API's Registration Statement on Form S-4 (Registration Statement No. 33-28373) declared effective April 28, 1989, and incorporated by reference herein). (10.16) Globe Newspaper Company, Inc. Supplemental Executive Retirement Plan, as amended effective December 16, 1998. (10.17) API's 1990 Stock Option Plan (Restated 1991) (filed as Exhibit 1 to API's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1991 (Commission File No. 1-10251), and incorporated by reference herein). (10.18) The Company's Deferred Executive Compensation Plan, as amended effective December 28, 1998, and January 1, 1999. (10.19) The New York Times Designated Employees Deferred Earnings Plan, as amended effective December 28, 1998, and January 1, 1999. (10.20) 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). (10.21) Distribution Agreement, dated as of September 24, 1998, by and among the Company, Morgan Stanley & Co., Incorporated, Chase Securities Inc. and Salomon Smith Barney Inc. (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.22) Exchange Rate Agency Agreement, dated as of September 24, 1998, by and between the Company and Morgan Stanley Dean Witter (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (10.23) Calculation Agent Agreement, dated as of September 24, 1998, by and between the Company and The Chase Manhattan Bank (filed as an Exhibit to the Company's Form 8-K dated September 24, 1998, and incorporated by reference herein). (12) Ratio of Earnings to Fixed Charges. (21) Subsidiaries of the Company. (23) Consent of Deloitte & Touche LLP. (27) Financial Data Schedules. EX-10.16 2 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXHIBIT 10.16 GLOBE NEWSPAPER COMPANY, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Globe Newspaper Company, Inc. (the "Company") hereby restates, effective December 16, 1998, this Executive Supplemental Retirement Plan (the "Plan") for the benefit of past and present executives of the Company and its affiliates listed on Exhibits A, B and E (collectively, the "Executives"): 1. Purpose. The purpose of this Plan is to provide supplemental retirement payments and death payments for the Executives who become entitled to receive benefits under The New York Times Companies Pension Plan, as in effect from time to time (the "Retirement Plan"). Capitalized terms used herein shall have the meanings given them in the Retirement Plan unless otherwise defined in this Plan. 2. Supplemental Retirement Payments. The Company or an affiliate shall pay to each Executive listed on Exhibit A who has completed 36 months in this Plan (or to such person or persons as may at that time be entitled to receive payments with respect to such an Executive under the Retirement Plan) the amount by which (a) any benefit that would have been payable under the Retirement Plan if (i) the expression "1.83-1/3%" in the definition of "Gross Amount" in the Retirement Plan were changed to "2%," and (ii) clause (c) of the definition of "Gross Amount" were changed to read "the number of his/her Years of Accrual Service not in excess of 25 plus, if the Executive had more than 25 Years of Accrual Service, his/her Additional Earned Service, as defined in Section 2 of the Supplemental Executive Retirement Plan of Globe Newspaper Company, Inc.," and (iii) his/her regular compensation and regular annual bonuses (including any amounts deferred under The New York Times Company Deferred Compensation Plan) were included in the calculation of the accrued amount under the Retirement Plan (except that for purposes of calculating this amount, the period used for calculating the average monthly rate of compensation will be the 260 consecutive weeks prior to the normal retirement date under the Retirement Plan or the date of earlier termination), and (iv) the amount so calculated were payable without reference to any benefit limits affecting the Executive other than limits on the Family Death Benefit exceeds (b) the sum of (i) the benefit actually paid from time to time under the Retirement Plan and (ii) the appropriate offset amount, as defined in the Retirement Plan. The amount payable with respect to an Executive who shall have completed less than 36 months in this plan shall be calculated as set forth in the preceding sentence but excluding therefrom all service and compensation before the Executive became listed on Exhibit A. Supplemental retirement payments hereunder shall be made on the same dates and over the same period as payments under the Retirement Plan are made. The Additional Earned Service for an Executive who was in Band 3A when last employed by the Company or an affiliate shall be .5 times the number by which the Executive's Years of Accrual Service, not to exceed 30, exceed 25 and the Additional Earned Service for any Executive who was the Publisher or in Band 1 or 2 when last employed, shall be .75 times the number by which the Executive's Years of Accrual Service, not to exceed 35, exceed 25. Exhibit A shall state the Band in which each employed Executive is placed. 3. Return to Active Employment Following Commencement of Benefit. In the event an Executive who has begun to receive a benefit hereunder is reemployed by the Company or an affiliate and his/her benefit under the Retirement Plan is suspended, his/her benefit shall be suspended during the period of such reemployment that benefits under the Retirement Plan are suspended. Upon his/her subsequent retirement or earlier termination of employment, he/she shall become entitled to an increased benefit, reduced by the actuarial equivalent of the payments made to him/her prior to reemployment. 4. Death Payments. The Company shall pay as a death benefit to the designated beneficiary of an Executive listed on Exhibit B or E the amount, if any, by which (a) the product of (i) his/her regular annual compensation from the Company and its affiliates in effect on his/her date of death or his/her date of earlier retirement, and (ii) the death benefit multiplier specified below for the status of the Executive at the time of death, exceeds (b) the sum of (i) the death benefits payable with respect to the Executive under the Globe Newspaper Life Insurance Trust, and (ii) the death benefits payable to the Executive's designated beneficiary or beneficiaries under one or more insurance agreements between the Company and the Executive: 1 Executive's Status at Date of Death Applicable Multiplier ---------------- --------------------- (1) Employed by Company and/or death benefit multiplier its subsidiaries, listed on set opposite name on Exhibit B and less than Exhibit B 65 years of age (2) Employed by Company and/or 50% of death benefit its subsidiaries, listed on multiplier set opposite on Exhibit B and 65 years name on Exhibit B of age or older (3) Retired from employment death benefit multiplier by Company and its set opposite name on subsidiaries while listed on Exhibit C Exhibit B and after the date 36 months prior to Normal Retirement Date (4) Employed by Company and/or death benefit multiplier its subsidiaries, Normal set opposite name on Retirement Date has not Exhibit D occurred but taken off Exhibit B within 36 months prior to Normal Retirement Date (5) Listed on Exhibit E death benefit multiplier set opposite name on Exhibit E For the purpose of this Section 4, "Normal Retirement Date" of an Executive means the first day of the month coinciding with or next following the first of the following events (a) his/her 65th birthday or (b) his/her 62nd birthday if the Executive then would have completed 30 calendar years in each of which the Executive had 1,000 Hours of Service. 5. Effect on Other Agreements. Nothing in this Plan shall limit the right of an Executive to receive payments pursuant to any other agreement if such payments are greater than the supplemental payments contemplated by Sections 2 and 3 of this Plan. 6. Vesting. If an Executive completes 10 years of employment with the Company and its affiliates, but is removed from Exhibit A before payments begin under the Retirement Plan, his/her name shall be added to Exhibit E together with the date on which he/she was removed from Exhibit A and his/her length of service as of that date, and the amount contemplated by Section 2 shall be paid to the Executive when such payments begin, subject to forfeiture under Section 7. In that event, the amount payable shall be calculated with regard to compensation, if any, from the Company and its affiliates after removal from Exhibit A, but without regard to length of service after that date. If the Executive fails so to complete 10 years of employment and is so removed, he/she shall have no benefit under this Plan. 7. Forfeiture. The right of any Executive to a benefit under this Plan shall be forfeited if the Executive is discharged for gross neglect of duty, insubordination or serious misconduct. No Executive shall at any time either during employment or, following his/her retirement, during the period in which any payments are being made to him/her pursuant to this Plan carry on activities which, in the opinion of the Company, are plainly detrimental in a material way to the best interests of the Company or its affiliates. Upon making a determination that the activities of any Executive are so detrimental, the Company shall so inform the Executive by written notice. If the Executive shall not cease and terminate such detrimental activities within 30-day period from receipt of such written notice, the Company shall have no further obligations under this Plan, and all payments to and rights and benefits of the 2 Executive, any designated beneficiary or beneficiaries or any contingent beneficiary hereunder shall immediately cease and terminate and be forfeited and the Company shall have no further liability hereunder. 