-----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, NBwjb/QgptnSvkZNs0CEyWXseHU61rp1pKyHbAWn8CVLEDBtg0SWXhoNHzK7N3Vu VW+VpMgfSM8RhBMdeS6tHQ== 0001047469-98-039822.txt : 19981111 0001047469-98-039822.hdr.sgml : 19981111 ACCESSION NUMBER: 0001047469-98-039822 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980927 FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW YORK TIMES CO CENTRAL INDEX KEY: 0000071691 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 131102020 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05837 FILM NUMBER: 98742509 BUSINESS ADDRESS: STREET 1: 229 W 43RD ST CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2125561234 MAIL ADDRESS: STREET 1: 229 W 43RD STREET CITY: NEW YORK STATE: NY ZIP: 10036 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For Quarter Ended September 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 43RD STREET, NEW YORK, NEW YORK ---------------------------------------- (Address of principal executive offices) 10036 ---------- (Zip Code) Registrant's telephone number, including area code 212-556-1234 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Number of shares of each class of the registrant's common stock outstanding as of November 1, 1998 (exclusive of treasury shares): Class A Common Stock 181,516,261 shares Class B Common Stock 849,602 shares Exhibit Index is located on page 24 of this document PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE NEW YORK TIMES COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars and shares in thousands, except per share data)
Three Months Ended Nine Months Ended ------------------------------------- ------------------------------------ September 27, September 28, September 27, September 28, 1998 1997 1998 1997 ------------------------------------- ------------------------------------ (13 Weeks) (39 Weeks) Revenues Advertising ........................ $ 471,166 $ 466,766 $ 1,510,621 $ 1,449,082 Circulation ........................ 167,180 165,819 507,205 503,505 Other .............................. 44,382 50,996 136,654 145,402 ----------- ----------- ----------- ----------- Total ........................... 682,728 683,581 2,154,480 2,097,989 ----------- ----------- ----------- ----------- Production costs Raw materials ...................... 83,492 78,266 260,015 228,026 Wages and benefits ................. 139,522 145,633 440,760 453,275 Other .............................. 134,686 126,104 378,408 360,454 ----------- ----------- ----------- ----------- Total ........................... 357,700 350,003 1,079,183 1,041,755 Selling, general and administrative expenses ............................. 223,607 242,243 712,392 736,295 ----------- ----------- ----------- ----------- Total ........................... 581,307 592,246 1,791,575 1,778,050 ----------- ----------- ----------- ----------- Operating profit ....................... 101,421 91,335 362,905 319,939 Income from joint ventures ............. 5,336 3,359 13,614 7,726 Interest expense - net ................. 10,337 11,699 30,964 31,406 Gains on dispositions of assets ........ -- -- 12,619 -- ----------- ----------- ----------- ----------- Income before income taxes and extraordinary charge ............... 96,420 82,995 358,174 296,259 Income taxes ........................... 41,445 36,767 155,831 113,243 ----------- ----------- ----------- ----------- Income before extraordinary charge ..... 54,975 46,228 202,343 183,016 Extraordinary charge, net of tax ....... -- -- 7,716 -- ----------- ----------- ----------- ----------- Net income ............................. $ 54,975 $ 46,228 $ 194,627 $ 183,016 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Average number of common shares outstanding: Basic ................................ 188,546 191,786 190,889 193,262 Diluted .............................. 192,284 195,622 195,082 197,128 Per share of common stock: Basic earnings before extraordinary charge ............................. $ 0.29 $ 0.24 $ 1.06 $ 0.95 Extraordinary charge, net of tax ..... -- -- (0.04) -- ----------- ----------- ----------- ----------- Basic earnings after extraordinary charge ............................. $ 0.29 $ 0.24 $ 1.02 $ 0.95 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted earnings before extraordinary charge ............................. $ 0.29 $ 0.24 $ 1.04 $ 0.93 Extraordinary charge, net of tax ..... -- -- (0.04) -- ----------- ----------- ----------- ----------- Diluted earnings after extraordinary charge ............................. $ 0.29 $ 0.24 $ 1.00 $ 0.93 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Dividends ............................ $ 0.095 $ 0.080 $ 0.275 $ 0.235 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 2 THE NEW YORK TIMES COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 27, December 28, 1998 1997 ------------- ------------ (Unaudited) ASSETS Current Assets Cash and short-term investments .......................... $ 31,825 $ 106,820 Accounts receivable - net ................................ 310,271 331,287 Inventories Newsprint and magazine paper .......................... 30,021 27,694 Work-in-process, etc .................................. 4,591 4,440 ---------- ---------- Total inventories ................................. 34,612 32,134 Deferred income taxes .................................... 44,204 44,204 Other current assets ..................................... 70,802 85,556 ---------- ---------- Total current assets .............................. 491,714 600,001 ---------- ---------- Other Assets Investment in joint ventures ............................. 128,301 133,054 Property, plant and equipment (less accumulated depreciation of $913,490 in 1998 and $868,274 in 1997) .............................................. 1,340,608 1,366,931 Intangible assets acquired Cost in excess of net assets acquired (less accumulated amortization of $233,715 in 1998 and $210,815 in 1997) .............................................. 970,419 993,206 Other intangible assets acquired (less accumulated amortization of $59,142 in 1998 and $43,975 in 1997) .. 369,718 384,499 Miscellaneous assets ..................................... 153,508 145,492 ---------- ---------- TOTAL ASSETS ...................................... $3,454,268 $3,623,183 ---------- ---------- ---------- ----------
See notes to condensed consolidated financial statements. 3 THE NEW YORK TIMES COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited)
September 27, December 28, 1998 1997 --------------- ------------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Commercial paper outstanding ................ $ 67,750 $ -- Accounts payable ............................ 174,690 189,580 Accrued payroll and other related liabilities 83,211 103,511 Accrued expenses ............................ 152,873 175,500 Unexpired subscriptions ..................... 82,359 82,621 Current portion of long-term debt and Capital lease obligations .................. 104,152 104,033 ----------- ----------- Total current liabilities ................ 665,035 655,245 ----------- ----------- Other Liabilities Long-term debt .............................. 415,039 490,237 Capital lease obligations ................... 84,007 45,191 Deferred income taxes ....................... 189,383 170,870 Other ....................................... 549,025 533,578 ----------- ----------- Total other liabilities .................. 1,237,454 1,239,876 ----------- ----------- Total liabilities ........................ 1,902,489 1,895,121 ----------- ----------- Stockholders' Equity Capital stock ............................... 21,358 11,385 Additional paid-in capital .................. 261,753 773,367 Earnings reinvested in the business ......... 1,629,970 1,488,910 Common stock held in treasury, at cost ...... (361,302) (545,600) ----------- ----------- Total stockholders' equity ............... 1,551,779 1,728,062 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $ 3,454,268 $ 3,623,183 ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 4 THE NEW YORK TIMES COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended ------------------------------ September 27, September 28, 1998 1997 ------------------------------ (39 Weeks) OPERATING ACTIVITIES: Net cash provided by operating activities .................................. $ 348,105 $ 309,027 --------- --------- INVESTING ACTIVITIES: Additions to property, plant and equipment ................................. (60,458) (126,578) Net proceeds from dispositions ............................................. 9,934 11,872 Other - net ................................................................ 2,822 (198) --------- --------- Net cash used in investing activities ...................................... (47,702) (114,904) --------- --------- FINANCING ACTIVITIES: Net commercial paper borrowings ............................................ 67,750 (26,500) Long-term debt reduction ................................................... (78,820) (2,827) Capital shares Issuance .............................................................. 6,365 6,317 Repurchase ............................................................ (318,336) (127,283) Dividends paid to stockholders ............................................. (52,357) (45,434) Other - net ................................................................ -- 344 --------- --------- Net cash used in financing activities ...................................... (375,398) (195,383) --------- --------- Decrease in cash and short-term investments ................................ (74,995) (1,260) Cash and short-term investments at the beginning of the year ............... 106,820 39,103 --------- --------- Cash and short-term investments at the end of the quarter .................. $ 31,825 $ 37,843 --------- --------- --------- ---------
Amounts in these Statements of Cash Flows are presented on a cash basis and may differ from those shown in other sections of the financial statements. See notes to condensed consolidated financial statements. 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unaudited 1. General The accompanying Notes to Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in the annual report on Form 10-K for the year ended December 28, 1997, for The New York Times Company (the "Company") filed with the Securities and Exchange Commission. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations, as of and for the interim periods ended, have been included. Due to the seasonal nature of the Company's business, results for interim periods are not necessarily indicative of a full year's operations. Certain reclassifications have been made to the 1997 Condensed Consolidated Financial Statements to conform with classifications used at September 27, 1998. 2. Dispositions of Assets During the second quarter of 1998, the Company recorded an $8,000,000 pre-tax gain from the satisfaction of a post-closing requirement related to the 1997 sale of the Company's non-golf magazines. This gain increased basic and diluted earnings per share by $.02. For further details, see the "Magazine Group" section in "Management's Discussion and Analysis". During the first quarter of 1998, the Company recorded a $4,600,000 pre-tax gain resulting from the sale of equipment. The gain increased basic and diluted earnings per share by $.01. 3. Common Stock Split, Retirement and Dividend Increase On June 17, 1998, a 2-for-1 split of the Company's Class A and B Common Stock was effective. Additionally, the Company increased the number of authorized Class A shares to 300,000,000 and Class B shares to 849,602. The number of shares of Class A Common Stock outstanding on June 17, 1998, after giving effect to the split, was 190,193,392; the number of Class B shares was 849,602. All references in the Consolidated Financial Statements referring to per share, share price and share amounts have been adjusted retroactively for the 2-for-1 stock split. As a result of the issuance of additional shares, approximately $9,600,000 was transferred from additional paid-in capital to capital stock to record the distribution. On June 17, 1998, the Company retired 16,911,881 shares of Class A Common Stock and 139,943 shares of Class B Common Stock. The Company accounts for treasury stock retirements on a first-in-first-out basis. As a result of this retirement, treasury stock and additional paid-in capital were reduced by approximately $539,200,000. On May 21, 1998, the Board of Directors authorized a $.01 increase, on a post-split basis, in the quarterly dividend payments on both classes of common stock. 6 4. Income Taxes The variances between the effective tax rate on income before income taxes and the federal statutory rate, exclusive of an extraordinary charge and gains on dispositions of assets in 1998 and a favorable adjustment resulting from the completion of the Company's federal tax audits for periods through 1992 ("favorable tax adjustment") in 1997, are as follows:
Three Months Ended Nine Months Ended --------------------------------------------------------------------------------- September 27, September 28, September 27, September 28, 1998 1997 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- % of % of % of % of (Dollars in thousands) Amount Pre-tax Amount Pre-tax Amount Pre-tax Amount Pre-tax - ----------------------------------------------------------------------------------------------------------------------------------- Tax at federal statutory rate................ $33,747 35.0% $29,048 35.0% $120,944 35.0% $103,691 35.0% State and local taxes, net of federal benefits ................... 6,197 6.4 6,554 7.9 23,014 6.7 22,812 7.7 Amortization of nondeductible intangible assets acquired................. 1,852 1.9 2,143 2.6 6,704 1.9 7,297 2.5 Other - net ................................. (351) (0.4) (978) (1.2) (344) 0.1 (2,557) (0.9) -------- -------- -------- -------- -------- -------- -------- ------ Subtotal..................................... $41,445 43.0% $36,767 44.3% $150,318 43.5% $131,243 44.3% Favorable tax adjustment .................... -- -- -- (18,000) Gains on dispositions of assets.............. -- -- 5,513 -- -------- -------- -------- -------- -------- -------- -------- ------ Income taxes................................. $41,445 $36,767 $155,831 $113,243 -------- -------- -------- -------- -------- -------- -------- ------ -------- -------- -------- -------- -------- -------- -------- ------
