UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2007

 

Commission file number 1-5837

 

THE NEW YORK TIMES COMPANY
(Exact name of registrant as specified in its charter)

 

620 EIGHTH AVENUE, NEW YORK, NEW YORK
(Address of principal executive offices)

10018
(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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x   No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   x   Accelerated filer   o   Non-accelerated filer   o.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   o   No   x.

Number of shares of each class of the registrant’s common stock outstanding as of August 3, 2007 (exclusive of treasury shares):

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE NEW YORK TIMES COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(In thousands, except per share data)

		For the Quarters Ended						For the Six Months Ended
		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
		(13 weeks)						(26 weeks)
Revenues
Advertising		$	508,467		$	539,443		$	1,013,382		$	1,062,128
Circulation		218,664			219,705			441,118			439,986
Other		61,812			60,488			120,463			116,719
Total revenues		788,943			819,636			1,574,963			1,618,833
Operating Costs
Production costs
Raw materials		63,139			84,478			138,035			166,415
Wages and benefits		158,883			161,412			324,443			327,793
Other		103,900			108,439			208,469			216,867
Total production costs		325,922			354,329			670,947			711,075
Selling, general and administrative costs		344,481			343,504			686,542			690,014
Depreciation and amortization		46,645			35,560			91,082			71,036
Total operating costs		717,048			733,393			1,448,571			1,472,125
Net loss on sale of assets		68,156			—			68,156			—
Gain on sale of WQEW-AM		39,578			—			39,578			—
Operating profit		43,317			86,243			97,814			146,708
Net income from joint ventures		4,745			8,770			2,592			10,737
Interest expense, net		7,126			13,234			18,454			25,758
Income from continuing operations before income taxes and minority interest		40,936			81,779			81,952			131,687
Income taxes		18,851			28,156			39,750			47,631
Minority interest in net (income)/loss of subsidiaries		(24		)	244			(15		)	337
Income from continuing operations		22,061			53,867			42,187			84,393
Discontinued operations, Broadcast Media Group: Income from discontinued operations, net of income taxes		1,977			5,714			5,753			7,600
Gain on sale, net of income taxes		94,330			—			94,330			—
Discontinued operations, net of income taxes		96,307			5,714			100,083			7,600
Net income		$	118,368		$	59,581		$	142,270		$	91,993
Average number of common shares outstanding
Basic		143,906			144,792			143,901			144,978
Diluted		144,114			144,943			144,114			145,166
Basic earnings per share:
Income from continuing operations		$	0.15		$	0.37		$	0.29		$	0.58
Discontinued operations, net of income taxes		0.67			0.04			0.70			0.05
Net income		$	0.82		$	0.41		$	0.99		$	0.63
Diluted earnings per share:
Income from continuing operations		$	0.15		$	0.37		$	0.29		$	0.58
Discontinued operations, net of income taxes		0.67			0.04			0.70			0.05
Net income		$	0.82		$	0.41		$	0.99		$	0.63
Dividends per share		$	0.230		$	0.175		$	0.405		$	0.340

 

See Notes to Condensed Consolidated Financial Statements.

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THE NEW YORK TIMES COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

		July 1, 2007			December 31, 2006
ASSETS		(Unaudited)
Current Assets
Cash and cash equivalents		$	57,644		$	72,360
Accounts receivable-net		344,892			402,639
Inventories
Newsprint and other paper		23,523			32,594
Work-in-process and other		4,559			4,102
Total inventories		28,082			36,696
Deferred income taxes		92,563			73,729
Assets held for sale		—			357,028
Other current assets		87,377			242,591
Total current assets		610,558			1,185,043
Other Assets
Investments in joint ventures		147,176			145,125
Property, plant and equipment (less accumulated depreciation and amortization of $1,152,454 in 2007 and $1,297,546 in 2006)		1,400,477			1,375,365
Intangible assets acquired
Goodwill		676,944			650,920
Other intangible assets acquired (less accumulated amortization of $224,734 in 2007 and $217,972 in 2006)		138,215			133,448
Deferred income taxes		197,924			125,681
Miscellaneous assets		260,531			240,346
TOTAL ASSETS		$	3,431,825		$	3,855,928

 

See Notes to Condensed Consolidated Financial Statements.