8. Unsecured Rights. The rights of each Executive, his/her designated beneficiary or beneficiaries and any contingent beneficiary shall be solely those of a general, unsecured creditor of the Company. The Company shall be under no obligation to set aside or segregate any funds or resources of any kind to meet any of its obligations hereunder, and no one shall have any rights on account of this Plan in or to any of the specific funds or resources of the Company. 9. Amendment; Revision of Exhibits A-E. Effective January 1, 1997, the ERISA Committee of The New York Times Company ("NYT Co.") Board of Directors (the "Board Committee"), except insofar as such authority has been delegated by the Board Committee to the ERISA Management Committee, shall have the power at any time or times to amend the Plan, acting at a meeting or by consent as evidenced by a copy of the document amending the Plan executed by the Secretary of NYT Co., but no amendment shall deprive any Executive of rights vested pursuant to Section 6. In addition, Exhibits A-E may be replaced at any time by new Exhibits A-E, changing one or more of the Executives listed thereon, their pension multipliers or death benefit multipliers, signed and dated by either the Chief Financial Officer of the Company or the Director of Compensation of the Company. The most recently executed Exhibits A-E shall control. IN WITNESS WHEREOF, Globe Newspaper Company, Inc., pursuant to action by the ERISA Committee of The New York Times Company Board of Directors on December 16, 1998, has caused this restatement to be executed and delivered by its Clerk as of December 31, 1998. GLOBE NEWSPAPER COMPANY, INC. By: /s/ Catherine E. C. Henn -------------------------------- Catherine E. C. Henn, Clerk 3 EX-10.18 3 DEFERRED EXECUTIVE COMPENSATION PLAN EXHIBIT 10.18 THE NEW YORK TIMES COMPANY DEFERRED EXECUTIVE COMPENSATION PLAN ARTICLE I INTRODUCTION 1.1 Purpose Of Plan. The Employer has adopted the Plan set forth herein to provide a means by which certain employees may elect to defer receipt of designated percentages or amounts of their Compensation. 1.2 Status Of Plan. The Plan is intended to be "a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), and shall be interpreted and administered to the extent possible in a manner consistent with that intent. ARTICLE II DEFINITIONS Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: 2.1 Account means, for each Participant, the account established for his or her benefit under Section 5.1. Such Account shall include both salary and bonus deferrals. 2.2 Change Of Control means: (a) any individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof (a "Person") (or two or more Persons acting in concert), other than any descendent (or any spouse thereof) of Iphigene Ochs Sulzberger (a "Family Member") or a beneficiary or trustee (as the same may change from time to time) of a trust over 50% of the individual beneficiaries of which are Family Members, acquiring the power to elect a majority of the directors of The New York Times Company (the "Company") in a transaction or series of transactions not approved in advance by a vote of at least three quarters of the Continuing Directors (as defined below); or (b) individuals who, as of the date hereof, constitute the Board of Directors of the Company (as of the date hereof the "Continuing Directors") ceasing for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or a nomination for election by the Company's shareholders, was approved in advance by a vote of at least three quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the directors of the Company, as such terms are used in Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a Continuing Director; or (c) approval by the stockholders of the Company of a reorganization, merger, consolidation, liquidation or dissolution of the Company or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by three quarters of the Continuing Directors. 2.3 Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 2.4 Compensation means the annual bonus and the base salary of a Participant. The ERISA Board Committee, in its sole discretion, shall designate from time to time the maximum percentage of base salary and bonus that can be deferred under the Plan. Such designation shall be listed in Appendix A. For purposes of the Plan, Compensation shall be determined before giving effect to Elective Deferrals and other salary reduction amounts which are not included in the Participant's gross income under Code Sections 125, 401(k), 402(h) or 403(b). 2.5 Effective Date means July 1, 1994. 1 2.6 Election Form means the participation election form as approved and prescribed by the Plan Administrator. 2.7 Elective Deferral means the portion of Compensation which is deferred by a Participant under Article IV. 2.8 Eligible Employee means, on the Effective Date or on any date thereafter, each employee of the Employer who is in the class of employees eligible to receive options under The New York Times Company 1991 Executive Stock Incentive Plan, whose eligibility for such options is not dependent on the achievement of specific performance measures and actually receives such options in the year prior to the year for which such employee defers any Compensation under the Plan, and who is not eligible to participate in any other non-qualified deferred compensation plan sponsored by the Employer and/or its subsidiaries and affiliates while deferring Compensation under this Plan. 2.9 Employer means The New York Times Company, any successor to all or a major portion of the Employer's assets or business which assumes the obligations of the Employer, and each other entity that is affiliated with the Employer whose employees, with the consent of the Company, are eligible, as provided under Section 2.8, to participate in the Plan. 2.10 ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 2.11 ERISA Board Committee means a committee of the Board of Directors of The New York Times Company. 2.12 ERISA Management Committee means a committee appointed by the ERISA Board Committee. 2.13 Insolvency means either (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.14 Participant means any Eligible Employee who participates in the Plan in accordance with Article III. 2.15 Plan means The New York Times Company Deferred Executive Compensation Plan and all amendments thereto. 2.16 Plan Administrator means the person, persons or entity designated by the Employer under Article VIII to oversee the administration of the Plan. If no such person or entity is so serving at any time, the Employer shall be the Plan Administrator. 2.17 Plan Year means the 12-month period beginning on January 1 and ending on December 31 of each year, except for the first plan year which begins on July 1, 1994, and ends on December 31, 1994. 2.18 Recordkeeper means the person(s) or entity appointed or hired by the ERISA Management Committee under Section 8.1. 2.19 Total And Permanent Disability means the inability of a Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Plan Administrator. 2.20 Trust means the trust established by the Employer that identifies the Plan as a plan with respect to which assets are to be held by the Trustee. Plan assets in the trust are subject to the general creditors of The New York Times Company in the event of bankruptcy or Insolvency. 2.21 Trustee means the trustee or trustees under the Trust. 2.22 Valuation Option means the performance of the investment funds listed in Appendix B of the Plan. ARTICLE III PARTICIPATION 3.1 Commencement Of Participation. Any Eligible Employee who elects to defer part of his or her Compensation in accordance with Article IV shall become a Participant in the Plan as of the date such deferrals commence in accordance with such Article. 