5. Debt Obligations and Extraordinary Charge On April 2, 1998, the Company's tender offer for any and all of its $150,000,000 of outstanding publicly-held 8.25% debentures due March 15, 2025, expired. The debenture holders tendered approximately $78,100,000 of the outstanding debentures. As a result, the Company recorded a pre-tax extraordinary charge of approximately $13,700,000 in the second quarter of 1998 in connection with this early extinguishment of debt. This charge reduced basic and diluted earnings per share by $.04. The Company currently maintains $300,000,000 in revolving credit agreements which require, among other matters, specified levels of stockholders' equity. The amount of stockholders' equity in excess of the required levels was approximately $760.0 million at September 27, 1998, compared with $917.0 million at September 28, 1997. In July 1998, the Company renewed its $100,000,000 revolving credit agreement, which had a maturity of July 1998, through July 1999. The remaining $200,000,000 revolving credit agreement expires in July 2002. 7 On August 21, 1998, the Company filed a $300,000,000 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. This registration statement became effective August 28, 1998. On September 24, 1998, the Company filed a prospectus supplement to allow the issuance of up to $300,000,000 in medium-term notes. On October 8, 1998, the Company borrowed $49,500,000 under the medium-term note program. These notes mature on October 8, 2003, and pay interest semi-annually at a rate of 5%. The proceeds were utilized to pay down borrowings under the Company's commercial paper program. In October of 1993, the Company issued $200,000,000 of senior notes. Five-year notes totaling $100,000,000 were due in October of 1998 while the remaining six and one-half year $100,000,000 notes are due in April 2000. On October 28, 1998, the Company repaid $100,000,000 due on its five-year senior notes. 6. Supplemental Cash Flow Information; Noncash Financing Activities Repurchases of common stock in connection with certain exercises under the Company's stock option plans increased treasury stock by $30,155,000 in 1998 and $36,067,000 in 1997. Additional paid-in capital increased by corresponding amounts. In May 1998, the Company amended a lease agreement for its Edison printing facility. The amendment modifies certain provisions of the lease agreement including extending its term by an additional 10 years through May 2018 and reducing rental obligations. As a result, capitalized lease costs and the related liability were increased by approximately $42,000,000. 7. Common Stock Repurchases During the first nine months of 1998, the Company repurchased approximately 9,455,000 shares of its Class A Common Stock at a cost of approximately $303,000,000. The average price of these repurchases was approximately $32 per share. To date, approximately $419,000,000 remains from an August 1998 Board of Directors repurchase authorization of $575,000,000. Stock repurchases under this program exclude shares reacquired in connection with certain exercises under the Company's stock option plans at a cost of approximately $21,700,000 in the first nine months of 1998 and $11,800,000 in the first nine months of 1997. 8. Voluntary Staff Reductions At September 27, 1998, and December 28, 1997, approximately $18,000,000 and $25,000,000 of the total amount of prior charges related to voluntary staff reductions remain unpaid. The $18,000,000 balance is expected to be paid within two years. No such charges were recorded in the second or third quarters of 1997 or in the first nine months of 1998. In the first quarter of 1997, the Company recorded approximately $2,500,000 in pre-tax charges, relating to staff reductions at corporate headquarters and The New York Times. These charges reduced basic and diluted earnings per share by $.01. 8 9. Comprehensive Income In the first quarter of 1998, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Accounting Standards No. 130 ("FAS 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 Condensed Consolidated Financial Statements. FAS 130 requires the disclosure of Comprehensive Income, which was $54,400,000 for the third quarter of 1998 and $193,400,000 for the first nine months of 1998 and was the same as net income for the third quarter and first nine months of 1997. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Advertising revenues accounted for approximately 70% of the Company's revenues in the first nine months of 1998 and circulation revenues accounted for approximately 24% of its revenues in the same period. Advertising revenues cause the Company's consolidated revenues to vary by season. Second-quarter and fourth-quarter advertising volume are usually higher than first and third-quarter volume since economic activity tends to be lower after the holidays and in the summer. Quarterly trends are also affected by the overall economy and by economic conditions in the Company's various markets. In the first nine months of 1998, raw materials represented approximately 15% of the Company's total costs. The major component of raw materials is newsprint. The Company's cost of newsprint has been higher during all of 1998 than in 1997. A price increase has been announced that could further increase the Company's cost of newsprint in 1998; however even if it becomes effective, this increase is not expected to have a material effect on the Company's operations for the fourth quarter of 1998. The Company expects that any percentage increase in newsprint costs comparing the fourth quarter of 1998 to the 1997 comparable period will be less than the percentage increase already experienced in the first nine months of 1998 over the 1997 comparable period. Results of Operations Third-quarter net income increased 18.9% to $55.0 million, or $.29 basic and diluted earnings per share, from 1997 third-quarter net income of $46.2 million, or $.24 basic and diluted earnings per share.* Net income, excluding special items and an extraordinary charge, for the first nine months, increased 17.3% to $195.2 million, or $1.03 basic ($1.01 diluted) earnings per share, from $166.4 million, or $.87 basic ($.85 diluted) earnings per share, in the first nine months of 1997. For the first nine months of 1998, the increase in net income was primarily due to higher advertising revenues and greater cost containment; higher newsprint costs and depreciation expense reduced somewhat that increase in net income. Including special items and an extraordinary charge, net income for the first nine months of 1998 rose 6.3% to $194.6 million from $183.0 million in the comparable 1997 period. Special Items and Extraordinary Charge The special items and extraordinary charge that affected the 1998 and 1997 first nine months results were: 1998 - The overall effect of these items reduced both basic and diluted earnings per share by $.01 for the nine months. - $7.7 million after-tax extraordinary charge for the first nine months in connection with the Company's repurchase of $78.1 million of its $150.0 million, 8.25% notes due in 2025. This charge reduced basic and diluted earnings per share by $.04. - $8.0 million pre-tax gain for the first nine months from the satisfaction of a post-closing requirement related to the 1997 sale of the Company's non-golf magazines. This gain increased basic and diluted earnings per share by $.02. - $4.6 million pre-tax gain for the first nine months from the sale of equipment. This gain increased basic and diluted earnings per share by $.01. - -------------- * All share and per share amounts are adjusted for the 2-for-1 split that took effect in June of 1998. 10 1997 - The overall effect of these items increased both basic and diluted earnings per share by $.08 for the nine months. - $18.0 million after-tax gain for the first nine months resulting from a favorable tax adjustment from the completion of the Company's federal income tax audits for the periods through 1992. This gain increased basic and diluted earnings per share by $.09. - $2.5 million pre-tax charge for the first nine months for severance and related costs resulting from work force reductions. This charge reduced basic and diluted earnings per share by $.01. Revenues Revenues for the third quarter of 1998 were $682.7 million, approximately equal to the comparable 1997 period. For the first nine months of 1998, revenues grew 2.7% to $2.2 billion. On a comparable basis, adjusted for the 1997 disposition of certain properties (primarily six magazines), 1998 third-quarter revenues increased by approximately 1.9% and nine month revenues increased approximately 4.7% over the comparable 1997 periods. Expenses Production costs for the third quarter of 1998 increased 2.2% to $357.7 million from $350.0 million in the comparable 1997 period. For the first nine months of 1998, production costs increased 3.6% to $1.08 billion from $1.04 billion in the first nine months of 1997. The increase for the nine months was primarily due to higher newsprint costs and depreciation expense associated with new production facilities. On a comparable basis, adjusted for the 1997 sale of the Company's non-golf magazines, 1998 third quarter production costs increased 3.7% and nine month production costs increased 5.0%. Selling, general and administrative expenses in the third quarter of 1998 decreased 7.7% to $223.6 million from $242.2 million in the third quarter of 1997. For the first nine months of 1998, these expenses decreased 2.9% to $712.4 million from $733.8 million in the first nine months of 1997, exclusive of the workforce reduction costs described above. The decrease for both periods was primarily due to lower compensation expenses and a reduction in other expenses as a result of the disposition of certain properties in 1997. On a comparable basis, adjusted for the 1997 sale of the Company's non-golf magazines, 1998 third quarter selling, general and administrative expenses decreased 5.3% and nine month selling, general and administrative expenses decreased .9%. Operating Profit Operating profit in the third quarter of 1998 increased 11.0% to $101.4 million compared with $91.3 million in the third quarter of 1997. For the first nine months of 1998, operating profit rose 12.6% to $362.9 million from $322.4 million in the first nine months of 1997, excluding workforce reduction costs. The improvement in operating profit was principally due to higher advertising revenues at the Newspaper Group and tighter cost controls. Higher newsprint costs and depreciation and amortization expense, partly offset the improvement. 11 EBITDA "EBITDA" is earnings before interest, income taxes, depreciation and amortization. EBITDA 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"). 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. EBITDA for the 1998 third quarter rose 11.6% to $155.6 million from $139.4 million in 1997. For the first nine months of 1998, excluding gains on dispositions of assets and the extraordinary charge, EBITDA rose 13.5% to $518.2 million from $456.4 million in the first nine months of 1997. Including the special items and the extraordinary charge, EBITDA for the first nine months of 1998 rose 9.0% to $517.1 million from $474.4 million in the first nine months of 1997. Joint Ventures Income from Joint Ventures increased to $5.3 million from $3.4 million in the third quarter of 1998 and to $13.6 million from $7.7 million in the first nine months of 1998. The increase was primarily due to higher income from equity investments in paper mills. Interest Net interest expense, which appears as the line item "Interest Expense-net", decreased to $10.3 million in the third quarter of 1998, from $11.7 million in the third quarter of 1997. The decrease, is primarily the result of a reduction in total indebtedness. Total interest income and capitalized interest included in the third-quarter amounts were $1.1 million in 1998 and $.8 million in 1997. For the first nine months of 1998, net interest expense decreased to $31.0 million from $31.4 million in 1997. The decrease for the first nine months of 1998 is primarily attributable to a reduction in the amount of total indebtedness as well as increased investment income. Lower capitalized interest partially offset this decrease in net interest expense. Total interest income and capitalized interest included in the first nine-month amounts were $3.3 million in 1998 and $6.7 million in 1997. Effective Tax Rate The Company's effective tax rate was 43.0% in the third quarter of 1998, compared with 44.3% in the third quarter of 1997. For the first nine months of 1998, the effective tax rate was 43.5% compared with 44.3% in the first nine months of 1997, exclusive of special items and an extraordinary charge. The decreases in the effective tax rates were primarily the result of lower state and local income taxes. 12 Segment Information
- ---------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ------------------------------------------------------------------------------ September 27, September 28, September 27, September 28, (Dollars in thousands) 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------------- (13 Weeks) (39 Weeks) Revenues Newspapers....................................... $620,965 $605,271 $1,950,080 $1,863,330 Broadcast........................................ 34,817 34,933 109,164 105,088 Magazines........................................ 26,947 43,377 95,237 129,571 -------- -------- ---------- ---------- Total.......................................... $682,728 $683,581 $2,154,480 $2,097,989 -------- -------- ---------- ---------- -------- -------- ---------- ---------- Operating Profit (Loss) Newspapers....................................... $ 95,013 $ 84,830 $ 332,085 $ 302,716 Broadcast........................................ 9,679 9,656 30,573 27,245 Magazines........................................ 4,489 6,603 24,810 21,561 Unallocated Corporate Expenses................... (7,759) (9,754) (24,563) (31,583) -------- -------- ---------- ---------- Total.......................................... $101,421 $ 91,335 $ 362,905 $ 319,939 -------- -------- ---------- ---------- -------- -------- ---------- ---------- Depreciation and Amortization Newspapers....................................... $ 42,932 $ 41,773 $ 127,576 $ 118,787 Broadcast........................................ 4,392 3,913 13,258 13,334 Magazines........................................ (467) (2,019) (4,724) (5,492) Corporate........................................ 1,824 977 5,247 1,831 Joint Ventures................................... 88 89 264 266 -------- -------- ---------- ---------- Total......................................... $ 48,770 $ 44,733 $ 141,621 $ 128,726 -------- -------- ---------- ---------- -------- -------- ---------- ----------
A discussion of the operating results of the Company's segments follows: Newspaper Group: The Newspaper Group consists of The New York Times ("The Times"), The Boston Globe ("The Globe"), 21 Regional Newspapers, newspaper distributors, a news service, a features syndicate, TimesFax, licensing operations of The New York Times databases and microfilm and New Ventures. New Ventures primarily include projects in electronic media.