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THE NEW YORK TIMES COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

		July 1, 2007			December 31, 2006
LIABILITIES AND STOCKHOLDERS’ EQUITY		(Unaudited)
Current Liabilities
Commercial paper outstanding		$	237,500		$	422,025
Accounts payable		213,765			242,528
Accrued payroll and other related liabilities		102,868			121,240
Accrued expenses		210,221			200,030
Unexpired subscriptions		83,773			83,298
Current portion of long-term debt and capital lease obligations		75			104,168
Construction loan		—			124,705
Total current liabilities		848,202			1,297,994
Other Liabilities
Long-term debt		721,126			720,790
Capital lease obligations		6,699			74,240
Pension benefits obligation		349,387			384,277
Postretirement benefits obligation		244,258			256,740
Other		379,807			296,078
Total other liabilities		1,701,277			1,732,125
Minority Interest		5,981			5,967
Stockholders’ Equity
Common stock of $.10 par value:
Class A — authorized 300,000,000 shares; issued: 2007 — 148,050,220; 2006 —148,026,952 (including treasury shares: 2007 — 4,978,076; 2006 — 5,000,000)		14,805			14,804
Class B — convertible — authorized and issued shares: 2007 - 832,572; 2006 — 832,592		83			82
Additional paid-in capital		7,844			—
Retained earnings		1,137,249			1,111,006
Common stock held in treasury, at cost		(158,389)			(158,886)
Accumulated other comprehensive loss, net of income taxes		(125,227)			(147,164)
Total stockholders’ equity		876,365			819,842
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,431,825		$	3,855,928

 

See Notes to Condensed Consolidated Financial Statements.

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THE NEW YORK TIMES COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

		Six Months Ended
		July 1, 2007			June 25, 2006
		(26 weeks)
OPERATING ACTIVITIES
Net cash (used in)/provided by operating activities		$	(11,745	)	$	166,056
INVESTING ACTIVITIES
Capital expenditures		(225,652		)	(137,296		)
Proceeds from sale of the Broadcast Media Group		575,288			—
Proceeds from sale of WQEW-AM		40,000			—
Proceeds from sale of Edison, N.J., assets		90,819			—
Payment for purchase of Edison, N.J., printing plant		(139,961		)	—
Acquisitions, net of cash acquired of $1,190		(27,632		)	—
Other investing (payments)/proceeds—net		(7,453		)	620
Net cash provided by/(used in) investing activities		305,409			(136,676		)
FINANCING ACTIVITIES
Commercial paper (repayments)/borrowings-net		(184,525		)	7,525
Construction loan borrowings		—			24,446
Long-term obligations:
Reductions		(102,412		)	(801		)
Capital shares:
Issuances		529			4,398
Repurchases		(816		)	(20,943		)
Excess tax benefits from stock-based awards		43			745
Dividends paid to stockholders		(58,574		)	(49,475		)
Other financing proceeds—net		37,221			993
Net cash used in financing activities		(308,534		)	(33,112		)
Decrease in cash and cash equivalents		(14,870		)	(3,732		)
Effect of exchange rate changes on cash and cash equivalents		154			242
Cash and cash equivalents at the beginning of the year		72,360			44,927
Cash and cash equivalents at the end of the quarter		$	57,644		$	41,437

 

SUPPLEMENTAL DATA

 

Acquisitions

·                  In May 2007, the Company acquired ConsumerSearch, Inc. for approximately $33 million, including $5 million in net liabilities assumed.

·                  In March 2007, the Company acquired UCompareHealthCare.com for $2.3 million. The Company paid approximately $1.8 million in the first quarter of 2007 and withheld the remaining $0.5 million for a one-year indemnification period.

Other

·                  Financing activities — Other financing proceeds in 2007 includes cash received from the Company’s real estate development partner for repayment of the Company’s loan receivable.

Non-Cash

·                  As of December 31, 2006, approximately $125 million was outstanding under the Company’s real estate development partner’s construction loan. In January 2007, the Company was released as a co-borrower, and therefore the receivable and the construction loan were reversed and are not included in the Company’s Condensed Consolidated Balance Sheet as of July 1, 2007.  See Note 12 for additional information related to the Company’s new headquarters.

·                  As part of the purchase and sale of the Company's Edison, N.J., printing facility (see Note 8), the Company terminated its existing capital lease agreement. This resulted in the reversal of the related assets (approximately $86 million) and capital lease obligation (approximately $69 million). 

See Notes to Condensed Consolidated Financial Statements.

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THE NEW YORK TIMES COMPANY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.                         GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of The New York Times Company’s (the “Company”) management, the Condensed Consolidated Financial Statements present fairly the financial position of the Company as of July 1, 2007, and December 31, 2006, and the results of operations and cash flows of the Company for the periods ended July 1, 2007 and June 25, 2006.  All adjustments necessary for a fair presentation have been included and are of a normal and recurring nature.  All significant intercompany accounts and transactions have been eliminated in consolidation.  The Company’s Condensed Consolidated Financial Statements and related Notes should be read in conjunction with the Consolidated Financial Statements and related Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.  Due to the seasonal nature of the Company’s business, operating results for the interim periods are not necessarily indicative of a full year’s operations.

As of July 1, 2007, the Company’s significant accounting policies, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, have not changed materially, except for the adoption of Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”) (see Note 5).