2 3.2 Continued Participation. A Participant in the Plan shall continue to be a Participant so long as any amount remains credited to his or her Account. However, future deferrals under the Plan may be made only if such Participant continues to be an Eligible Employee under the Plan. ARTICLE IV ELECTIVE DEFERRALS 4.1 Elective Deferrals. An individual who is an Eligible Employee on the Effective Date may, by completing an Election Form and filing it with the Plan Administrator by the end of the first month following the Effective Date, elect to defer the receipt of a portion of one or more payments of Compensation for a period of at least three Plan Years and on such terms as the ERISA Management Committee may permit. Thereafter, any Eligible Employee may elect to defer the receipt of a percentage or dollar amount of one or more payments of Compensation for a period of a least three Plan Years and on such terms as the ERISA Management Committee may permit, commencing with Compensation paid in the next succeeding Plan Year, by completing an Election Form during the annual enrollment period for the Plan as determined by the Plan Administrator. Effective January 1, 1999, with respect to Elective Deferrals made for the Plan Year 1999 and thereafter, deferrals will mature at the end of a three-year cycle. An individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the first year of the deferral cycle for a period of three Plan Years and on such terms as the ERISA Management Committee may permit; an individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the second year of the deferral cycle for a period of two Plan Years and on such terms as the ERISA Management Committee may permit; and an individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the last year of a deferral cycle for a period of one Plan Year and on such terms as the ERISA Management Committee may permit. All deferrals made during a three-year cycle will mature at the end of the third Plan Year in that cycle. A new three-year cycle will commence after the expiration of each three-year cycle. No Participant may defer more than the portion of his or her Compensation designated by the ERISA Management Committee in Appendix A. A Participant's Compensation shall be reduced in accordance with the Participant's election hereunder and amounts deferred hereunder shall be paid by the Employer to the Trust as soon as administratively feasible and credited to the Participant's Account as of the date the amounts are received by the Trustee. 4.2 Investment Election. An individual who is an Eligible Employee and elects to defer Compensation under this Plan shall elect to have his or her Account valued based on the Valuation Option represented by the performance of one or more of the investment funds listed in Appendix B of the Plan. Such Appendix B may be amended at any time by an action of the ERISA Management Committee. If a Participant does not elect a Valuation Option for his or her Account, the Account shall be valued based on the Valuation Option represented by the performance of Fund A. A participant may change his or her selection of Valuation Options on any date. ARTICLE V ACCOUNTS 5.1 Accounts. The Plan Administrator and/or the Recordkeeper shall establish an Account for each Participant reflecting his or her Elective Deferrals made for the Participant's benefit together with any adjustments for income, gain or loss and any payments from the Account. The Plan Administrator and/or the Recordkeeper shall establish sub-accounts for each Participant that has more than one election in effect under Section 7.1 and such other sub-accounts as are necessary for the proper administration of the Plan. As of the last business day of each calendar quarter, the Plan Administrator shall provide, or cause to be provided, the Participant with a statement of his or her Account reflecting the income, gains and losses (realized and unrealized), amounts of deferrals, fund transfers and distributions of such Account since the prior statement. 5.2 Investments. The assets of the Trust shall be invested in such investments as the Trustee shall determine. The Trustee may (but is not required to) consider the Employer's or a Participant's investment preferences when investing the assets attributable to a Participant's Account. 3 ARTICLE VI VESTING 6.1 Vesting. A Participant shall be immediately vested in, i.e., shall have a nonforfeitable right to, all Elective Deferrals, and all income and gain attributable thereto, credited to his or her Account. ARTICLE VII PAYMENTS 7.1 Election As To Form Of Payment. Payments to Participants shall be made in annual installments over a period of 10 years commencing between January 2 and March 15 immediately following the end of each deferral period. The amount of each installment payment will equal the balance of a Participant's Account immediately prior to the installment payment divided by the number of installment payments remaining to be made. The above notwithstanding, a Participant may elect in writing to receive the value of his or her Account in one lump sum, in annual installments over a period of five years, or in annual installments over a period of fifteen years, so long as such election is made at least 13 months prior to the end of the deferral period. Additionally, effective January 1, 1999, a Participant may elect in writing to receive the value of his or her Account in a partial lump sum where the Participant may choose the percent of an expiring deferral to be paid in a lump sum with the balance in annual installments over the remainder of the 5, 10 or 15 year-installment period; provided, however, that such election is made at least 13 months prior to the end of the deferral period. Effective January 1, 1999, for (i) Elective Deferrals made for Plan Year 1999 and thereafter, and (ii) for Elective Deferrals made prior to January 1, 1999 which are subject to a Participant's election after January 1, 1999 to renew the deferral, a Participant's election as to the form of payment as set forth in this Section 7.1 shall apply to the Participant's entire Account. If the Participant begins to receive distributions of his or her Account pursuant to this Section 7.l, a subsequent election to defer additional Compensation shall be subject to a new election under this Section 7.1 and shall not affect the payment stream established by the prior distribution election. 7.2 Extension Of Deferral Periods. A Participant may make an election in writing to extend any deferral period for three to ten additional Plan Years so long as such Participant makes an election therefor at least 13 months prior to the expiration of the deferral period. Effective January 1, 1999, elections to extend a deferral period must be made for a three-year cycle. A new three-year cycle will commence at the end of every third Plan Year. An election to extend a deferral period must be made by the Participant in writing at least 13 months prior to the end of a deferral period. If a deferral period will expire during the course of a three-year cycle, the Participant's election is limited to an election to extend the deferral period until the end of such three-year cycle. A Participant may elect to renew deferral periods for additional three-year cycles an unlimited number of times. Effective January 1, 1999, terminated Participants will not be permitted to renew their deferral elections. Payments to terminated Participants will begin at the expiration of their current deferral period in accordance with the method selected under Section 7.1 (unless the Participant retired under a Company pension plan, or had attained age 55 and completed at least ten years of service as of his or her date of termination, in which case additional elections to defer are permitted). 7.3 Change Of Control. As soon as possible following a Change Of Control of the Employer, each Participant shall be paid his or her entire Account balance in a single lump sum. 7.4 Termination Of Employment Or Disability. Upon termination of a Participant's employment for any reason other than death, the Participant's Account shall be paid to the Participant in the form of payment in effect at the time the Total and Permanent Disability or termination of employment occurs and after the expiration of the deferral period. The above notwithstanding, the Plan Administrator, in its sole discretion, may: (a) pay out a Participant's Account balance in one lump sum at any time prior to the expiration of each deferral period; (b) accelerate the beginning of payments of deferrals to any time prior to the expiration of a deferral period; and (c) revoke the deferral elections of a Participant for the year of the termination of his/her employment. 