--------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ----------------------------------------------------------------------- September 27, September 28, September 27, September 28, (Dollars in thousands) 1998 1997 1998 1997 --------------------------------------------------------------------------------------------------------------- (13 Weeks) (39 Weeks) Revenues Newspapers............................ $615,228 $601,011 $1,934,163 $1,854,152 New Ventures.......................... 5,737 4,260 15,917 9,178 -------- -------- ---------- ---------- Total Revenues........................ $620,965 $605,271 $1,950,080 $1,863,330 -------- -------- ---------- ---------- EBITDA Newspapers............................ $140,609 $128,206 $ 466,533 $ 425,513 New Ventures.......................... (2,664) (1,603) (6,871) (4,010) -------- -------- ----------- ----------- Total EBITDA........................... $137,945 $126,603 $ 459,661 $ 421,503 -------- -------- ----------- ----------- Operating Profit (Loss) Newspapers............................. $ 98,129 $ 86,704 $ 340,184 $ 307,475 New Ventures........................... (3,116) (1,874) (8,099) (4,759) -------- --------- ----------- ----------- Total Operating Profit................. $ 95,013 $ 84,830 $ 332,085 $ 302,716 -------- --------- ----------- -----------
13 The Newspaper Group's operating profit was $95.0 million in the third quarter of 1998, compared with $84.8 million in the third quarter of 1997. For the first nine months of 1998, operating profit was $332.1 million, compared with $304.2 million in the first nine months of 1997, excluding workforce reductions. Revenues were $621.0 million in the third quarter of 1998, compared with $605.3 million in the third quarter of 1997. For the first nine months of 1998, revenues were $1.95 billion, compared with $1.86 billion in the first nine months of 1997. The increase in the Group's revenues for the 1998 third quarter and first nine months was primarily due to higher advertising revenues of 3.5% in the third quarter and 6.3% in the nine months; both increases resulted from higher rates and volume. The Company currently anticipates that 1998 advertising revenue at the Newspaper Group will increase in a range between 5.5% and 6.5%. The improvement in operating profit for the 1998 third quarter and nine months was primarily attributable to increases in advertising revenue and improved cost containment. Higher depreciation expense related to new production facilities and unfavorable increases in newsprint cost of 7.9% for the quarter and 16.4% for the first nine months, partially offset the improvements. Increases of 3.4% in the quarter and 4.8% for the first nine months were volume related, principally due to higher advertising and new sections, and the remainder of the increase was due to higher prices. Average circulation of daily newspapers for the third quarter and first nine months ended September 27, 1998, was as follows:
--------------------------------------------------------------------------------------------- Three Months Ended September 27, 1998 ---------------------------------------------------------- (Copies in thousands) Weekday % Change Sunday % Change --------------------------------------------------------------------------------------------- Average Net Paid Circulation The New York Times 1,063.0 0.2% 1,604.5 (2.3%) The Boston Globe 471.4 (1.9%) 749.3 (2.3%) Regional Newspapers 704.2 0.3% 755.7 (0.3%) ---------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------- Nine Months Ended September 27, 1998 ---------------------------------------------------------- (Copies in thousands) Weekday % Change Sunday % Change --------------------------------------------------------------------------------------------- Average Net Paid Circulation The New York Times 1,081.6 0.2% 1,627.8 (1.6%) The Boston Globe 467.3 (1.1%) 749.3 (0.9%) Regional Newspapers 735.6 0.6% 786.9 0.0% ---------------------------------------------------------------------------------------------
The average circulation declines for the third quarter and first nine months, on Sundays, at The Times primarily reflect The Times's continuing strategy to improve the quality of its home delivered circulation base by reducing the use of promotional discounts for new subscription orders. Though this strategy results in fewer new subscribers in the short term, the remaining subscribers tend to be long-term customers, resulting in higher circulation in the long term, and a more valuable audience for advertisers. Complementing this quality strategy are a number of vigorous marketing initiatives to improve single-copy sales and encourage continued circulation growth by expanding availability in major markets across the nation. The Times and The Globe have also added new sections and made improvements in delivery service to attract new readers and retain existing ones. 14 Advertising volume on a comparable basis for the third quarter and first nine months was as follows:
--------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 27, 1998 September 27, 1998 --------------------------- ------------------------- (Inches in thousands) Volume % Change Volume % Change --------------------------------------------------------------------------------------------------------------- Advertising Volume (excluding preprints) The New York Times................................. 889.6 0.1% 2,853.5 0.9% The Boston Globe................................... 707.1 1.4% 2,205.7 1.4% Regional Newspapers................................ 3,836.1 1.6% 11,843.7 3.0% ---------------------------------------------------------------------------------------------------------------
Advertising volume at The Times increased approximately 0.1% for the quarter and 0.9% for the first nine months. Category results were as follows:
------------------------------ ---------------------------- -------------------------- Three Months Ended Nine Months Ended ---------------------------- -------------------------- September 27, 1998 September 27, 1998 ---------------------------- -------------------------- % Change % Change ------------------------------ ---------------------------- -------------------------- Retail......................... (7.4%) (7.5%) National...................... +4.1% +6.7% Classified.................... +1.8% +2.8% Zoned......................... (2.4%) (3.6%) ------------------------------ ---------------------------- -------------------------- Total......................... +0.1% +0.9% ------------------------------ ---------------------------- -------------------------- Preprints..................... (10.0%) +2.3% ------------------------------ ---------------------------- --------------------------
Advertising volume at The Globe increased approximately 1.4% for both the quarter and first nine months. Category results were as follows:
------------------------------ ---------------------------- -------------------------- Three Months Ended Nine Months Ended ---------------------------- -------------------------- September 27, 1998 September 27, 1998 ---------------------------- -------------------------- % Change % Change ------------------------------ ---------------------------- -------------------------- Retail........................ (2.6%) (5.1%) National...................... +20.3% +15.2% Classified.................... (0.4%) +0.6% Zoned......................... (15.6%) (8.6%) ------------------------------ ---------------------------- -------------------------- Total......................... +1.4% +1.4% ------------------------------ ---------------------------- -------------------------- Preprints..................... +11.9% +5.5% ------------------------------ ---------------------------- --------------------------
Advertising volume at the Regionals increased approximately 1.6% for the quarter and 3.0% for the first nine months. Category results were as follows:
------------------------------ ---------------------------- -------------------------- Three Months Ended Nine Months Ended ---------------------------- -------------------------- September 27, 1998 September 27, 1998 ---------------------------- -------------------------- % Change % Change ------------------------------ ---------------------------- -------------------------- Retail........................ (1.1%) +0.8% National...................... (19.7%) (6.6%) Legal......................... +12.5% +3.9% Classified.................... +4.7% +5.6% ------------------------------ ---------------------------- -------------------------- Total......................... +1.6% +3.0% ------------------------------ ---------------------------- -------------------------- Preprints..................... +7.5% +7.4% ------------------------------ ---------------------------- --------------------------
15 Broadcast Group: The Broadcast Group consists of eight network-affiliated television stations and two radio stations.
------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended ------------------------------------------------------------------------------ September 27, September 28, September 27, September 28, (Dollars in thousands) 1998 1997 1998 1997 ------------------------------------------------------------------------------------------------------------- (13 Weeks) (39 Weeks) Revenues..................... $34,817 $34,933 $109,164 $105,088 ------------------------------------------------------------------------------------------------------------- EBITDA....................... $14,071 $13,569 $ 43,831 $ 40,579 ------------------------------------------------------------------------------------------------------------- Operating Profit............. $ 9,679 $ 9,656 $ 30,573 $ 27,245 -------------------------------------------------------------------------------------------------------------
The Broadcast Group's operating profit was $9.7 million in the third quarter of 1998 on revenues of $34.8 million, approximately equal to the 1997 operating profit and revenues for the comparable period. Operating profit was $30.6 million for the first nine months of 1998 on revenues of $109.2 million, compared with $27.2 million in the first nine months of 1997 on revenues of $105.1 million. Stronger advertising revenues were the main reason for the increase in operating profit. Third quarter advertising revenues were adversely affected by the General Motors strike, which was recently settled. Magazine Group: The Magazine Group is comprised of three golf-related publications and related activities in the golf field, and New Ventures such as on-line magazine services. The revenues for the Group include the amortization of a $40.0 million non-compete agreement associated with the divestiture of the Women's Magazine Division. This amount was recognized on a straight-line basis over a four-year period ended July 1998.