Certain reclassifications have been made to the prior periods to conform to classifications used as of and for the period ended July 1, 2007, such as presenting depreciation and amortization separately from production and selling, general and administrative costs.  The fiscal periods included herein comprise 13 weeks for the second-quarter periods and 26 weeks for the six-month periods.

Recent Accounting Pronouncements

In February 2007, FASB issued Statement of Financial Accounting Standards (“FAS”) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (“FAS 159”).  FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value.  FAS 159 is effective for fiscal years beginning after November 15, 2007.  The Company is currently evaluating the impact of adopting FAS 159 on its financial statements.

In September 2006, FASB issued FAS No. 157, Fair Value Measurements (“FAS 157”).  FAS 157 establishes a common definition for fair value under accounting principles generally accepted in the United States of America (“GAAP”), establishes a framework for measuring fair value and expands disclosure requirements about such fair value measurements.  FAS 157 is effective for fiscal years beginning after November 15, 2007.  The Company is currently evaluating the impact of adopting FAS 157 on its financial statements.

In September 2006, FASB ratified the Emerging Issues Task Force (“EITF”) conclusion under EITF No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (“EITF 06-4”).  Diversity in practice exists in accounting for the deferred compensation and postretirement aspects of endorsement split-dollar life insurance arrangements.  EITF 06-4 was issued to

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clarify the accounting and requires employers to recognize a liability for future benefits in accordance with FAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (if, in substance, a postretirement benefit plan exists), or Accounting Principles Board Opinion No. 12, Omnibus Opinion—1967 (if the arrangement is, in substance, an individual deferred compensation contract) based on the substantive agreement with the employee.

EITF 06-4 is effective for fiscal years beginning after December 15, 2007, with earlier application permitted.  The effects of adopting EITF 06-4 can be recorded either as (i) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity as of the beginning of the year of adoption, or (ii) a change in accounting principle through retrospective application to all prior periods.  The Company is currently evaluating the impact of adopting EITF 06-4 on its financial statements.

NOTE 2.                         DISCONTINUED OPERATIONS

On May 7, 2007, the Company sold its Broadcast Media Group, which consisted of nine network-affiliated television stations, their related Web sites and digital operating center, for approximately $575 million.  The Company recognized a pre-tax gain on the sale of $191.2 million ($94.3 million after-tax).

In accordance with the provisions of FAS No. 144, Accounting for Costs Associated with Exit or Disposal Activities, the Broadcast Media Group’s results of operations and the gain on the sale are presented as discontinued operations, and certain assets and liabilities are classified as held for sale for the period presented before the sale.  The results of operations presented as discontinued operations through May 7, 2007, and the assets and liabilities classified as held for sale as of December 31, 2006, are summarized below.

		For the Quarters Ended						For the Six Months Ended
(In thousands)		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
Revenues		$	13,798		$	39,112		$	46,702		$	71,066
Total operating costs		10,451			29,427			36,854			58,184
Pre-tax income		3,347			9,685			9,848			12,882
Income taxes		1,370			3,971			4,095			5,282
Income from discontinued operations, net of income taxes		1,977			5,714			5,753			7,600
Gain on sale, net of income taxes of $96,911		94,330			—			94,330			—
Discontinued operations, net of income taxes		$	96,307		$	5,714		$	100,083		$	7,600

 

(In thousands)		December 31, 2006
Property, plant & equipment, net		$	64,309
Goodwill		41,658
Other intangible assets, net		234,105
Other assets		16,956
Assets held for sale		357,028
Program rights liability(a)		14,931
Net assets held for sale		$	342,097

(a)         Included in “Accounts payable” in the Condensed Consolidated Balance Sheet.

NOTE 3.                         GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is the excess of cost over the fair market value of tangible and other intangible assets acquired.  Goodwill is not amortized but tested for impairment annually or if certain circumstances indicate a possible

7

impairment may exist, in accordance with FAS No. 142, Goodwill and Other Intangible Assets.

Other intangible assets acquired consist primarily of mastheads on various acquired properties, customer lists, trade names, as well as other assets.  Other intangible assets acquired that have indefinite lives (mastheads and certain trade names) are not amortized but tested for impairment annually or if certain circumstances indicate a possible impairment may exist.  Certain other intangible assets acquired (customer lists and other assets) are amortized over their estimated useful lives.

The Company performs its annual impairment testing in the fourth quarter of its fiscal year.

The changes in the carrying amount of goodwill were as follows:

(In thousands)		News Media Group			About Group			Total
Balance as of December 31, 2006		$	306,564		$	344,356		$	650,920
Goodwill acquired during year		—			26,343			26,343
Goodwill adjusted during the year		(2,009		)	—			(2,009		)
Foreign currency translation		1,690			—			1,690
Balance as of July 1, 2007		$	306,245		$	370,699		$	676,944

On May 4, 2007, the Company acquired ConsumerSearch, Inc., a leading online aggregator and publisher of consumer product reviews, for approximately $33 million, including $5 million in net liabilities assumed.  ConsumerSearch includes product comparisons and recommendations and adds a new functionality to the About Group.