7.5 Death. If a Participant dies prior to the complete distribution of his or her Account, the balance of the Account shall be paid as soon as practicable to the Participant's designated beneficiary or beneficiaries, in the form elected by the Participant at the time of his or her death, provided, however, that the ERISA Management 4 Committee and/or the Plan Administrator may, in their sole discretion, pay out the balance of such Participant's Account in one lump sum. Any designation of beneficiary shall be made by the Participant on a Beneficiary Designation Form filed with the Plan Administrator and may be changed by the Participant at any time by filing another Beneficiary Designation Form containing the revised instructions. If no beneficiary is designated or no designated beneficiary survives the Participant, payment shall be made to the Participant's surviving spouse or, if none, to his/her issue per stirpes, in a single payment. If no spouse or issue survives the Participant, payment shall be made in a single lump sum to the Participant's estate. The most recent Beneficiary Designation Form executed by the Participant prior to his/her death shall apply to all Election Deferrals credited to the Participant's Account at the date of his/her death. 7.6 Taxes. All federal, state or local taxes that the Plan Administrator determines are required to be withheld from any payments made pursuant to this Article VII shall be withheld. ARTICLE VIII PLAN ADMINISTRATION 8.1 Plan Administration And Interpretation. The ERISA Management Committee (the "Committee") shall oversee the administration of the Plan, shall serve as the agent of the Company with respect to the trust, and shall appoint a Plan Administrator and/or Recordkeeper for the day-to-day operations of the Plan. Such Plan Administrator and/or Recordkeeper shall be listed in Appendix C to this Plan. The Committee shall have complete control and authority to determine the rights and benefits under all claims, demands and actions arising out of the provisions of the Plan of any Participant, beneficiary, deceased Participant, or other person having or claiming to have any interest under the Plan. The Committee shall have complete discretion to interpret the Plan and to decide all matters under the Plan. Such interpretation and decision shall be final, conclusive and binding on all Participants and any person claiming under or through any Participant. Any individual(s) serving on the Committee who is a Participant will not vote or act on any matter relating solely to himself or herself. 8.2 Committee Powers, Duties, Procedures, Etc. The Committee shall have such powers and duties, may adopt such rules and regulations, may act in accordance with such procedures, may appoint such agents, may delegate such powers and duties, may receive such reimbursements and compensation, and shall follow such claims and appeal procedures with respect to the Plan as it may establish. 8.3 Plan Administrator's Duties. The Plan Administrator shall be responsible for the day-to-day operations of the Plan. His or her duties shall include, but not be limited to, the following: (a) Keeping track of employees eligible to participate in the Plan and the date each employee becomes eligible to participate. (b) Maintaining, or causing to be maintained by the Recordkeeper, Participants' Accounts, including all sub-accounts required for different contribution types and payment elections made by Participants under the Plan and any other relevant information. (c) Transmitting, or causing to be transmitted by the Recordkeeper, various communications to Participants and obtaining information from Participants such as changes in investment selections. (d) Filing reports required by various governmental agencies. When making a determination or calculation, the Plan Administrator and the Recordkeeper shall be entitled to rely on information furnished by a Participant, a beneficiary, the Employer or the Trustee. The Plan Administrator shall have the responsibility for complying with any reporting and disclosure requirements of ERISA. 8.4 Information. To enable the Plan Administrator and/or Recordkeeper to perform their functions, the Employer shall supply full and timely information to the Plan Administrator and/or Recordkeeper on all matters relating to the compensation of Participants, their employment, retirement, death, termination of employment, and such other pertinent facts as the Plan Administrator and/or Recordkeeper may require. 8.5 Indemnification Of Committee And Plan Administrator. The Employer agrees to indemnify and to defend to the fullest extent permitted by law any officer(s) or employee(s) who serve on the Committee or as Plan Administrator (including any such individual who formerly served on the Committee or as Plan Administrator) against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any 5 claims approved by the Employer) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. ARTICLE IX AMENDMENT AND TERMINATION 9.1 Amendments. The Employer shall have the right to amend the Plan from time to time, subject to Section 9.3, by an action of the ERISA Board Committee. However, the preceding notwithstanding, the ERISA Management Committee shall have the power to amend at any time the payment provisions under Article VII of the Plan. 9.2 Termination Of Plan. This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer and any Eligible Employee (or any other employee) or a consideration for, or an inducement or condition of employment for, the performance of the services by any Eligible Employee (or other employee). The Employer reserves the right to terminate the Plan at any time, subject to Section 9.3, by an action of the ERISA Board Committee. Upon termination, the Employer may (a) elect to continue to maintain the Trust to pay benefits hereunder as they become due as if the Plan had not terminated or (b) direct the Trustee to pay promptly to Participants (or their beneficiaries) the vested balance of their Accounts. 9.3 Existing Rights. No amendment or termination of the Plan shall adversely affect the rights of any Participant with respect to amounts that have been credited to his or her Account prior to the date of such amendment or termination. ARTICLE X MISCELLANEOUS 10.1 No Funding. The Plan constitutes a mere promise by the Employer to make payments in accordance with the terms of the Plan and Participants and beneficiaries shall have the status of general unsecured creditors of the Employer. Nothing in the Plan will be construed to give any employee or any other person rights to any specific assets of the Employer or of any other person. In all events, it is the intent of the Employer that the Plan be treated as unfunded for tax purposes and for purposes of Title I of ERISA. 10.2 Non-Assignability. None of the benefits, payments, proceeds or claims of any Participant or beneficiary shall be subject to any claim of any creditor of any Participant or beneficiary and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor of such Participant or beneficiary, nor shall any Participant or beneficiary have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise, under the Plan. 10.3 Limitation Of Participants' Rights. Nothing contained in the Plan shall confer upon any person a right to be employed or to continue in the employ of the Employer, or interfere in any way with the right of the Employer to terminate the employment of a Participant in the Plan at any time, with or without cause. 10.4 Participants Bound. Any action with respect to the Plan taken by the Plan Administrator or the Employer or the Trustee or any action authorized by or taken at the direction of the Plan Administrator, the Employer or the Trustee shall be conclusive upon all Participants and beneficiaries entitled to benefits under the Plan. 10.5 Receipt And Release. Any payment to any Participant or beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Employer, the Plan Administrator and the Trustee under the Plan, and the Plan Administrator may require such Participant or beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. If any Participant or beneficiary is determined by the Plan Administrator to be incompetent by reason of physical or mental disability (including minority) to give a valid receipt and release, the Plan Administrator may cause the payment or payments becoming due to such person to be made to another person for his or her benefit without responsibility on the part of the Plan Administrator, the Employer or the Trustee to follow the application of such funds. 