------------------------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended --------------------------------------------------------------------------------- September 27, September 28, September 27, September 28, (Dollars in thousands) 1998 1997 1998 1997 ------------------------------------------------------------------------------------------------------------------ (13 Weeks) (39 Weeks) Revenues Magazines..................... $25,804 $40,062 $88,465 $120,400 Non-Compete................... 833 2,500 5,833 7,500 New Ventures.................. 310 815 939 1,671 ------------------------------------------------------------------------------------------------------------------ Total Revenues................ $26,947 $43,377 $95,237 $129,571 ------------------------------------------------------------------------------------------------------------------ EBITDA Magazines..................... $ 4,086 $ 6,465 $20,297 $ 21,869 New Ventures.................. (64) (1,881) (211) (5,800) ------------------------------------------------------------------------------------------------------------------ Total EBITDA.................. $ 4,022 $ 4,584 $20,086 $ 16,069 ------------------------------------------------------------------------------------------------------------------ Operating Profit (Loss) Magazines..................... $ 3,720 $ 6,210 $19,188 $ 20,504 Non-Compete................... 833 2,500 5,833 7,500 New Ventures.................. (64) (2,107) (211) (6,443) ------------------------------------------------------------------------------------------------------------------ Total Operating Profit........ $ 4,489 $ 6,603 $24,810 $ 21,561 ------------------------------------------------------------------------------------------------------------------
16 The Magazine Group's operating profit was $4.5 million in the third quarter of 1998 on revenues of $26.9 million, compared with $6.6 million in the third quarter of 1997, on revenues of $43.4 million. Consolidation in the golf equipment industry and a very competitive rate environment adversely affected the group's performance. Operating profit was $24.8 million for the first nine months of 1998 on revenues of $95.2 million, compared with $21.6 million in the first nine months of 1997, on revenues of $129.6 million. The improvement in operating profit for the nine months was principally attributable to the Company's exit from the tee-time reservation business in the fourth quarter of 1997. The Group's revenue decreased for both periods as a result of the sale of the Company's non-golf magazines in the fourth quarter of 1997. The results of the magazines that were sold were included in the Group's results for the first eleven months of 1997. Excluding the magazines that were sold, operating profit was $4.5 million in the third quarter of 1998 on revenues of $26.9 million, compared with $5.2 million in the third quarter of 1997, on revenues of $30.6 million. On a comparable basis, operating profit for the first nine months of 1998 was $24.8 million on revenues of $95.2 million, compared with $26.1 million in the first nine months of 1997, on revenues of $96.8 million. Liquidity and Capital Resources Net cash provided by operating activities was $348.1 million in the first nine months of 1998, compared with $309.0 million in the first nine months of 1997. The increase of $39.1 million in 1998 was primarily due to an improvement in operating profit. Net cash used in investing activities was $47.7 million in the first nine months of 1998 compared with $114.9 million in the first nine months of 1997. The decrease of $67.2 million in 1998 was primarily due to lower capital expenditures. Net cash used in financing activities was $375.4 million in the first nine months of 1998 compared with $195.4 million in the first nine months of 1997. The increase of $180.0 million in 1998 was primarily related to stock repurchases, and the repurchase of its debentures, partially offset by an increase in issuances of commercial paper. 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 .74 at September 27, 1998 and .76 and September 28, 1997. The ratio of long-term debt and capital lease obligations as a percentage of total capitalization was 28% at both September 27, 1998 and September 28, 1997. The Company currently estimates that capital expenditures for 1998 will range from $90.0 million to $100.0 million. The Company currently anticipates that depreciation and amortization expense will approximate $190.0 million to $200.0 million for 1998 compared with $173.9 million in 1997. 17 The Company currently maintains $300.0 million in revolving credit agreements, which require, among other matters, specified levels of stockholders' equity. The amount of stockholders' equity in excess of the required levels was approximately $760.0 million at September 27, 1998, compared with $917.0 million at September 28, 1997. The decrease in the level of unrestricted stockholders' equity is mainly due to the repurchase of Class A Common Stock. In July 1998, the Company renewed its $100.0 million revolving credit agreement, which had a maturity of July 1998, through July 1999. The remaining $200.0 million revolving credit agreement expires in July 2002. The Company's total long-term debt, including capital leases, was $603.2 million at September 27, 1998 and $640.1 million at September 28, 1997, respectively. The decrease is primarily attributable to the Company's repurchase of its debentures as described below. This decrease was offset somewhat by an increase in capitalized lease obligations as a result of an amendment to the Company's lease for the Edison facility. On August 21, 1998, the Company filed a $300.0 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 $300.0 million in medium term notes. On October 8, 1998, the Company borrowed $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%. The proceeds were utilized to pay down borrowings under the Company's commercial paper program. In October of 1993, the Company issued $200.0 million of senior notes. Five-year notes totaling $100.0 million were due in October of 1998 while the remaining six and one-half year $100.0 million notes are due in April 2000. On October 28, 1998, the Company repaid $100.0 million due on its five-year senior notes. The Company's tender offer for any and all of its $150.0 million of outstanding publicly-held 8.25% debentures due March 15, 2025, expired on April 2, 1998. The debenture holders tendered $78.1 million of the outstanding debentures. The Company financed the purchase of the debentures with available cash and through its existing commercial paper facility. By replacing higher rate long-term borrowings with lower-rate short-term alternatives, the Company 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 $89.3 million. Year 2000 Readiness Disclosure The Company has evaluated the potential impact of the situation commonly referred to 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. 18 The Company's State of Readiness In April 1997, the Company began an initiative 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 location, type of system, its relative importance, probable method and cost of remediation, and targeted start and end dates for addressing the issue. This inventory includes systems in the following areas: (1) systems used to create the Company's publications; (2) systems used in the operation of the Company's production and distribution facilities; (3) systems used in the operation of the Company's broadcast operations; (4) business and financial applications systems; and (5) facility and infrastructure systems (building systems, utilities, security systems, etc.). The systems identified in the inventory were further categorized into five priority classifications: Shutdown -- highest priority. If these systems (e.g., editorial systems, presses, 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. Impractical Workaround -- while alternatives exist, it is too expensive to implement if these systems were to fail. Approximately 9%. Costly Workaround -- if these systems were to fail, a feasible but costly alternative exists. Approximately 29%. Additional But Manageable Cost -- If these systems fail, and alternative solution exists at a moderate cost. Approximately 22%. No Impact -- little if any consequence to the business if these systems fail. Approximately 31%. 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 October 13, 1998, 64% of all systems had been remediated and tested. Testing systems for Year 2000 compliance includes the use of dates which 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 no method exists for achieving certainty that any significant business partners will function without disruption in the Year 2000, the Company's goal is to obtain as much detailed information as possible about its advertisers' and suppliers' Year 2000 plans and to identify those companies which 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. 19 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 Condensed Consolidated Statements of Income), and the remaining amount is being deducted as an expense on the Company's Condensed Consolidated Statements of Income through mid-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. While no assurances can be given, 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 Pronouncements In February 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 132, Employer's Disclosures about Pensions and Other Postretirement Benefits ("SFAS 132"), which is effective for fiscal years beginning after December 15, 1997. 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 does not change the measurement or recognition of pension or other postretirement benefits. The adoption of SFAS 132 will not have a material effect on the Company's Consolidated Financial Statements. 20 In April 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position No. 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires that entities 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 March 1998, the AICPA issued SOP 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 adoption of SOP 98-1 is not expected to have a material effect on the Company's Consolidated Financial Statements. SOP 98-5 and SOP 98-1 are effective for fiscal years beginning after December 15, 1998. In June 1998, the 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 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. Factors That Could Affect Operating Results Except for the historical information contained herein, the matters discussed in this quarterly report are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. These risks and uncertainties include national and local conditions, as well as competition, that could influence the levels (rate and volume) of retail, national and classified advertising and circulation generated by the Company's various markets and material increases in newsprint and magazine paper prices. They also include other risks detailed from time to time in the Company's publicly-filed documents, including this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the period ended December 28, 1997. 21 Item 4. Exhibits and Reports on Form 8-K (a) Exhibits 10.7.1 Amendment to Lease between the Company and Z Edison Limited Partnership, dated May 14, 1997. 10.7.2 Second Amendment to Lease between the Company and Z Edison Limited Partnership, dated June 30, 1998. 12 Ratio of Earnings to Fixed Charges. 27 Financial Data Schedule. (b) Reports on Form 8-K: On September 24, 1998, the Company filed a Report on Form 8-K which is reported under Item 5 the Company's entry into the following agreements on that day: (i) a U.S. Distribution Agreement with Morgan Stanley & Co. Incorporated, Chase Securities Inc. and Salomon Smith Barney Inc., (ii) an Exchange Rate Agency Agreement with Morgan Stanley Dean Witter, and (iii) a Calculation Agent Agreement with The Chase Manhattan Bank. These Agreements relate to the Company's registration of up to $300,000,000 (or the equivalent in other currencies) of Medium-Term Notes (the "Notes"), pursuant to (1) a Registration Statement filed with the Securities and Exchange Commission (the "SEC") on Form S-3 (File No. 333-62023) on August 21, 1998, and declared effective by the SEC on August 28, 1998, and (2) a Prospectus Supplement, dated and filed with the SEC on September 24, 1998. 22 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE NEW YORK TIMES COMPANY -------------------------------- (Registrant) Date: November 9, 1998 /S/ John M. O'Brien ---------------- ------------------------------- John M. O'Brien Senior Vice President and Chief Financial Officer (Principal Financial Officer) 23 Exhibit Index to Quarterly Report Form 10-Q Quarter Ended September 27, 1998 Exhibit No. Exhibit 10.7.1 Amendment to Lease between the Company and Z Edison Limited Partnership, dated May 14, 1997. 10.7.2 Second Amendment to Lease between the Company and Z Edison Limited Partnership, dated June 30, 1998. 12 Ratio of Earning to Fixed Charges. 27 Financial Data Schedule. EX-10.