On March 27, 2007, the Company acquired UCompareHealthCare.com, a site that provides dynamic Web-based interactive tools to consumers to enable them to measure the quality of certain healthcare services, for $2.3 million.  The Company paid approximately $1.8 million and withheld the remaining $0.5 million for a one-year indemnification period.  UCompareHealthCare.com expands the About Group’s online health channel.

The Condensed Consolidated Financial Statements include the operating results of these acquisitions subsequent to the dates of acquisition.

Based on preliminary valuations of ConsumerSearch and UCompareHealthCare.com, the Company has allocated the excess of the purchase price over the carrying value of the net assets acquired of $24.8 million to goodwill and $8.2 million to other intangible assets for ConsumerSearch and $1.5 million to goodwill and $0.8 million to other intangible assets for UCompareHealthCare.com.  The goodwill for the UCompareHealthCare.com acquisition is tax-deductible, but the goodwill for the ConsumerSearch acquisition is not tax-deductible.  The intangible assets of ConsumerSearch consist of its trade name, content and proprietary technology.  The intangible assets of UCompareHealthCare.com consist of content and proprietary technology.

The preliminary purchase price allocations for the ConsumerSearch and UCompareHealthCare.com acquisitions are subject to adjustment when additional information concerning asset and liability valuations is obtained.  The final asset and liability fair values may differ from those included in the Company’s Condensed Consolidated Balance Sheet as of July 1, 2007; however, the changes are not expected to have a material effect on the Company’s Condensed Consolidated Financial Statements.

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Other intangible assets acquired were as follows:

		July 1, 2007									December 31, 2006
(In thousands)		Gross Carrying Amount			Accumulated Amortization			Net			Gross Carrying Amount			Accumulated Amortization			Net
Amortized other intangible assets:
Customer lists		$	222,216		$	(198,095	)	$	24,121		$	220,935		$	(196,268	)	$	24,667
Other		64,714			(26,639		)	38,075			63,777			(21,704		)	42,073
Total		286,930			(224,734		)	62,196			284,712			(217,972		)	66,740
Unamortized other intangible assets:
Trade names		8,880			—			8,880			—			—			—
Newspaper mastheads		67,139			—			67,139			66,708			—			66,708
Total		76,019			—			76,019			66,708			—			66,708
Total other intangible assets acquired		$	362,949		$	(224,734	)	$	138,215		$	351,420		$	(217,972	)	$	133,448

 

As of July 1, 2007, the remaining weighted-average amortization period is eight years for customer lists and seven years for other amortizable intangible assets acquired included in the table above.

Amortization expense related to other intangible assets acquired that are subject to amortization was approximately $7 million in the first half of 2007, and is expected to be approximately $14 million for the fiscal year 2007.  Estimated annual amortization expense for the next five years related to these intangible assets is expected to be as follows:

(In thousands)
Year		Amount
2008		$	10,800
2009		8,900
2010		8,700
2011		8,400
2012		7,100

 

NOTE 4.                         DEBT OBLIGATIONS

The Company’s total debt, including commercial paper and capital lease obligations, was $965.4 million as of July 1, 2007.  Until January 2007, the Company was a co-borrower under a $320 million non-recourse construction loan in connection with the construction of its new headquarters.  The Company did not draw down on the construction loan, which is being used by its development partner.  However, as a co-borrower, the Company was required to record the amount outstanding of the construction loan on its financial statements.  The Company also recorded a receivable, due from its development partner, for the same amount outstanding under the construction loan.  As of December 31, 2006, approximately $125 million was outstanding under the construction loan and recorded as a receivable included in “Other current assets” in the Condensed Consolidated Balance Sheet.  In January 2007, with the Company’s release as a co-borrower, the receivable and the construction loan were reversed and are not included in the Company’s Condensed Consolidated Balance Sheet as of July 1, 2007.  See Note 12 for additional information related to the Company’s new headquarters.

The Company’s $725.0 million commercial paper program is supported by the revolving credit agreements described below.  Commercial paper issued by the Company is unsecured and can have maturities of up to 270 days.  The Company had $237.5 million in commercial paper outstanding as of July 1, 2007, with an annual weighted-average interest rate of 5.5% and an average of 12 days to maturity from original issuance.  Commercial

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paper decreased during the second quarter of 2007 because the proceeds from the sales of the Broadcast Media Group and WQEW-AM (“WQEW”) were used to repay the Company’s outstanding commercial paper.