10.6 Governing Law. The Plan shall be construed, administered, and governed in all respects under and by the laws of the State of New York. If any provision shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 10.7 Headings And Subheadings. Heading and subheadings in this Plan are inserted for convenience only and are not to be considered in the construction of the provisions hereof. 6 APPENDIX A LIMIT ON ELECTIVE DEFERRALS For the 1994 and 1995 Plan Years, a Participant may defer up to 100% of his/her annual bonus and no portion of his/her salary. For the 1996 Plan Year and until changed by the Committee, a Participant may defer up to 100% of his/her annual bonus and up to 33% of his/her base salary. 7 APPENDIX B VALUATION OPTIONS For 1994 and until changed by the ERISA Management Committee, each Participant may elect to value his or her account based on the performance of one or more of the following funds: 1. Fund A: AIM Limited Maturity Treasury 2. Fund B: AIM Aggressive Growth 3. Fund C: AIM Value 4. Fund D: Merrill Lynch Federal Securities 5. Fund E: Merrill Lynch Capital 6. Fund F: Templeton Foreign 7. Fund G: Merrill Lynch Global Allocation For 1999 and until changed by the ERISA Management Committee, each Participant may elect to value his or her account based on the performance of one or more of the following funds: 1. Fund A: Vanguard Short Term Federal Fund 2. Fund B: Vanguard Total Bond Market Index Fund 3. Fund C: Vanguard Asset Allocation Fund 4. Fund D: Vanguard Growth and Income Fund 5. Fund E: Frank Russell Equity I Fund 6. Fund F: Frank Russell Equity II Fund 7. Fund G: AIM Aggressive Growth Fund 8. Fund H: Putnam International Growth Fund 9. Fund I: Putnam Asset Allocation Fund - Balanced Portfolio 8 APPENDIX C PLAN ADMINISTRATOR AND RECORD KEEPER 1.1 Plan Administrator For the Plan Year 1995, and until removed, the Plan Administrator shall be Phil Ryan. For the Plan Year 1997, and until removed, the Plan Administrator shall be Diane Zubalsky. 1.2 Recordkeeper For the Plan Year 1994, and until removed, the Recordkeeper shall be Actuarial Information Management Systems. From June 1, 1996, and thereafter until removed, the Recordkeeper shall be Merrill Lynch. Effective December 28, 1998, and until removed by the ERISA Management Committee, the Recordkeeper shall be The Vanguard Group. 9 EX-10.19 4 DESIGNATED EMPLOYEES DEFERRED EARNINGS PLAN EXHIBIT 10.19 THE NEW YORK TIMES DESIGNATED EMPLOYEES DEFERRED EARNINGS PLAN ARTICLE I INTRODUCTION 1.1 Purpose of Plan. The Employer has adopted the Plan set forth herein to provide a means by which a select group of designated employees may elect to defer receipt of designated percentages or amounts of their Compensation. 1.2 Status of Plan. The Plan is intended to be "a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of Section 201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), and shall be interpreted and administered to the extent possible in a manner consistent with that intent. ARTICLE II DEFINITIONS Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: 2.1 Account means, for each Participant, the account established for his or her benefit under Section 5.1. Such account shall include both salary and bonus deferrals. 2.2 Change of Control means (a) any individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof (a "Person") (or two or more Persons acting in concert), other than any descendent (or any spouse thereof) of Iphigene Ochs Sulzberger (a "Family Member") or a beneficiary or trustee (as the same may change from time to time) of a trust over 50% of the individual beneficiaries of which are Family Members, acquiring the power to elect a majority of the directors of The New York Times Company (the "Company") in a transaction or series of transactions not approved in advance by a vote of at least three quarters of the Continuing Directors (as defined below); or (b) individuals who, as of the date hereof, constitute the Board of Directors of the Company (as of the date hereof the "Continuing Directors") ceasing for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose elections, or a for election by the Company's shareholders, was approved in advance by a vote of at least three quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the directors of the Company, as such terms are used in Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a Continuing Director; or (c) approval by the stockholders of the Company of a reorganization, merger, consolidation, liquidation or dissolution of the Company or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by three quarters of the Continuing Directors. 2.3 Code means the Internal Revenue Code of 1986, as amended from time to time. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 2.4 Compensation means the advertising and circulation sales incentive plan, the Management By Objective annual bonus and a Participant's base salary. The ERISA Management Committee, in its sole discretion, shall designate from time to time the percentage of base salary and bonus that can be deferred under the Plan. Such designation shall be listed in Appendix A. For purposes of the Plan, Compensation shall be determined before 1 giving effect to Elective Deferrals and other salary reduction amounts which are not included in the Participant's gross income under Code Sections 125, 401(k), 402(h) or 403 (b). 2.5 Effective Date means January 1, 1998. 2.6 Election Form means the participation election form as approved and prescribed by the Plan Administrator. 2.7 Elective Deferral means the portion of Compensation which is deferred by a Participant under Article IV. 2.8 Eligible Employee means, on the Effective Date or on any date thereafter, each employee of The New York Times, a division of the Employer, who is eligible to receive, based on specific performance measures, stock options under The New York Times Company 1991 Executive Stock Incentive Plan, and who is not eligible to contribute to any other non-qualified deferred compensation plan sponsored by the Employer and/or its subsidiaries and affiliates. As of January 1, 1999, or on any date thereafter, Eligible Employee means each employee of The New York Times, a division of the Employer, who is eligible to receive, based on specific performance measures, stock options under The New York Times Company 1991 Executive Stock Incentive Plan, whose total earnings for the year prior to a deferral under this Plan are at least $100,000, and who is not eligible to contribute to any other non-qualified deferred compensation plan sponsored by the Employer and/or its subsidiaries and affiliates. 2.9 Employer means The New York Times Company, any successor to all or a major portion of the Employer's assets or business which assumes the obligations of the Employer. 2.10 ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. 2.11 ERISA Board Committee means a committee of the Board of Directors of The New York Times Company. 2.12 ERISA Management Committee means a committee appointed by the ERISA Board Committee. 2.13 Insolvency means either (i) the Employer is unable to pay its debts as they become due, or (ii) the Employer is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.14 Participant means any Eligible Employee who participates in the Plan in accordance with Article III. 2.15 Plan means The New York Times Designated Employees Deferred Earnings Plan and all amendments thereto. 2.16 Plan Administrator means the person, persons or entity designated by the ERISA Management Committee under Article VIII for the day-to-day administration of the Plan. If no such person or entity is so serving at any time, the Employer shall be the Plan Administrator. 2.17 Plan Year means the 12-month period beginning on January 1 and ending on December 31 of each year. 2.18 Recordkeeper means the person(s) or entity appointed or hired by the ERISA Management Committee under Section 8.1. 2.19 Retiree means a Participant who retires under The New York Times Companies Pension Plan. 2.20 Total and Permanent Disability means the inability of a Participant to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Plan Administrator. 2.21 Trust means the trust established by the Employer that identifies the Plan as a plan with respect to which assets are to be held by the Trustee. The assets of the Trust shall be subject to claims of general creditors of The New York Times Company in the event of its bankruptcy or Insolvency. 2.22 Trustee means the trustee or trustees under the Trust. 