(7)(1) 2 EXHIBIT 10.7.1 Exhibit 10.7.1 AMENDMENT TO INDENTURE OF LEASE (the "Amendment") made as of this 14th day of May, 1997, between Z EDISON LIMITED PARTNERSHIP, a New Jersey limited partnership, having an office at 60 East 56th Street, New York, New York 10022, hereinafter referred to as "Landlord" and THE NEW YORK TIMES NEWSPAPER DIVISION OF THE NEW YORK TIMES COMPANY, a New York corporation, with its principal office at 229 West 43rd Street, New York, New York 10036, hereinafter referred to as "Tenant." WITNESSETH WHEREAS: A. Landlord and Tenant entered into that certain Indenture of Lease dated April 8, 1987 (the "Lease") by which Landlord leased to Tenant and Tenant leased from Landlord certain property with improvements thereon commonly known as Lot 22-B-8, Block 795-D on the Edison Township Tax Map in the Township of Edison, County of Middlesex, State of New Jersey (the "Demised Premises"); and B. Crossroads Holding Corporation ("Crossroads"), an affiliate of Tenant which directly or indirectly is wholly owned by Tenant, has requested that Landlord grant it a license, inter alia, to construct, operate and maintain on the Demised Premises a clubhouse and a portion of the driving tees structure (the "Golf Center Improvements") at the locations designated on the site plan attached hereto as Exhibit A and hereby made a part hereof, to be used in conjunction with a golf center being constructed and to be operated by Crossroads or another wholly-owned affiliate of Tenant on property owned by Crossroads adjoining the Demised Premises and commonly known as Lot 22-B-9, Block 795-D on the Edison Township Tax Map (the "Golf Center Premises"); and C. Landlord is agreeable to granting a license to Crossroads for the Golf Center Improvements only on condition that, if requested by Landlord, Tenant agrees to demolish and remove or cause to be demolished and removed the Golf Center Improvements from the Demised Premises upon the expiration or other termination of the Lease. Upon request, Tenant is agreeable to so demolishing and removing the Golf Center Improvements and restoring the Golf Center Premises to substantially their condition and state of repair prior to construction of the Golf Center Improvements. NOW, THEREFORE, in consideration of the premises, the sum of Ten and 00/100 ($10.00) Dollars and other good and valuable consideration in hand paid by each party to the other, the receipt of which is hereby acknowledged, Landlord and Tenant hereby amend the Lease as follows: 1. AMENDMENT OF SECTION 7.01.A. Section 7.01.A. is hereby amended by adding at the end of the first sentence thereof on the sixth line, the words ", except as provided in Section 7.02.C hereinafter set forth." 2. ADDITION OF SECTION 7.02.C. A new section is hereby added to the Lease as Section 7.02.C. as follows: C. Upon the expiration or other termination of the term of this Lease, if requested by Landlord, Tenant shall remove all of Crossroad's (or those of such other wholly-owned affiliate of Tenant as may operate the Golf Center Premises) personal property, equipment and fixtures located in and on the Golf Center Improvements (the "Golf Center Personalty"), demolish and remove the Golf Center Improvements and restore that portion of the Demised Premises affected thereby to substantially their condition and state of repair prior to the construction of the Golf Center Improvements, said obligation to be enforceable by an action for specific performance. The provisions of this Section shall survive the expiration or sooner termination of this Lease. 3. RATIFICATION OF LEASE. The Lease, as amended by this Amendment, is in all respects ratified and confirmed. -2- IN WITNESS WHEREOF, Landlord and Tenant have respectively duly executed this Amendment as of the date first above written. WITNESS: Z EDISON LIMITED PARTNERSHIP, a New Jersey limited partnership /s/Linda R. Lebensold - ------------------------ By: Z Investment Corp., its general partner By: /s/JOHN ZIRINSKY ----------------------- John Zirinsky President THE NEW YORK TIMES COMPANY /s/Linda R. Lebensold By: /s/RHONDA L. BRAUER - ------------------------ ------------------------ Rhonda L. Brauer Assistant Secretary -3- STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) BE IT REMEMBERED that on May 14, 1997, before me, the subscriber, a Notary Public of the State of New York, personally appeared JOHN ZIRINSKY, the President of Z Investment Corp., the General Partner of Z EDISON LIMITED PARTNERSHIP, a New Jersey limited partnership, the Landlord in the within Lease, who signed this Amendment by authority of the board of directors of Z Investment Corp. as such General Partner, and he thereupon acknowledged that the execution of this Amendment has been duly authorized by the Limited Partnership and that this Amendment was signed and delivered by him on behalf of such General Partner, as and for act and deed of Z Investment Corp. and as and for the act and deed of the Limited Partnership. /s/ Shien Chiou ------------------------- A Notary Public of the State of New York [SEAL] My Commission Expires STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) BE IT REMEMBERED that on May 14, 1997, before me, the subscriber, a Notary Public of the State of New York, personally appeared Rhonda L. Brauer, who, I am satisfied, is the person who signed the within document as Assistant Secretary of THE NEW YORK TIMES COMPANY, a New York corporation, the Tenant in the within document, and he thereupon acknowledged that the said document made by the Corporation and sealed with its corporate seal and delivered by him as such officer and as the voluntary act and deed of the Corporation, made by virtue of authority from its Board of Directors. /s/ Shien Chiou ------------------------- A Notary Public of the State of New York [SEAL] My Commission Expires -4- EX-10.(7)(2) 3 EXHIBIT 10.7.2 Exhibit 10.7.2 SECOND AMENDMENT TO INDENTURE OF LEASE ("Second Amendment") dated June 30, 1998, by and between Z EDISON LIMITED PARTNERSHIP, a New Jersey limited partnership, having an office at 60 East 56th St., New York, NY 10022 (hereinafter called "Landlord") and NEW YORK TIMES NEWSPAPER DIVISION OF THE NEW YORK TIMES COMPANY, a New York corporation, with its principal office at 279 W. 43rd St., New York, NY 10036 (hereinafter called "Tenant"). WITNESSETH: WHEREAS, Landlord and Tenant have heretofore entered into a certain Indenture of Lease dated April 8, 1987 (such Lease, as amended, is hereinafter collectively referred to as the "Lease") pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain property with improvements thereon commonly known as Lot 22-B-8, Block 795-D on the Edison Township Tax Map in the Township of Edison, County of Middlesex, State of New Jersey (the "Demised Premises"); and WHEREAS, Landlord and Tenant have agreed to extend the initial term of the Lease and, in connection therewith, have agreed to modify and amend certain options and other provisions of the Lease, all as more particularly set forth herein. NOW, THEREFORE, in consideration of the Premises and mutual covenants hereinafter contained, the parties hereto hereby agree to supplement and amend the Lease as follows: 1. All capitalized terms contained in this Second Amendment (and not otherwise defined herein) shall, for the purposes hereof, have the same meaning ascribed to them in the Lease. 2. The initial term of the Lease is hereby extended until May 31, 2018 upon and subject to all of the terms, covenants, agreements, provisions and conditions set forth in the Lease as hereby modified, all with the same force and effect as if said term, as hereby extended, were the term originally granted with respect to the Demised Premises. Accordingly, the definition of "Expiration Date" as set forth in Section 1.02 of the Lease is hereby modified and amended to mean May 31, 2018, unless the term shall terminate sooner pursuant to any of the provisions of the Lease or pursuant to law. 3. Section 1.03 of the Lease is hereby deemed deleted in its entirety. 4. Effective as of June 1, 1998 the annual Fixed Rent specified in the Lease with respect to the initial term thereof shall be as follows: (a) Six Million Four Hundred Thousand Dollars ($6,400,000) per annum during the period from June 1, 1998 through May 31, 2007; (b) Seven Million Seven Hundred and Fifty Thousand Dollars ($7,750,000) per annum during the period from June 1, 2007 through May 31, 2008; (c) Nine Million Dollars ($9,000,000) per annum during the period from June 1, 2008 through May 31, 2013; and (d) Ten Million Dollars ($10,000,000) per annum during the period June 1, 2013 through May 31, 2018. The words "in the amount of $533,333.33" set forth in the third line of Section 3.01.B. shall be deemed deleted. 5. Article 25 of the Lease entitled "RIGHT TO EXTEND" is hereby deleted in its entirety and is replaced with the following: ARTICLE 25 RIGHT TO EXTEND 25.01. FIRST RENEWAL OPTION. Provided this Lease is in full force and effect on such date, Tenant shall have the right by written notice (the "First Renewal Notice") given to Landlord not later than eighteen (18) months prior to the Expiration Date (i.e. by November 30, 2016) to elect to extend the term of this Lease for a single twenty (20) year period (the "First Renewal Option Period") commencing on June 1, 2018 and ending on May 31, 2038. In such event, the last day of the First Renewal Option Period (i.e., May 31, 2038) shall be deemed the Expiration Date. 25.02. A. SECOND RENEWAL OPTION. Provided this Lease is in full force and effect on such date, and Tenant has elected to extend this Lease for (i) the First Renewal Option Period or (ii) the First and Second Rolling Renewal Option Periods, Tenant shall have the right by written notice (the "Second Renewal Notice") given to Landlord not later than eighteen months prior to the then Expiration Date (i.e., by November 30, 2036) to elect to extend the term of this Lease for a ten (10) year period (the "Second Renewal Option Period") commencing on June 1, 2038 and ending on May 31, 2048. In such event, the last day of the Second Renewal Option Period (i.e., May 31, 2048) shall be deemed the Expiration Date. B. SECOND TWENTY YEAR RENEWAL OPTION. Provided this Lease is in full force and effect on such date, and Tenant has elected to extend this Lease for the First Rolling Renewal Option Period (as hereinafter defined), Tenant shall have the right by written notice (the "Second 20 Year Notice") given to Landlord not later than November 30, 2026, to elect to extend the term of this Lease for a single twenty (20) year period (the "Second 20 Year Renewal Option Period") commencing on June 1, 2028 and ending on May 31, 2048. In the event Tenant extends the term of the Lease for the Second 20 Year -2- Renewal Option Period, the last day of the Second 20 Year Renewal Option Period (i.e., May 31, 2048) shall be the Expiration Date. C. FIRST ROLLING RENEWAL OPTION. Provided this Lease is in full force and effect on such date, Tenant (as an alternative to the First Renewal Option set forth in Section 25.01) shall have the right by written notice (the "First Rolling Renewal Notice") given to Landlord not later than ten (10) years and nine (9) months prior to the Expiration Date (i.e., by August 31, 2007) to elect to extend the term of this lease for a single ten (10) year period (the "First Rolling Renewal Option Period") commencing on June 1, 2018 and ending on May 31, 2028. In such event, the last day of the First Rolling Renewal Option Period (i.e., May 31, 2028) shall be the Expiration Date. D. SECOND ROLLING RENEWAL OPTION. Provided (i) this Lease is in full force and effect on such date, and (ii) Tenant has elected to extend this Lease for the First Rolling Renewal Option Period, Tenant shall have the right by written notice (the "Second Rolling Renewal Notice") given to Landlord not later than ten (10) years and nine (9) months prior to May 31, 2028 (i.e. by August 31, 2017), to elect to extend the term of this Lease for a single ten (10) year period (the "Second Rolling Renewal Option Period") commencing on June 1, 2028 and ending on May 31, 2038. In event Tenant extends the term of the Lease for the Second Rolling Renewal Option Period, the last day of the Second Rolling Renewal Option Period (i.e., May 31, 2038) shall be the Expiration Date. 25.03. RENEWAL PERIOD TERMS. In each of the First Renewal Option Period, Second Renewal Option Period, First Rolling Renewal Option Period, Second Rolling Renewal Option Period and Second 20 Year Option Period, as the case may be, Landlord and Tenant shall be bound by all the terms, covenants and conditions of this Lease, except that the annual Fixed Rent for and during the years covered by any such Option Periods shall be as follows: (a) During the period June 1, 2018 through May 31, 2023 the annual Fixed Rent shall be Eleven Million Dollars ($11,000,000) per annum; (b) During the period June 1, 2023 through May 31, 2028 the annual Fixed Rent shall be Twelve Million Dollars ($12,000,000) per annum; (c) During the period June 1, 2028 through May 31, 2033 the annual Fixed Rent shall be Thirteen Million Dollars ($13,000,000) per annum; (d) During the period June 1, 2033 through May 31, 2038 the annual Fixed Rent shall be Fourteen Million Dollars ($14,000,000) per annum; (e) During the period June 1, 2038 through May 31, 2043 the annual Fixed Rent shall be Fifteen Million Dollars ($15,000,000) per annum; and -3- (f) During the period June 1, 2043 through May 31, 2048 the annual Fixed Rent shall be Sixteen Million Dollars ($16,000,000) per annum. "25.04. NO FURTHER RENEWALS. Notwithstanding anything contained herein to the contrary, in no event shall Tenant have the right to extend or renew this Lease beyond May 31, 2048." "25.05. TIME OF THE ESSENCE FOR RENEWAL NOTICE. Time shall be of the essence in Tenant's giving each of the First Renewal Notice, the Second Renewal Notice, the First Rolling Renewal Notice, the Second 20 Year Notice and the Second Rolling Renewal Notice and may not be extended or abbreviated for any reason, provided Tenant's right to exercise its option for the First Renewal Option Period, the Second Renewal Option Period, the First Rolling Renewal Option Period, the Second 20 Year Renewal Option Period and the Second Rolling Renewal Option Period, as the case may be, shall in no event expire prior to the Expiration Date until Landlord shall have given to Tenant not less than thirty (30) days prior notice (which notice may not be given (i) more than twenty (20) months prior to the Expiration Date, with respect to the First Renewal Option Period, the Second Renewal Option Period and the Second 20 Year Renewal Option Period, (ii) prior to June 30, 2007, with respect to First Rolling Renewal Option Period, and (iii) prior to June 30, 2017, with respect to the Second Rolling Renewal Option Period ) of the prospective lapse of time to give said First Renewal Notice, Second Renewal Notice, First Rolling Renewal Notice, Second 20 Year Notice or Second Rolling Renewal Notice, as the case may be (during which time Tenant may exercise the same) before Tenant loses its rights to extend this Lease in accordance with Sections 25.01 and/or Section 25.02 hereof." 