The primary purpose of the Company’s $800.0 million revolving credit agreements is to support its commercial paper program.  In addition, these revolving credit agreements provide a facility for the issuance of letters of credit.  Of the total $800.0 million available under the two revolving credit agreements ($400.0 million credit agreement maturing in May 2009 and $400.0 million credit agreement maturing in June 2011), the Company has issued letters of credit of approximately $24 million.  The remaining balance of approximately $776 million supports the Company’s commercial paper program.  There were no borrowings outstanding under the revolving credit agreements as of July 1, 2007, and December 31, 2006.

Any borrowings under the revolving credit agreements bear interest at specified margins based on the Company’s credit rating, over various floating rates selected by the Company.

The revolving credit agreements each contain a covenant that requires a specified level of stockholders’ equity (as defined in the agreements).  As of July 1, 2007, the amount of stockholders’ equity in excess of the required levels was approximately $652 million.

The Company’s five-year 5.350% notes aggregating $50.0 million matured on April 16, 2007, and its five-year 4.625% notes aggregating $52.0 million matured on June 25, 2007.  As of December 31, 2006, these notes were recorded in “Current portion of long-term debt and capital lease obligations.”  In the second quarter of 2007, the Company made principal repayments totaling $102.0 million.

As part of the purchase and sale of the Company's Edison, N.J., printing facility (see Note 8), the Company terminated its existing capital lease agreement. This resulted in the reversal of the related assets (approximately $86 million) and capital lease obligation (approximately $69 million).

“Interest expense, net” in the Company’s Condensed Consolidated Statements of Income was as follows:

		For the Quarters Ended						For the Six Months Ended
(In thousands)		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
Interest expense		$	14,005		$	18,661		$	32,309		$	35,979
Interest income		(678		)	(2,247		)	(1,732		)	(4,203		)
Capitalized interest		(6,201		)	(3,180		)	(12,123		)	(6,018		)
Interest expense, net		$	7,126		$	13,234		$	18,454		$	25,758

 

NOTE 5.                         INCOME TAXES

The Company’s effective income tax rate increased to 46.0% in the second quarter and 48.5% in the first half of 2007 compared with 34.4% in the second quarter and 36.2% in the first half of 2006.  The increases were primarily due to the income taxes associated with asset sales in the second quarter of 2007 (see Notes 2 and 8) and a net tax adjustment primarily due to the application of a change in New York state law (effective January 1, 2007) that required a revaluation of the existing deferred tax balances.

On January 1, 2007, the Company adopted FIN 48.  The adoption of FIN 48 resulted in a cumulative effect adjustment of approximately $24 million recorded as a reduction to the beginning balance of retained earnings.  A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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(In thousands)
Balance at January 1, 2007		$	108,474
Additions based on tax positions related to the current year		18,559
Additions for tax positions of prior years		—
Reductions for tax positions of prior years		(7,965		)
Settlements		—
Balance at July 1, 2007		$	119,068

 

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $64 million as of July 1, 2007, and approximately $57 million as of December 31, 2006.

The Company also recognizes accrued interest expense and penalties related to the unrecognized tax benefits as additional tax expense, which is consistent with prior periods.  The total amount of accrued interest and penalties was approximately $30 million as of July 1, 2007, and was approximately $25 million as of December 31, 2006.

With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2000.  Management believes that its accrual for tax liabilities is adequate for all open audit years.  This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.

It is reasonably possible that U.S. federal, state and local, and non-U.S. tax examinations will be settled during the next twelve months.  If any of these tax audit settlements do occur within the next twelve months, the Company would make any necessary adjustments to the accrual for uncertain tax benefits.  Until formal resolutions are reached between the Company and the tax authorities, the determination of a possible audit settlement range for the impact on uncertain tax benefits is not practicable.  On the basis of present information, it is the opinion of the Company’s management that any assessments resulting from the current audits will not have a material effect on the Company’s consolidated financial statements.

NOTE 6.                         COMMON STOCK

During the first half of 2007, the Company repurchased 29,300 shares of its Class A Common Stock under its stock repurchase program at a cost of approximately $0.7 million.  The average price of these repurchases was $24.42 per share.  As of July 1, 2007, approximately $93 million remained from the Company’s current share repurchase authorization.

On June 21, 2007, the Board declared a dividend of $.23 per share on the Company’s Class A and B Common Stock.  The dividend is payable on September 12, 2007, to shareholders of record on September 4, 2007.  The estimated dividend payable of approximately $33 million is included in “Accounts payable” in the Company’s Condensed Consolidated Balance Sheet as of July 1, 2007.

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NOTE 7.                         PENSION AND POSTRETIREMENT BENEFITS

Pension

The Company sponsors several pension plans (qualified funded plans and non-qualified unfunded plans) and makes contributions to several others, in connection with collective bargaining agreements, that are considered multi-employer pension plans.  These plans cover substantially all employees.