2.23 Valuation Option means the performance of the investment funds listed in Appendix B of the Plan. 2 ARTICLE III PARTICIPATION 3.1 Commencement of Participation. Any Eligible Employee who elects to defer part of his or her Compensation in accordance with Article IV shall become a Participant in the Plan as of the date such deferrals commence in accordance with such Article. 3.2 Continued Participation. A Participant in the Plan shall continue to be a Participant so long as any amount remains credited to his or her Account. However, future deferrals under the Plan may be made only if such Participant continues to be an Eligible Employee under the Plan. ARTICLE IV ELECTIVE DEFERRALS 4.1 Elective Deferrals. Any Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation for a period of at least three Plan Years and no more than five Plan Years and on such terms as the ERISA Management Committee may permit, commencing with Compensation paid in the next succeeding Plan Year by completing an Election Form during the annual enrollment period for the Plan as determined by the Plan Administrator. Effective January 1, 1999, with respect to Elective Deferrals made for the Plan Year 1999 and thereafter, deferrals will mature at the end of a three-year cycle. An individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the first year of the deferral cycle for a period of three Plan Years and on such terms as the ERISA Management Committee may permit; an individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the second year of the deferral cycle for a period of two Plan Years and on such terms as the ERISA Management Committee may permit; and an individual who is an Eligible Employee may elect to defer the receipt of a portion of one or more payments of Compensation during the last year of a deferral cycle for period of one Plan Year and on such terms as the ERISA Management Committee may permit. All deferrals made during a three-year cycle will mature at the end of the third Plan Year in that cycle. A new three-year cycle will commence after the expiration of each three-year cycle. No Participant may defer more than the portion of his or her Compensation designated by the ERISA Management Committee in Appendix A. A Participant's Compensation shall be reduced in accordance with the Participant's election hereunder and amounts deferred hereunder shall be paid by the Employer to the Trust as soon as administratively feasible and credited to the Participant's Account as of the date the amounts are received by the Trustee. 4.2 Investment Election. An individual who is an Eligible Employee and elects to defer Compensation under this Plan shall elect to have his or her Account valued based on the Valuation Option represented by the performance of one or more of the investment funds listed in Appendix B of the Plan. Such Appendix B may be amended at any time by an action of the ERISA Management Committee. If a Participant does not elect a Valuation Option for his or her Account, his or her Account shall be valued based on the Valuation Option represented by the performance of Fund A. A Participant may change his or her selection of Valuation Options on any date. ARTICLE V ACCOUNTS 5.1 Accounts. The Plan Administrator and/or the Recordkeeper shall establish an Account for each Participant reflecting his or her Elective Deferrals made for the Participant's benefit together with any adjustments for income, gain or loss and any payments from the Account. The Plan Administrator and/or the Recordkeeper shall establish sub-accounts for each Participant that has more than one election in effect under Section 7.1 and such other sub-accounts as are necessary for the proper administration of the Plan. As of the last business day of each calendar quarter, the Plan Administrator shall provide, or cause to be provided, the Participant with a statement of his or her Account reflecting the income, gains and losses (realized and unrealized), amounts of deferrals, fund transfers and distribution of such Account since the prior statement. 3 5.2 Investments. The assets of the Trust shall be invested in such investments as the Trustee shall determine. The Trustee may (but is not required to) consider the Employer's or a Participant's investment preferences when investing the assets attributable to a Participant's Account. ARTICLE VI VESTING 6.1 Vesting. A participant shall be immediately vested in, i.e., shall have a nonforfeitable right to, all Elective Deferrals, and all income, gain and loss attributable thereto, credited to his or her Account. ARTICLE VII PAYMENTS 7.1 Election as to Form of Payment. Payments to Participants shall be made in annual installments over a period of 10 years commencing between January 2 and March 15 immediately following the end of the deferral period. The amount of each installment payment will equal the balance of a Participant's Account immediately prior to the installment payment divided by the number of installment payments remaining to be made. The above notwithstanding, a Participant may elect in writing to receive the value of his or her Account in one lump sum, in annual installments over a period of five years, or in annual installments over a period of fifteen years, so long as such election is made at least 13 months prior to the end of the deferral period. Additionally, effective January 1, 1999, a Participant may elect in writing to receive the value of his or her Account in a partial lump sum where the Participant may choose the percent of an expiring deferral to be paid in a lump sum with the balance in annual installments over the remainder of the 5 or 15 year-installment period; provided, however, that such election is made at least 13 months prior to the end of the deferral period. Effective January 1, 1999, for (i) Elective Deferrals made for Plan Year 1999 and thereafter, and (ii) for Elective Deferrals for Plan Years beginning prior to January 1, 1999 which are subject to a Participant's election after January 1, 1999 to renew the deferral, a Participant's election as to the form of payment as set forth in this Section 7.1 shall apply to the Participant's entire Account. If the Participant commences payment of his or her Account pursuant to Section 7.l, a subsequent election to defer additional Compensation shall be subject to a new election under this Section 7.1 and shall not affect the payment stream established by a prior distribution election. 7.2 Extension of Deferral Periods. A Participant who is an active employee or a Retiree, or who is on Total and Permanent Disability may make an election in writing to extend any deferral period for at least five and no more than ten additional Plan Years so long as such Participant makes an election therefor at least 13 months prior to the expiration of the deferral period. Effective January 1, 1999, elections to extend a deferral period must be made for a three-year cycle. A new three-year cycle will commence at the end of every third Plan Year. An election to extend a deferral period must be made by the Participant in writing at least 13 months prior to the end of a deferral period. If a deferral period will expire during the course of a three-year cycle, the Participant's election is limited to an election to extend the deferral period until the end of such three-year cycle. A Participant may elect to renew deferral periods for additional three-year cycles an unlimited number of times. A Participant who is an active employee or a Retiree or who is on Total and Permanent Disability may elect to renew deferral periods for additional three-year cycles an unlimited number of times. Participants whose employment with the Employer has been terminated may not extend his/her deferral periods and shall begin to receive distributions in accordance with Section 7.4. 7.3 Change of Control. As soon as possible following a Change of Control of the Employer, each Participant shall be paid his or her entire Account balance in a single lump sum. 7.4 Termination of Employment or Disability. Upon termination of a Participant's employment for any reason other than death, the Participant's Account shall be paid to the Participant in the form of payment in effect at the time the disability or termination of employment occurs and after the expiration of the deferral period. 