6. (a) The first ten lines of Section 26.01. A. are hereby deleted and are replaced as follows: "26.01. A. FIRST OPTION NOTICE. Provided the Lease is then in full force and effect and Tenant is not then in default in the payment of Fixed Rent, Taxes and insurance premiums hereunder beyond any applicable cure period, and Tenant shall not have extended the term of this Lease beyond May 31, 2018, Tenant shall have the option to purchase the Demised Premises ("First Option") on a date to be designated by Tenant in the First Option Notice, which date shall be within the 90 day period commencing on June 1, 2018 and ending on August 31, 2018 (the "First Option Purchase Date") for a purchase price of One Hundred Twenty Million Dollars ($120,000,000). The First Option may be exercised only by Tenant (a) by delivering notice ("First Option Notice") to Landlord or its assignee or transferee, not earlier than June 1, 2014 and not later than November 30, 2016, . . ." (b) The first ten lines of Section 26.01. B. of the Lease are hereby deleted and -4- shall be replaced as follows: "26.01. B. SECOND OPTION NOTICE. Provided the Lease is then in full force and effect and Tenant is not then in default in the payment of Fixed Rent, Taxes and insurance premiums hereunder beyond any applicable cure period, and Tenant shall have extended the term of this Lease through (but not beyond) May 31, 2028, Tenant shall have the option to purchase the Demised Premises ("Second Option") on a date to be designated by Tenant in the Second Option Notice, which date shall be within the 90 day period commencing on June 1, 2028 and ending on August 31, 2028 (the "Second Option Purchase Date") for a purchase price of One Hundred Forty Million Dollars ($140,000,000). The Second Option may be exercised only by Tenant (a) by delivering notice thereof ("Second Option Notice") to Landlord or its assignee or transferee, not earlier than June 1, 2024 and not later than November 30, 2026, and (b) delivering to Landlord's . . ." (c) The first ten lines of Section 26.01. C. of the Lease are hereby deleted and shall be replaced as follows: "26.01. C. I. THIRD OPTION NOTICE. Provided the Lease is then in full force and effect and Tenant is not then in default in the payment of Fixed Rent, Taxes and insurance premiums hereunder beyond any applicable cure period, and Tenant shall have extended the term of the Lease through (but not beyond) May 30, 2038, Tenant shall have the option to purchase the Demised Premises ("Third Option") on a date to be designated by Tenant in the Third Option Notice, which date shall be within the 90 day period commencing on June 1, 2038 and ending on August 31, 2038 (the "Third Option Purchase Date") for a purchase price of One Hundred Sixty Million Dollars ($160,000,000). The Third Option may be exercised only by Tenant (a) by delivering notice thereof ("Third Option Notice") to Landlord or its assignees or transferee, not earlier than forty eight (48) months prior to June 1, 2034 and not later than November 30, 2036, and (b) delivering to Landlord's attorneys. . .". (d) The following Section 26.01. C. II shall be added to the Lease: "26.01. C. II. FOURTH OPTION NOTICE. Provided the Lease is then in full force and effect and Tenant is not then in default in the payment of Fixed Rent, Taxes and insurance premiums hereunder beyond any applicable cure period, and Tenant shall have extended the term of the Lease through May 30, 2048, Tenant shall have the option to purchase the Demised Premises ("Fourth Option") on a date to be designated by Tenant in the Fourth Option Notice, which date shall be within the 90 day period commencing on June 1, 2048 and ending on August 31, 2048 (the "Fourth Option Purchase Date") for a purchase price of One Hundred Eighty Million Dollars ($180,000,000). The Fourth Option may be exercised only by Tenant (a) by delivering notice thereof ("Fourth Option Notice") to Landlord or its assignees or transferee, not earlier than June 1, 2044 and not later than -5- November 30, 2046, and (b) delivering to Landlord's attorneys, simultaneously with the Fourth Option Notice, a bank or certified check to the order of Landlord's attorneys in the amount of $5,000,000.00, which amount shall be held in escrow by Landlord's attorneys pending closing of title and applied to the purchase price or disbursed as otherwise hereinafter provided. (e) The first seven lines of Section 26.01. D. of the Lease are hereby deleted and shall be replaced as follows: "26.01. D. EXERCISE OF OPTION. For purposes of this Article 26, the term "Option(s)" shall refer to the First Option, Second Option, Third Option and Fourth Option, as the case may be. Exercise of the First Option shall automatically be deemed an extension by Tenant of the term of the Lease for the First Renewal Option Period, exercise of the Second Option shall automatically be deemed an extension by Tenant of the term of this Lease for the Second 20 Year Rolling Renewal Option Period, exercise of the Third Option shall automatically be deemed an extension by Tenant of the term of this Lease for the Second Renewal Option Period. In the event that... . (f) Section 26.02 of the Lease shall be deleted in its entirety and shall be replaced as follows: "26.02. DATE OF CLOSING. The closing of Title shall occur at the office of Landlord's attorneys on the First Option Purchase Date, Second Option Purchase Date, Third Option Purchase Date or Fourth Option Purchase Date, as the case may be, which date may be extended in accordance with the provisions of the Contract of Sale (it being agreed that during the period between the Expiration Date and the Fourth Option Purchase Date (as so extended), the Lease shall be deemed extended on the same terms and conditions as were in effect during the Second Renewal Period or the Second 20 Year Renewal Option Period, as the case may be). (g) The following items shall be added to the list of "Permitted Exceptions" as set forth on Exhibit B to the Contract of Sale attached to the Lease as Exhibit VII (as well as the list of "Liens and Encumbrances" attached to the Lease as Exhibit II): 9. Deed of Temporary Easement dated May 14, 1997 between and among Landlord, Crossroads Holding Corporation and Middlesex County Improvement Authority. 10. Deed of Permanent Easement and Maintenance Agreement dated May 14, 1997 between Landlord, Crossroads Holding Corporation and the County of Middlesex. 11. License Agreement dated May 14, 1997, as amended, between and -6- among, Landlord, Crossroads Holding Corporation, Tenant and the New York Branch of Fuji Bank Limited. 12. Any easement granted by Landlord to an Offeror Purchaser pursuant Section 11 of this Second Amendment. 7. (A) Landlord and Tenant acknowledge that pursuant to Section 7.01 A and Section 7.02 of the Lease, Tenant has certain obligations to repair and restore the Demised Premises at the Expiration Date or sooner termination of the term of the Lease and to return such Demised Premises to the Landlord free of certain property and equipment set forth in said Section 7.01 A and Section 7.02 and otherwise in the condition required in said Sections 7.01 A and 7.02 (the "Required Condition"). Tenant agrees that (except with respect to the Absolute Obligations, which shall be affirmative obligations of Tenant to perform prior to the Expiration Date or sooner termination of the term of the Lease in accordance with the terms set forth below), if at the Expiration Date or sooner termination of the term of this Lease, the Demised Premises is in other than the Required Condition, Tenant shall be required to pay to Landlord the amount ("Restoration Amount") required to place the Demised Premises in the "Required Condition"; provided, however, that with respect to any Restoration Amount that may be due to Landlord at the end of the term of this Lease on account of the existing conditions in the Premises (e.g. the improvements, additions and alterations currently existing in the Demised Premises) as of the date hereof (the "Current Conditions"), if Tenant elects to extend the term of the Lease (pursuant to the option provisions set forth in the Lease) though May 28, 2028 and the Lease is in full force and effect as of May 31, 2028, then such Restoration Amount on account of the Current Conditions (exclusive of the Absolute Obligations of Tenant which shall in no event be affected or reduced) shall be reduced by 25%; if Tenant elects to extend the term of the Lease (pursuant to the option provisions set forth in the Lease) through May 31, 2038 and the Lease is in full force and effect as of May 31, 2038, then such Restoration Amount on account of the Current Conditions (excluding the Absolute Obligations of Tenant, which shall in no event be affected or reduced) shall be reduced by 50%; and if Tenant elects to extend the term of the Lease (pursuant to the option provisions set forth in the Lease) through May 31, 2048 and the Lease is in full force and effect as of May 31, 2048, then such Restoration Amount on account of the Current Conditions (exclusive of the Absolute Obligations of Tenant, which shall in no event be affected or reduced) shall be reduced by 75%. Tenant agrees to provide Landlord with "as built" drawing showing the Current Conditions of the Demised Premises within twenty (20) days following the date hereof. The Restoration Amount (as reduced hereby) shall be paid by Tenant to Landlord no later than the date Tenant vacates the Demised Premises and delivers same to Landlord hereunder (but in no event subsequent to the Expiration Date). Landlord, as part of Landlord's repair/restoration notice(s) that Landlord sends to Tenant pursuant to Sections 7.01 A and 7.02 of the Lease, shall provide Tenant with Landlord's estimate of the Restoration Amount (including a reasonable breakdown of the COSTS of the work required under the Lease, as amended hereby) that Landlord believes will be due by Tenant based on the conditions then existing in the Demised Premises at the time of such notice(s) (subject to adjustment based on changed conditions at the end of the term). (In connection therewith, Tenant agrees to cooperate with Landlord in providing Landlord with (i) access to the Demised Premises and (ii) up-to-date -7- "as built" drawings showing the then existing conditions of the Demised Premises, if and to the extent same are in the possession of Tenant or its affiliates.) In the event Tenant shall disagree with Landlord's estimate of the Restoration Amount, Tenant shall deliver to Landlord its written notice ("Tenant's Statement") of such disagreement within thirty (30) days, specifying in reasonable detail the basis for Tenant's disagreement and the amount of the Restoration Amount that Tenant believes is due. In the event Landlord and Tenant shall be unable to agree on the COST of any work required to put the Demised Premises in the Required Condition (as opposed to any disagreement as to whether or not any removal or work is part of the Required Conditions (e.g. the constituent components of the Required Conditions) or whether the then existing condition meets the Required Conditions, which disputes shall be decided by a court of law), then either party may submit such COST dispute to arbitration for determination in New York County, State of New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association then prevailing in such jurisdiction. Landlord and Tenant agree that any determination as to such COST dispute made by the arbiter designated in such proceeding shall not exceed the amount of the total COST as determined by Landlord in Landlord's estimate, nor shall such determination be less than the total COST as determined by Tenant in Tenant's Statement. Any determination or award (as to such cost items) made in such arbitration shall be final and binding on the parties and shall not add to, or subtract from, or otherwise modify the provisions of the Lease (as modified hereby). Judgment upon any such determination or award which may be arbitrated hereunder may be entered in any court having jurisdiction hereunder. Pending the resolution of any disputes between the parties (by way of arbitration or court action, as the case may be) relating to the Restoration Amount, Tenant shall pay to Landlord, no later than the date Tenant vacates the Demised Premises and delivers same to Landlord, fifty percent of the sum of (i) the estimated Restoration Amount as determined by Landlord, plus (ii) the estimated Restoration Amount as set forth in Tenant's Statement (and upon the resolution of such dispute(s), suitable adjustment, with interest at the Prime Rate, shall be made in accordance therewith with appropriate refund or additional payments, as the case may be, being made by the relevant party to the other). (B) The Landlord acknowledges that no Restoration Amount shall be due and payable by Tenant to Landlord in the event that the Demised Premises is purchased by Tenant pursuant to the exercise by Tenant of (I) the First Option, Second Option, Third Option or Fourth Option pursuant to Article 26 of the Lease, or (ii) the right of first offer or first refusal pursuant to Article 27 of the Lease. (C) Notwithstanding anything contained herein or in the Lease to the contrary, it is understood and agreed that, in addition to the Restoration Amount (as reduced hereby) payable by Tenant to Landlord hereunder, Tenant, before surrendering the Demised Premises to Landlord, shall be required (herein collectively the "Absolute Obligations") to (i) remove any and all equipment