On May 7, 2007, the Company sold the Broadcast Media Group.  As part of the sale, Broadcast Media Group employees no longer accrue benefits under the Company’s pension plan and those employees who on the date of sale were within a year of becoming eligible for early retirement were bridged to retirement-eligible status.  Upon retirement, all Broadcast Media Group employees will receive pension benefits equal to their vested amount as of the date of the sale. The sale significantly reduced the expected years of future service from current employees, resulting in a curtailment of the pension plan.  The Company recorded a special termination charge, for benefits provided to employees bridged to retirement-eligible status, of $0.9 million, which is reflected in the gain on the sale of the Broadcast Media Group.

In connection with the curtailment, the Company remeasured one of its pension plans as of the date of the sale of the Broadcast Media Group.  The curtailment and remeasurement resulted in a decrease in the pension liability of $40.4 million and an increase in other comprehensive income (before taxes) of $40.4 million.

The components of net periodic pension cost of all Company-sponsored pension plans were as follows:

		For the Quarters Ended
		July 1, 2007									June 25, 2006
(In thousands)		Qualified Plans			Non- Qualified Plans			All Plans			Qualified Plans			Non- Qualified Plans			All Plans
Service cost		$	10,899		$	519		$	11,418		$	12,888		$	588		$	13,476
Interest cost		23,515			3,574			27,089			22,261			3,015			25,276
Expected return on plan assets		(30,712		)	—			(30,712		)	(28,162		)	—			(28,162		)
Amortization of prior service cost		363			18			381			361			17			378
Recognized actuarial loss		1,070			1,983			3,053			5,887			1,664			7,551
Effect of curtailment		15			—			15			512			—			512
Special termination benefits		—			908			908			—			—			—
Net periodic pension cost		$	5,150		$	7,002		$	12,152		$	13,747		$	5,284		$	19,031

 

		For the Six Months Ended
		July 1, 2007									June 25, 2006
(In thousands)		Qualified Plans			Non- Qualified Plans			All Plans			Qualified Plans			Non- Qualified Plans			All Plans
Service cost		$	22,807		$	1,038		$	23,845		$	26,019		$	1,176		$	27,195
Interest cost		47,001			7,148			54,149			44,493			6,030			50,523
Expected return on plan assets		(60,671		)	—			(60,671		)	(56,283		)	—			(56,283		)
Amortization of prior service cost		722			35			757			734			34			768
Recognized actuarial loss		3,144			3,965			7,109			12,035			3,328			15,363
Effect of curtailment		15			—			15			512			—			512
Special termination benefits		—			908			908			—			—			—
Net periodic pension cost		$	13,018		$	13,094		$	26,112		$	27,510		$	10,568		$	38,078

 

Although the Company does not have any quarterly funding requirements in 2007 (under the Employee Retirement Income Security Act of 1974, as amended, and Internal Revenue Code requirements), the Company will make contractual funding contributions of approximately $13 million (approximately $7 million was made in the first half of 2007) for The New York Times Newspaper Guild pension plan.  The Company may elect to make additional contributions to its other pension plans.  The amount of these contributions, if any, would be based on

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the results of the January 1, 2007, valuation, market performance and interest rates in 2007 as well as other factors.

Postretirement Benefits

The Company provides health and life insurance benefits to retired employees (and their eligible dependents) who are not covered by any collective bargaining agreements if the employees meet specified age and service requirements.  In addition, the Company contributes to a postretirement plan under the provisions of a collective bargaining agreement.

As part of the Broadcast Media Group sale, those employees who on the date of sale were within a year of becoming retirement eligible under the Company’s postretirement plan will be eligible to receive postretirement benefits upon reaching age 55.  All other Broadcast Media Group employees under age 55 are no longer eligible for benefits under the Company’s postretirement plan.  The sale significantly reduced the expected years of future service from current employees, resulting in a curtailment of the postretirement plan.  The Company recorded a curtailment gain of $4.7 million and a special termination charge, for benefits provided to employees bridged to retirement-eligible status, of $0.7 million, which is reflected in the gain on the sale of the Broadcast Media Group.

In connection with the curtailment, the Company remeasured one of its postretirement plans as of the date of the sale of the Broadcast Media Group.  The curtailment and remeasurement resulted in a decrease in the postretirement liability of $5.1 million and an increase in other comprehensive income (before taxes) of $0.4 million.