4 7.5 Death. If a Participant dies prior to the complete distribution of his or her Account, the balance of the Account shall be paid as soon as practicable to the Participant's designated beneficiary or beneficiaries, in the form elected by the Participant at the time of his or her death, provided, however, that the ERISA Management Committee and/or the Plan Administrator may, in their sole discretion, pay out the balance of such Participant's Account in one lump sum. Any designation of beneficiary shall be made by the Participant on a Beneficiary Designation Form filed with the Plan Administrator and may be changed by the Participant at any time by filing another Beneficiary Designation Form containing the revised instructions. If no beneficiary is designated or no designated beneficiary survives the Participant, payment shall be made to the Participant's surviving spouse or, if none, to his/her issue per stirpes, in a single payment. If no spouse or issue survives the Participant, payment shall be made in a single lump sum to the Participant's estate. The most recent Beneficiary Designation Form executed by the Participant prior to his/her death shall apply to all Election Deferrals credited to the Participant's Account at the date of his/her death. 7.6 Taxes. All federal, state or local taxes that the Plan Administrator determines are required to be withheld from any payments made pursuant to this Article VII shall be withheld prior to any distribution under this Plan. ARTICLE VIII PLAN ADMINISTRATION 8.1 Plan Administration and Interpretation. The ERISA Management Committee shall oversee the administration of the Plan, shall serve as the agent of the Company with respect to the trust, and shall appoint a Plan Administrator and/or Recordkeeper for the day-to-day operations of the Plan. Such Plan Administrator and/or Recordkeeper shall be listed in Appendix C to this Plan. The Committee shall have complete control and authority to determine the rights and benefits under all claims, demands and actions arising out of the provisions of the Plan of any Participant, beneficiary, deceased Participant, or other person having or claiming to have any interest under the Plan. The Committee shall have complete discretion to interpret the Plan and to decide all matters under the Plan. Such interpretation and decision shall be final, conclusive and binding on all Participants and any person claiming under or through any Participant. Any individual(s) serving on the Committee who is a Participant will not vote or act on any matter relating solely to himself or herself. 8.2 Committee Powers, Duties, Procedures, etc. The Committee shall have such powers and duties, may adopt such rules and regulations, may act in accordance with such procedures, may appoint such agents, may delegate such powers and duties, may receive such reimbursements and compensation, and shall follow such claims and appeal procedures with respect to the Plan as it may establish. 8.3 Plan Administrator's Duties. The Plan Administrator shall be responsible for the day-to-day operations of the Plan. His or her duties shall include, but not be limited to, the following: (a) Keeping track of employees eligible to participate in the Plan and the date each employee becomes eligible to participate. (b) Maintaining, or causing to be maintained by the Recordkeeper, Participants' Accounts, including all sub-accounts required for different contribution types and payment elections made by Participants under the Plan and any other relevant information. (c) Transmitting, or causing to be transmitted by the Recordkeeper, various communications to the Participants and obtaining information from Participants such as changes in investment elections. (d) Filing reports required by various governmental agencies. When making a determination or calculation, the Plan Administrator and the Recordkeeper shall be entitled to rely on information furnished by a Participant, a beneficiary, the Employer or the Trustee. The Plan Administrator shall be have the responsibility for complying with any reporting and disclosure requirements of ERISA. 8.4 Information. To enable the Plan Administrator and/or Recordkeeper to perform their functions, the Employer shall supply full and timely information to the Plan Administrator and/or Recordkeeper on all matters relating to the compensation of Participants, their employment, retirement, death, termination of employment, and such other pertinent facts as the Plan Administrator and/or Recordkeeper may require. 5 8.5 Indemnification of Committee and Plan Administrator. The Employer agrees to indemnify and to defend to the fullest extent permitted by law any officer(s) or employee(s) who serve on the Committee or as Plan Administrator (including any such individual who formerly served on the Committee or as Plan Administrator) against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. ARTICLE IX AMENDMENT AND TERMINATION 9.1 Amendments. The Employer shall have the right to amend the Plan from time to time, subject to Section 9.3, by an action of the ERISA Board Committee. However, the preceding notwithstanding, the ERISA Management Committee shall have the power to amend at any time the payment provisions under Article VII of the Plan. 9.2 Termination of the Plan. This plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer and any Eligible Employee (or any other employee) or a consideration for, or an inducement or condition of employment for, the performance of the services by any Eligible Employee (or other employee). The Employer reserves the right to terminate the Plan at any time, subject to Section 9.3, by an action of the ERISA Board Committee. Upon termination, the Employer may (a) elect to continue to maintain the Trust to pay benefits hereunder as they become due as if the Plan had not terminated or (b) direct the Trustee to pay promptly to Participants (or their beneficiaries) the vested balance of their Accounts. 9.3 Existing Rights. No amendment, or termination of the Plan shall adversely affect the rights of any Participant with respect to amounts that have been credited to his or her Account prior to the date of such amendment or termination. ARTICLE X MISCELLANEOUS 10.1 No Funding. The Plan constitutes a mere promise by the Employer to make payments in accordance with the terms of the Plan and Participants and beneficiaries shall have the status of general unsecured creditors of the Employer. Nothing in the Plan will be construed to give any employee or any other person rights to any specific assets of the Employer or of any other person. In all events, it is the intent of the Employer that the Plan be treated as unfunded for tax purposes and for purposes of Title I of ERISA. 10.2 Non-Assignability. None of the benefits, payments, proceeds or claims of any Participant or beneficiary shall be subject to any claim of any creditor of any Participant or beneficiary and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor of such Participant or beneficiary, nor shall any Participant or beneficiary have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise, under the Plan. 10.3 Limitation of Participants' Rights. Nothing contained in the Plan shall confer upon any person a right to be employed or to continue in the employ of the Employer, or interfere in any way with the right of the Employer to terminate the employment of a Participant in the Plan at any time, with or without cause. 10.4 Participants Bound. Any action with respect to the Plan taken by the Plan Administrator or the Employer or the Trustee or any action authorized by or taken at the direction of the Plan Administrator, the Employer or the Trustee shall be conclusive upon all Participants and beneficiaries entitled to benefits under the Plan. 10.5 Receipt and Release. Any payment to any Participant or beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Employer, the Plan Administrator and the Trustee under the Plan, and the Plan Administrator may require such Participant or beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. If any Participant or beneficiary is determined by the Plan Administrator to be incompetent by reason of physical or mental disability (including minority) to give a valid receipt and release, the Plan Administrator may cause the payment or payments becoming due to such person to be made to another person for his or her benefit without responsibility on the part of the Plan Administrator, the Employer or the Trustee to follow the application of such funds. 6 10.6 Governing Law. The Plan shall be construed, administered, and governed in all respects under and by the laws of the State of New York (regardless of any conflict of law provision). If any provision shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 10.7 Headings and Subheadings. Headings and subheadings in the Plan are inserted for convenience only and are not to be considered in the construction of the provisions thereof. 7 APPENDIX A LIMIT ON ELECTIVE DEFERRALS For the 1998 Plan Year and until changed by the Committee, a Participant may defer up to 100% of his/her advertising and circulation sales incentive plan, up to 100% of his/her Management By Objective annual bonus, and up to 35% of his/her base salary. 