pads, equipment footings, equipment foundations, tracks (including the railroad tracks installed by Tenant and the restoration of the slab which was removed in connection with the installation of same) and pits and shall backfill same with a concrete slab level with the original floor slab of the Demised Premises and otherwise shall repair and flash -8- patch (with concrete floor topping) the entire floor surface of the Demised Premises so as to leave same with a level concrete floor slab without holes, troughs, pads, foundations, pits, tracks or any other non-level floor conditions created by Tenant during the term of this Lease (herein referred to as the "Floor Slab Work"), (ii) perform all work necessary and/or required to place the existing office portion ("Office Portion") of the Demised Premises (including, without limitation, the HVAC equipment and other systems relating thereto) in the Required Condition and (iii) remove all of Tenant's personal property, equipment and fixtures, (including, without limitation all pulleys and conveyors, printing presses, printing press installations, paper feeding equipment, and other production and ancillary equipment) and repair any damage caused by such removal, (including filling in any holes created by the equipment removal), provided, however, that Tenant shall not (as part of such removal requirement set forth in this subclause (iii)) be required to remove the mezzanine levels or catwalks ("Mezzanine") within the warehouse portion of the Demised Premises or the HVAC and air withdrawal systems or the piping related to the printing presses, it being agreed, however, that the removal of these items shall be items that are required of Tenant in order to put the Demised Premises in the Required Condition and, accordingly, shall be included in the cost analyses in determining the Restoration Amount (as reduced hereby) payable by Tenant to Landlord hereunder. It is understood and agreed that the obligation of Tenant to perform the Absolute Obligations shall in no way be affected or reduced on account of any extension of the term of the Lease by Tenant as set forth above. (D) Landlord acknowledges and agrees that (notwithstanding anything herein to the contrary) at the Expiration Date or sooner termination of the term of the Lease, Tenant shall not be obligated to (i) remove the currently existing drive-in truck loading docks installed by Tenant, (ii) perform any restoration of the slab removed by Tenant to install such currently existing truck loading docks, (iii) perform any backfill or regrading of land affected by the installation of such currently existing loading docks, (iv) remove the loading dock doors (and related mechanical equipment to open and close such loading dock doors) relating to such currently existing loading docks, or (v) restore any exterior or interior walls which were removed to install such currently existing loading dock doors, and, accordingly, the removal and performance thereof shall not be taken into account in determining the Restoration Amount; provided however, that the foregoing shall in on way affect or prejudice the interpretation and/or construction of the provisions of Article 7 of the Lease with respect to the installation or construction of any future loading docks, truck bays or other floor area/slab removals as may be installed or performed by Tenant in the Demised Premises after the date hereof. (E) The provisions set forth above in this Section 7 (relating to the Tenant's restoration and/or removal obligations at the end of the term of the Lease) shall in no way effect or limit the obligations of Tenant (including, without limitation, its repair obligations) with respect to Demised Premises during the term of the Lease. 8. Section 17.05.B. of the Lease is hereby deleted in its entirety and is replaced with the following: -9- B. If the Demised Premises should be damaged or destroyed by fire to such an extent that Tenant in its reasonable judgment cannot operate its business in the balance of the Demised Premises and the term of this Lease (as previously extended hereunder pursuant to Article 25 hereof) is scheduled to expire within a period of three years after such damage or destruction, Tenant shall have the right to terminate this Lease by giving Landlord notice of such election within ninety (90) days after such damage or destruction, and if such notice is given, the term of this Lease shall terminate thirty (30) days following such notice provided, Tenant (i) delivers all insurance proceeds with respect to the Building (exclusive of those proceeds covering Tenants fixtures, equipment and personal property) or assigns its rights to such insurance proceeds to the Landlord and (ii) pays to the Landlord Rent which would otherwise become due and payable through the expiration of the term of the Lease (as extended hereunder pursuant to Article 25 hereof) except for the last two years thereof. Notwithstanding the above, in no event shall Tenant have the right to terminate the Lease if Tenant has exercised any of the Options to purchase the Demised Premises as provided for in Article 26 hereof. 9. The first ten lines of Section 18.03 of the Lease is hereby deleted and are replaced as follows: "18.03. PAYMENT OF CONDEMNATION AWARD - TERMINATION. In the event of any condemnation or taking which results in the termination of this Lease as provided for in Section 18.01 above, Tenant shall have the right, exercisable by notice of its election to Landlord delivered within thirty days following such condemnation or taking to elect to purchase the Demised Premises pursuant to the next immediately available Option that is available to Tenant pursuant to the provisions of Article 26 hereof (i.e. , if such condemnation or taking shall occur prior to May 30, 2018, the First Option, if the condemnation , or taking occurs prior to May 30, 2028, the Second Option, etc.). Such purchase shall take place in accordance with the provisions of Article 26 hereof, except that the closing of the purchase thereof shall take place on the earlier to occur of (i) the date of vesting of title or (ii) within sixty (60) days following the date on which notice of vesting of title shall have been received by Tenant. Tenant shall be required to pay to the Landlord the purchase price as required pursuant to the Option exercise by the Tenant as set forth in Article 26 hereof, together with Rent through the earlier to occur..." 10. RIGHT OF FIRST REFUSAL - GOLF CENTER PREMISES. Crossroads Holding Corporation ("Crossroads"), a wholly owned subsidiary of Tenant, is the owner of the property (adjoining the Demised Premises) commonly known as Lot 22-B-9, Block 795-D on the Edison Township Tax Map (the "Adjacent Golf Premises"), which Adjacent Golf Premises is currently being operated by Crossroads/Tenant as a golf training, learning and recreational center for use by Tenant or Tenant's affiliates, business invitees, guests, employees and customers. If Crossroads (or Tenant or any Affiliate of Tenant who shall then own the Adjacent Golf Premises) (collectively the "Seller") shall at any time wish to sell the Adjacent Golf Premises (which, for purposes hereof, shall include the sale of its ownership interests in Crossroads or such other structure that would -10- effectively transfer the beneficial ownership of the Adjacent Golf Premises) to a non-affiliated entity, Seller must first comply with the following provisions. Seller hereby grants to Landlord (or its designated affiliate) a right of first refusal with respect to any bona fide offer Seller receives to purchase the Adjacent Golf Premises from any non-affiliated entity. Upon receipt of an offer to purchase, Seller shall deliver notice to Landlord (or its designated affiliate) ("Refusal Notice"), together with the agreement of sale and all other agreements containing the purchase price and other material terms, covenants and conditions contained in the offer to purchase (hereinafter collectively referred to as the "Agreement of Sale"). Landlord (or its designated affiliate) shall have a period of ten (10) days following delivery of the Refusal Notice to exercise its right to purchase and shall exercise that right to purchase by executing and delivering the Agreement of Sale together with a certified or bank check in an amount equal to the amount of the cash deposit required thereunder to Seller's attorney or Seller, as such Agreement of Sale provides. In the event that the Agreement of Sale provides terms, covenants or conditions which are unique or non-monetary (e.g., an exchange of specified property or personal liability obligation) then acceptance thereof by Landlord (or its designated affiliate) may be accomplished by terms that provide equal or better economic benefit to Seller. If Landlord (or its designated affiliate) exercises its right to purchase under this provision, title shall close in accordance with the terms and conditions set forth in the Agreement of Sale. If Landlord (or its designated affiliate) fails to exercise its right of first refusal within the ten (10 ) day period, Seller shall be free to consummate the sale of the Adjacent Golf Premises with the offeror (the "Offeror Purchaser") pursuant to the terms, covenants and conditions set forth in the Agreement of Sale and in any event not later than six (6) months following of the Refusal Notice 11. In the event (i) Tenant shall have complied with the provisions of Section 10 hereof (relating to Landlord's right of first refusal with respect to the proposed sale of the Adjacent Golf Premises to the Offeror Purchaser in question) and Landlord has elected not to exercise its right of first refusal with respect thereto, and (ii) so long as this Lease is in full force and effect and Tenant is not in monetary default thereunder beyond any applicable notice and cure periods, Landlord agrees, at the request of Tenant, to grant and convey to such Offeror Purchaser who purchases the Adjacent Golf Premises during the term of this Lease (at the closing of such sale to such Offeror Purchaser), an Exit Only Easement (as defined below) crossing over certain portions of the Land. In consideration of Landlord conveying the Exit Only Easement to the Offeror Purchaser as set forth above, Tenant agrees to pay to Landlord the "fair market value" of the Exit Only Easement upon the granting thereof (or, if such fair market value shall not, as of such granting, have been agreed upon or established, then within ten (10) days of the date such fair market value shall have been agreed upon or established). Within thirty (30) days following Tenant's request of Landlord for a determination of the "fair market value" of the Exit Only Easement (which notice by Tenant may be given to Landlord at any time Tenant has a bona fide intention to sell the Adjacent Golf Premises in good faith regardless of whether Tenant has identified the Offeror Purchaser and/or has negotiated the Agreement of Sale with such Offeror Purchaser or has yet to comply with Section 10 of this Second -11- Amendment), Landlord shall advise Tenant of its determination of the "fair market value" of the Exit Only Easement ("Landlord's FMV Determination"); provided, however, that Landlord's FMV Determination shall only remain valid for up to nine (9) months following the giving thereof, and if Tenant shall request Landlord for Landlord's FMV Determination more than once in any thirty (30) month period, Tenant shall be required to reimburse Landlord for all costs and expenses incurred by Landlord in determining Landlord's FMV Determination and the "fair market value" of the Exit Only Easement for all such additional requests (after the first) within such thirty month period (including, without limitation, Landlord's costs of any outside appraisers or experts as well as Landlord's costs incurred in any arbitration relating to such request(s). Tenant shall have a period of twenty (20) days after receipt of Landlord's FMV Determination to either (i) accept Landlord's FMV Determination or (ii) notify Landlord that it disputes Landlord's FMV Determination of the Exit Only Easement and submit to Landlord Tenant's determination of the "fair market value" of the Exit Only Easement ("Tenant's FMV Response"). If Tenant shall fail to so dispute such Landlord's FMV Determination within such twenty (20) day period, Tenant shall be deemed to have irrevocably accepted such Landlord's FMV Determination (provided Landlord's FMV Determination also advises Tenant that failure to dispute such Landlord's FMV Determination within such twenty (20) day period shall constitute Tenant's acceptance thereof). If Landlord fails to respond to Tenant's original request for Landlord's FMV Determination within the thirty (30) day period set forth above, Tenant may submit to Landlord, within twenty days thereof, Tenant's determination of the "fair market value" of the Exit Only Easement ("Tenant's FMV Determination"). In such event, Landlord shall thereafter have a period of twenty (20) days following the receipt of Tenant's FMV Determination to either (i) accept Tenant's FMV Determination or (ii) notify Landlord that it disputes Tenant's FMV Determination of the Exit Only Easement and submit to Tenant Landlord's FMV Determination. If Landlord shall fail to so dispute such Tenant's FMV Determination within such twenty day period, Landlord shall be deemed to have irrevocably accepted such Tenant's FMV Determination of the Exit Only Easement (provided Tenant's FMV Determination also advises Landlord that failure to dispute such Tenant's FMV Determination within such twenty (20) day period shall constitute Landlord's acceptance thereof). If the Tenant timely disputes Landlord's FMV Determination with Tenant's FMV Response, or if the Landlord timely disputes Tenant's FMV Determination with Landlord's FMV Determination, as the case may be, the parties shall attempt to agree upon the fair market value for such Exit Only Easement