The components of net periodic postretirement benefit cost were as follows:

		For the Quarters Ended						For the Six Months Ended
(In thousands)		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
Service cost		$	1,853		$	2,376		$	4,044		$	4,752
Interest cost		3,547			3,667			7,498			7,334
Expected return on plan assets		—			(10		)	—			(20		)
Amortization of prior service credit		(1,892		)	(1,794		)	(3,966		)	(3,588		)
Recognized actuarial loss		674			744			1,569			1,488
Effect of curtailment		(4,717		)	—			(4,717		)	—
Special termination benefits		703			—			703			—
Net periodic postretirement cost		$	168		$	4,983		$	5,131		$	9,966

 

NOTE 8.                         OTHER

Staff Reductions

The Company recognized staff reduction charges of $5.0 million in the second quarter of 2007 and $12.8 million in the first half of 2007.  In the second quarter and first half of 2006, the Company recognized staff reduction charges of $9.1 million and $18.4 million, respectively.  Most of the charges in 2007 and 2006 were recognized at the News Media Group.  These charges are recorded in “Selling, general and administrative costs” in the Company’s Condensed Consolidated Statements of Income.  As of July 1, 2007, the Company had a staff reduction liability of $10.6 million included in “Accrued expenses” in the Company’s Condensed Consolidated Balance Sheet.

Plant Consolidation

In 2006, the Company announced plans to consolidate the printing operations of a facility it leased in Edison, N.J., into its newer facility in College Point, Queens.  As part of the consolidation, the Company purchased the Edison facility and then sold it, with two adjacent properties it already owned, to a third party.  The purchase

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and sale of the Edison facility closed in the second quarter of 2007, relieving the Company of rental terms that were above market as well as restoration obligations under the original lease.  As a result of the sale, the Company recognized a pre-tax loss of $68.2 million ($41.3 million after-tax) in the second quarter of 2007.  This loss is recorded in “Net loss on sale of assets” in the Company’s Condensed Consolidated Statements of Income.

As part of the consolidation, the Company expects a workforce reduction of approximately 300 full-time equivalent employees resulting in a charge of $18 to $22 million for staff reduction costs.  The Company plans to facilitate the reductions through a variety of severance and buyout packages.  The exact amount of the charge will depend on the final composition and seniority of the affected employees, and the timing of the recognition and expenditures will depend on the timing of the implementation of the staff reductions.

Sale of WQEW

On April 26, 2007, the Company sold WQEW to Radio Disney, LLC (which provided substantially all of WQEW programming through a licensing agreement) for $40.0 million.  The Company recognized a pre-tax gain of $39.6 million ($21.2 million after-tax) in the second quarter of 2007.

NOTE 9.                         EARNINGS PER SHARE

Basic and diluted earnings per share have been computed as follows:

		For the Quarters Ended						For the Six Months Ended
(In thousands, except per share data)		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
Basic earnings per share computation:
Numerator
Income from continuing operations		$	22,061		$	53,867		$	42,187		$	84,393
Discontinued operations, net of income taxes — Broadcast Media Group		96,307			5,714			100,083			7,600
Net income		$	118,368		$	59,581		$	142,270		$	91,993
Denominator
Average number of common shares outstanding		143,906			144,792			143,901			144,978
Income from continuing operations		$	.15		$	.37		$	.29		$	.58
Discontinued operations, net of income taxes — Broadcast Media Group		.67			.04			.70			.05
Basic earnings per share		$	.82		$	.41		$	.99		$	.63
Diluted earnings per share computation:
Numerator
Income from continuing operations		$	22,061		$	53,867		$	42,187		$	84,393
Discontinued operations, net of income taxes — Broadcast Media Group		96,307			5,714			100,083			7,600
Net income		$	118,368		$	59,581		$	142,270		$	91,993
Denominator
Average number of common shares outstanding		143,906			144,792			143,901			144,978
Incremental shares for assumed exercise of securities		208			151			213			188
Total shares		144,114			144,943			144,114			145,166
Income from continuing operations		$	.15		$	.37		$	.29		$	.58
Discontinued operations, net of income taxes — Broadcast Media Group		.67			.04			.70			.05
Diluted earnings per share		$	.82		$	.41		$	. 99		$	.63

 

The difference between basic and diluted shares is primarily due to the assumed exercise of stock options included in the diluted earnings per share computation.

Stock options with exercise prices that exceeded the average fair market value of the Company’s Common Stock had an antidilutive effect and, therefore, were excluded from the computation of diluted earnings per share.  Approximately 32 million stock options with exercise prices ranging from $23.83 to $48.54 were excluded from the computation in the second quarter and first six months of 2007.  Approximately 30 million stock options with exercise prices ranging from $25.05 to $48.54 were excluded from the computation in the second quarter and first six months of 2006.