8 APPENDIX B VALUATION OPTIONS For 1998 and until changed by the ERISA Management Committee, each Participant may elect to value his or her account based on the performance of one or more of the following funds: 1. Fund A: AIM Limited Maturity Treasury 2. Fund B: AIM Aggressive Growth 3. Fund C: AIM Value 4. Fund F: Templeton Foreign 5. Fund E: Merrill Lynch Capital 6. Fund D: Merrill Lynch Federal Securities 7. Fund G: Merrill Lynch Global Allocation For 1999 and until changed by the ERISA Management Committee, each Participant may elect to value his or her account based on the performance of one or more of the following funds: 1. Fund A: Vanguard Short-Term Federal Fund 2. Fund B: Vanguard Total Bond Market Index Fund 3. Fund C: Vanguard Asset Allocation Fund 4. Fund D: Vanguard Growth And Income Fund 5. Fund E: Frank Russell Equity I Fund 6. Fund F: Frank Russell Equity II Fund 7. Fund G: AIM Aggressive Growth Fund 8. Fund H: Putnam International Growth Fund 9. Fund I: Putnam Asset Allocation Fund - Balanced Portfolio 9 APPENDIX C PLAN ADMINISTRATOR AND RECORDKEEPER 1.1 Plan Administrator For the Plan Year 1998, and until removed by the ERISA Management Committee, the Plan Administrator shall be Diane Zubalsky. 1.2 Recordkeeper For the Plan Year 1998, and until removed by the ERISA Management Committee, the Recordkeeper shall be Merrill Lynch. Effective December 28, 1998, and until removed by the ERISA Management Committee, the Recordkeeper shall be The Vanguard Group. 10 EX-12 5 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 THE NEW YORK TIMES COMPANY Ratio of Earnings to Fixed Charges (Unaudited)
Years Ended --------------------------------------------------------------------- December 27, December 28, December 29, December 31, December 31, (In thousands, except ratio) 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before fixed charges Income before income taxes, income from joint ventures and an extraordinary item (1) (2) $ 484,506 $ 423,375 $ 179,686 $ 218,810 $ 383,610 Less net gain on dispositions of assets (12,619) (10,388) (32,836) (11,291) (200,873) Distributed earnings from less than fifty percent owned affiliates 18,192 14,982 16,957 7,980 8,224 Less pre-tax preferred stock dividends -- (129) (174) (163) (166) - --------------------------------------------------------------------------------------------------------------------------------- Adjusted pre-tax earnings from continuing operations 490,079 427,840 163,633 215,336 190,795 Fixed charges less capitalized interest 56,594 55,304 40,821 42,970 43,912 - --------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before fixed charges $ 546,673 $ 483,144 $ 204,454 $ 258,306 $ 234,707 - --------------------------------------------------------------------------------------------------------------------------------- Fixed charges Interest expense, net of capitalized interest $ 46,927 $ 45,039 $ 30,759 $ 33,574 $ 34,880 Capitalized interest 173 5,394 19,574 15,177 4,943 Less pre-tax preferred stock dividends -- 129 174 163 166 Portion of rentals representative of interest factor 9,667 10,136 9,888 9,233 8,866 - --------------------------------------------------------------------------------------------------------------------------------- Total fixed charges $ 56,767 $ 60,698 $ 60,395 $ 58,147 $ 48,855 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Ratio of earnings to fixed charges 9.63 7.96 3.39 4.44 4.80 - ---------------------------------------------------------------------------------------------------------------------------------
(1) 1998 excludes a $14 million pre-tax extraordinary item resulting from the early extinguishment of certain long term debt (see Note 8 of the Notes to the Consolidated Financial Statements). (2) 1996 includes a $127 million pre-tax noncash accounting charge related to SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of (see Note 4 of the Notes to the Consolidated Financial Statements). EX-21 6 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE COMPANY(1),(2) Jurisdiction of Incorporation or Name of Subsidiary Organization - ----------------- -------------- NYT Capital, Inc............................................ Delaware City & Suburban Delivery Systems, Inc................... Delaware Comet-Press Newspapers, Inc............................. Delaware Crossroads Holding Corporation.......................... New Jersey Donohue Malbaie Inc. (49%).............................. Canada Gainesville Sun Publishing Company...................... Florida Globe Newspaper Company, Inc............................ Massachusetts Boston Globe Electronic Publishing, Inc.............. Massachusetts Boston Globe Investments, Inc........................ Massachusetts Zakrzewska Ltd. Partnership (99%)................ Massachusetts Community Newsdealers Inc............................ Massachusetts Globe Specialty Products, Inc........................ Massachusetts Retail Sales, Inc.................................... Massachusetts Hendersonville Newspaper Corporation.................... North Carolina Lakeland Ledger Publishing Corporation.................. Florida NYT Holdings, Inc....................................... Delaware NYTRNG, Inc............................................. Delaware NYT Shared Service Center, Inc.......................... Delaware Ocala Star-Banner Corporation........................... Florida Sarasota Herald-Tribune Co. ............................ Florida The Dispatch Publishing Company, Inc.................... North Carolina The Houma Courier Newspaper Corporation................. Delaware The Times Southwest Broadcasting, Inc................... Arkansas The New York Times Company Magazine Group, Inc.......... Delaware NYT Special Services, Inc............................ Delaware The New York Times Distribution Corporation............. Delaware The New York Times Electronic Media Company............. Delaware The New York Times Sales, Inc........................... Delaware The New York Times Syndication Sales Corporation........ Delaware The Santa Rosa Press Democrat, Inc...................... Delaware The Spartanburg Herald-Journal, Inc..................... Delaware Times Leasing, Inc...................................... Delaware Times On-Line Services, Inc............................. New Jersey Wilmington Star-News, Inc............................... New York WNEP-TV, Inc............................................ Pennsylvania WREG-TV, Inc............................................ Delaware Times West Coast Broadcasting, Inc................... Delaware WREG-TV, LLC..................................... Delaware WTKR-TV, Inc............................................ Delaware The New York Times Company.................................. New York International Herald Tribune S.A.S. (50%)............... France London Bureau Limited................................... United Kingdom Madison Paper Industries (partnership) (40%)............ Maine NYT Administradora de Bens e Servicos Ltda.............. Brazil NYT 1896T, Inc.......................................... Delaware Rome Bureau S.r.l....................................... Italy - -------- (1) 100% owned unless otherwise indicated. (2) The names of certain subsidiaries have been omitted because, considered in the aggregate, as a single subsidiary, they would not constitute a significant subsidiary. EX-23 7 INDEPENDENT AUDITOR'S CONSENT EXHIBIT 23 INDEPENDENT AUDITOR'S CONSENT The New York Times Company: We consent to the incorporation by reference in Registration Statements No. 333-43369, No. 333-43371, No. 333-37331, No. 333-09447, No. 2-91826, 33-31538, 33-43210, 33-43211, 33-50461, 33-50465, 33-50457, 33-50467, 33-50459 and 33-56219 on Form S-8 and in Registration Statements No. 333-64275, No. 333-62023, No. 333-53007 and No. 33-57403 on Form S-3 of our report dated January 27, 1999, appearing in the Annual Report on Form 10-K of The New York Times Company (the "Company") for the year ended December 27, 1998. We also consent to the reference to us under the heading "Experts" in Registration Statements No. 2-91826 and No. 33-31538 on Form S-8 and No. 333-64275, No. 333-62023, No. 333-53007 and No. 33-57403 on Form S-3. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York February 26, 1999 EX-27 8 FDS
5 12-MOS Dec-27-1998 Dec-27-1998 35,991 0 366,297 34,364 32,287 521,976 2,223,500 897,304 3,465,109 627,800 0 0 0 18,661 1,512,809 3,465,109 0 2,936,705 0 1,461,644 0 0 43,333 505,520 218,890 286,630 0 7,716 0 278,914 1.48 1.45
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