within twenty (20) days thereafter. If the parties are unable to reach such an agreement within such twenty (20) days, then either party may submit such dispute to arbitration for determination in Middlesex County, State of New Jersey in accordance with the Commercial Arbitration Rules of the American Arbitration Association then prevailing in such jurisdiction. The arbitrator selected to arbitrate such dispute shall have at least ten (10) years of experience in the determination of values of commercial real estate in the State of New Jersey. Within thirty days following the appointment of the arbitrator, the arbitrator shall schedule a hearing where the parties and their advocates shall have the right to present evidence, call witnesses and experts and cross examine the other parties witnesses and experts, and the arbitrator shall within fifteen days thereafter submit its final determination of the "fair market value" of the Exit Only Easement. Landlord and Tenant agree that any determination of the "fair market value" of the Exit Only -12- Easement made by the arbitrator designated in such proceeding shall not exceed Landlord's determination of the "fair market value" as set forth in Landlord's FMV Determination nor shall such determination be less than the "fair market value" as determined by Tenant in its Tenant's FMV Response or Tenant's FMV Determination, as the case may be. Any determination or ruling made in such arbitration by the arbitrator shall be final and binding on the parties and the arbitrator shall not add to, or subtract from, or otherwise modify the provisions of this Second Amendment. Each party shall pay one half of the fees and expenses of the arbitrator appointed in such arbitration and any attorneys fees, witness fees and similar expenses of the parties shall be borne separately by each of the parties. In the event the fair market value of the Exit Only Easement shall not have been determined by the time that the Offeror Purchaser is purchasing the Adjacent Golf Premises, Landlord agrees not to withhold the granting of such Exit Only Easement in conjunction with such sale to the Offeror Purchaser, provided, however, that Tenant shall remain liable and responsible for the payment of the fair market value of the Exit Only Easement and shall execute and acknowledge such liability and obligation in writing to Landlord at the time of the granting of the Exit Only Easement. For purposes of this Section 11, the "fair market value" of the Exit Only Easement shall mean the amount that a willing owner of land under no compulsion would agree to accept from a purchaser and what such willing purchaser under no compulsion would agree to pay to the owner of such land for the right to utilize the Exit Only Easement, taking into account the highest and best use of the Adjacent Golf Premises (and the increased value thereof) as well as any diminution in the value of the Demised Premises on account of the granting of the Exit Only Easement and all other relevant factors pertaining thereto. For purposes hereof, the "Exit Only Easement" shall mean a non-exclusive easement (but only for the benefit of the Offeror Purchaser and it successors and assigns who shall then own the Adjacent Golf Premises) for the exiting of vehicular travel running from the Adjacent Golf Premises over and above certain roadways or parking areas on the Demised Premises to the existing main entrance driveway of the Demised Premises (herein the "Connecting Road"), and the right to proceed therefrom by way of a left turn into such existing main driveway (utilizing only one lane thereof) ( the"Driveway Easement Portion") for left turn egress only onto Woodbridge Avenue at the traffic light fronting Woodbridge Avenue in a manner which will not interfere with Landlord's (and Landlord's tenants) ability to make a left turn onto Woodbridge Avenue from its egress lanes. The location and dimensions of the Exit Only Easement shall be as specifically shown and plotted on Exhibit A attached hereto and made part hereof and such Offeror Purchaser shall have no right to access or use any other portion of Landlord's property except as specifically plotted thereon. Tenant acknowledges and agrees that said Exit Only Easement, as shown on the attached Exhibit A, has been approved by Tenant and is satisfactory to Tenant in all respects. Owner makes no representations or warranties of any kind with respect to the utilization or sufficiency of the Exit Only Easement. All costs and expenses to construct and/or permit Tenant to utilize the Exit Only Easement for left turn egress onto Woodbridge Avenue, including, without limitation, the cost of constructing the Connecting Road and the Alternate Driveway Easement Portion (as defined below), shall be at Tenant's sole cost and -13- expense. If (i) all necessary permits for a third lane of egress onto Woodbridge Avenue (i.e. the right to add one additional outgoing lane onto Woodbridge Avenue to the two already existing) are obtained, and (ii) Landlord (and its tenants) will be permitted to make a left turn onto Woodbridge Avenue from the two lanes that will remain for Landlord's (or its tenant's) use, then (A) Landlord agrees to segregate the Driveway Easement Portion from the remaining two egress lanes utilizing a method chosen by Landlord, at Landlord's sole cost and expense, and (B) Landlord shall have the right to remove the existing meridian divider at the entrance to the Demised Premises and the location of the Driveway Easement Portion of the Exit Only Easement may be moved by Landlord to a new lane created over the existing meridian divider ("Alternate Driveway Easement Portion"), as more particularly set forth on Exhibit B attached hereto and made part hereof. Control of traffic on and over the Demised Premises shall be in the sole discretion of the Landlord, but the Landlord agrees to act in good faith and not to unreasonably restrict egress from the Adjacent Golf Premises over the Exit Only Easement, consistent with and subject to the Landlord's own needs for smooth ingress and egress of traffic to and from to the Demised Premises and its right to an orderly and prompt traffic flow of vehicles to and from the Demised Premises and the business coming into and going out of the Demised Premises. The form of the agreement memorializing the granting of the Exit Only Easement shall (A) specifically provide that the Offeror Purchaser (and its successors and assigns who shall then own the Adjacent Golf Premises) shall (i) repair and maintain the Exit Only Easement (and shall reimburse Landlord for the cost thereof if such Offeror Purchaser shall fail to do so), (ii) indemnify, defend and hold Landlord and its partners, shareholders, officers, employees, agents and representatives harmless from and against any and all liabilities, costs (including reasonable attorneys fees), liens, actions, claims, damages and obligations arising from or in connection with the Exit Only Easement or any act, omission, breach or default by such Offeror Purchaser (or such successors and assigns), and (iii) specifically restrict Offeror Purchaser (and its successors and assigns) from using (x) the Exit Only Easement for incoming traffic onto the Adjacent Golf Premises or for outgoing right hand turns onto Woodbridge Avenue and (y) any lanes of the existing main driveway other than the left-most lane thereof (from the standpoint of someone exiting the property) as the Driveway Easement Portion of the Exit Only Easement; and (B) in all other respects shall be reasonably satisfactory to Landlord (and, subject to the foregoing provisions of this Section 11, the Tenant). 12. The first nine (9) lines of subclause (b) of Section 2.04 of the Contract of Sale attached to the Lease as Exhibit VII, shall be modified to read as follows: " (b) terminate the Agreement by written notice to Seller in which event the Net Lease shall be reinstated and in full force and effect and the provisions of Article 25 of the Net Lease shall be deemed to be amended to provide for two additional renewal options of twenty years and eighteen years, respectively, which may be exercised in the same manner as set forth in Section 25.02 of the Net Lease (so long as Tenant has previously elected to extend the term of the Net Lease to the date immediately preceding the additional renewal period in question) and the annual Fixed Rent for each such additional renewal period shall be $16,000,000 and the Deposit and interest earned thereon, if . . ." -14- 13. The Bank of New York shall be added to the list of entities who may be chosen by Tenant as "Insurance Trustee" pursuant to Section 17.02 of the Lease. 14. All references in the Lease (and the Exhibits attached thereto) to ECRA shall be deemed to refer to ECRA as same has been replaced and modified by the Industrial Site Recovery Act, (N.J.S.A. Section 13:K-6 ET. SEQ.) ("ISRA"). 15. From and after the date hereof, all notices under the Lease hereinafter delivered by Tenant to Landlord pursuant to Article 22 of the Lease shall be sent to Landlord at the following addresses: Z Edison Limited Partnership 60 East 56th Street New York, NY 10022 Attn: John Zirinsky With a copy to: Lewis R. Kaster, Esq. Robinson Silverman Pearce Aronsohn & Berman, LLP 1290 Avenue of the Americas New York, NY 10104 16. Landlord and Tenant each covenant and represent to the other that this Second Amendment was not brought about or procured through the use or instrumentality of any broker and that all negotiations with respect to the terms of this Second Amendment were conducted between Landlord and Tenant. Tenant covenants and agrees that should any claim be made by any broker or other person for a brokerage commission or other compensation in connection with the negotiation, execution or procurement of this Second Amendment by, through or on account of any acts of Tenant or its representatives, Tenant will indemnify and hold harmless Landlord from any and all liabilities and expenses in connection therewith. Landlord covenants and agrees that should any claim be made by any broker or other person for a brokerage commission or other compensation in connection with the negotiation, execution or procurement of this Second Amendment by, through or on account of any acts of Landlord or its representatives, Landlord will indemnify and hold harmless Tenant from any and all liabilities and expenses in connection therewith. 17. Except as extended and modified by this Second Amendment, the Lease and all covenants, agreements, terms and conditions contained therein shall remain in full force and effect and are hereby in all respects ratified and confirmed. -15- 18. This Second Amendment shall not be binding upon Landlord or Tenant unless and until it is signed by both Landlord and Tenant. 19. The covenants, agreements, terms, provisions and conditions contained in this Second Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and, except as otherwise provided in the Lease as extended and modified by this Second Amendment, their respective legal successors and assigns. 20. This Second Amendment contains the entire agreement between the parties with respect to the subject matter hereof and may not be changed orally but only by a writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. 21. This Second Amendment shall be governed by and interpreted in accordance with the laws of the State of New Jersey. 22. Landlord and Tenant agree that, at the request of either, each will execute a memorandum of this Second Amendment in form satisfactory for recording in the offices of the Middlesex County Clerk. In no event shall this Second Amendment be recorded by either party without the consent of both parties hereto. -16- IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the day and year first above written. LANDLORD: Z EDISON LIMITED PARTNERSHIP By: Z Investment Corp. Witness: /s/ Kecia Wilson By: /s/ John Zirinsky - --------------------- ----------------------- John Zirinsky, Pres. - ------------- TENANT: THE NEW YORK TIMES COMPANY Witness: /s/ James W. Sapp BY: /s/ Rhonda L. Brauer - ------------------- -------------------------- Rhonda L. Brauer, Assistant Secretary /s/ Rosie Cubero - -------------------- -17- EX-12 4 EXHIBIT 12 Exhibit 12 THE NEW YORK TIMES COMPANY RATIO OF EARNINGS TO FIXED CHARGES (dollars in thousands, except ratio) (unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- EARNINGS FROM CONTINUING OPERATIONS BEFORE FIXED CHARGES Income before income taxes, income from joint ventures and an extrordinary item (A) $ 91,084 $ 79,636 $ 344,560 $ 288,533 Less net gain of dispositions of assets - - (12,619) - Distributed earnings from less-than-fifty-percent-owned affiliates 4,480 4,013 11,336 9,774 --------- --------- --------- --------- Adjusted pretax earnings from continuing operations 95,564 83,649 343,277 298,307 Fixed charges less capitalized interest 13,515 15,270 41,166 41,756 --------- --------- --------- --------- EARNINGS FROM CONTINUING OPERATIONS BEFORE FIXED CHARGES $ 109,079 $ 98,919 $ 384,443 $ 340,063 ========= ========= ========= ========= FIXED CHARGES Interest expense, net of capitalized interest $ 11,164 $ 12,639 $ 34,114 $ 33,864 Capitalized interest 243 260 173 5,293 Portion of rentals representative of interest factor 2,351 2,631 7,052 7,892 --------- --------- --------- --------- TOTAL FIXED CHARGES $ 13,758 $ 15,530 $ 41,339 $ 47,049 ========= ========= ========= ========= RATIO OF EARNINGS TO FIXED CHARGES 7.93 6.37 9.30 7.23 ========= ========= ========= =========
(A) 1998 excludes a $13.7 million pretax extraordinary item in April resulting from the early extinguishment of certain long term debt. EX-27 5 FDS
5 6-MOS DEC-27-1998 SEP-27-1998 31,825 0 332,184 21,913 34,612 491,606 2,254,098 913,490 3,454,160 664,927 0 0 0 21,358 1,530,421 3,454,160 0 2,154,480 0 1,079,183 0 0 30,964 358,174 155,831 202,343 0 7,716 0 194,627 1.02 1.00
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