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NOTE 10.                  COMPREHENSIVE INCOME

Comprehensive income was as follows:

		For the Quarters Ended						For the Six Months Ended
(In thousands)		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
Net income		$	118,368		$	59,581		$	142,270		$	91,993
Foreign currency translation adjustments		2,719			4,253			3,602			5,102
Unrealized derivative gains on cash-flow hedges		—			2,556			—			2,932
Unrealized (loss)/gain on marketable securities		—			(24		)	—			36
Reclassification adjustment for realized loss included in net income		—			468			—			468
Adjustments to pension and postretirement obligations		56,711			—			56,711			—
Amortization of unrecognized amounts included in pension and postretirement obligations		(2,486		)	—			767			—
Income tax charge		(34,493		)	(1,255		)	(39,143		)	(1,438		)
Comprehensive income		$	140,819		$	65,579		$	164,207		$	99,093

 

The “Accumulated other comprehensive loss, net of income taxes” in the Company’s Condensed Consolidated Balance Sheets was net of a deferred income tax benefit of approximately $113 million as of July 1, 2007, and approximately $152 million as of December 31, 2006.

NOTE 11.                  SEGMENT STATEMENTS OF INCOME

The Company’s reportable segments consist of the News Media Group and the About Group.  These segments are evaluated regularly by management in assessing performance and allocating resources.

Below is a description of the Company’s reportable segments:

News Media Group (consisting of The New York Times Media Group, which principally includes The New York Times (“The Times”), NYTimes.com, the International Herald Tribune and WQXR-FM; the New England Media Group, which principally includes The Boston Globe (the “Globe”), Boston.com and the Worcester Telegram & Gazette; and the Regional Media Group, which includes 14 daily newspapers and their related digital operations); and

About Group (consisting of the Web sites of About.com, ConsumerSearch.com, UCompareHealthCare.com and Calorie-Count.com).  The Company acquired UCompareHealthCare.com in the first quarter of 2007 and ConsumerSearch.com in the second quarter of 2007 (see Note 3).  The Condensed Consolidated Financial Statements include the operating results of these acquisitions subsequent to the date of each acquisition.

The Broadcast Media Group, which was sold on May 7, 2007, is classified as a discontinued operation and is no longer included as a reportable segment (see Note 2).

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		For the Quarters Ended						For the Six Months Ended
(In thousands)		July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
REVENUES
News Media Group		$	764,238		$	800,190		$	1,527,715		$	1,581,181
About Group		24,705			19,446			47,248			37,652
Total		$	788,943		$	819,636		$	1,574,963		$	1,618,833
OPERATING PROFIT (LOSS)
News Media Group		$	46,653		$	90,933		$	106,282		$	155,188
About Group		8,511			7,309			16,841			14,252
Corporate		(11,847		)	(11,999		)	(25,309		)	(22,732		)
Total		$	43,317		$	86,243		$	97,814		$	146,708
Net income from joint ventures		4,745			8,770			2,592			10,737
Interest expense, net		7,126			13,234			18,454			25,758
Income from continuing operations before income taxes and minority interest		40,936			81,779			81,952			131,687
Income taxes		18,851			28,156			39,750			47,631
Minority interest in net (income)/ loss of subsidiaries		(24		)	244			(15		)	337
Income from continuing operations		22,061			53,867			42,187			84,393
Discontinued operations, Broadcast Media Group:
Income from discontinued operations, net of income taxes		1,977			5,714			5,753			7,600
Gain on sale, net of income taxes		94,330			—			94,330			—
Discontinued operations, net of income taxes		96,307			5,714			100,083			7,600
Net income		$	118,368		$	59,581		$	142,270		$	91,993

 

NOTE 12.                  CONTINGENT LIABILITIES

New Headquarters Building

The Company is in the process of completing construction on its new headquarters building in New York City (the “Building”), which the Company began to occupy in the second quarter of 2007.  In December 2001, a wholly owned subsidiary of the Company (“NYT”) and FC Lion LLC (a partnership between an affiliate of the Forest City Ratner Companies and an affiliate of ING Real Estate) became the sole members of The New York Times Building LLC (the “Building Partnership”), a partnership established for the purpose of constructing the Building.  In August 2006, the Building was converted to a leasehold condominium, and NYT and FC Lion LLC each acquired ownership of its respective leasehold condominium units.  Also in August 2006, Forest City Ratner Companies purchased the ownership interest in FC Lion LLC of the ING Real Estate affiliate.  In turn, FC Lion LLC assigned its ownership interest in the Building Partnership and the FC Lion LLC condominium units to FC Eighth Ave., LLC.

In connection with the construction of the Building, the Building Partnership obtained a construction loan, secured by the Building.  In January 2007, the construction loan was amended to release NYT as a co-borrower and release NYT’s condominium units from the related lien.  The Company was also released from its obligation to make an extension loan.  The Company no longer includes the construction loan in its financial statements (see Note 4).

The Company’s actual and anticipated capital expenditures in connection with the Building, net of proceeds from the sale of its previous headquarters, including core and shell and interior construction costs, are detailed in the table below.

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