NYT

Business Context and Reporting Period

This Form 10-Q covers The New York Times Company for the quarter ended March 30, 2003. The Company operates primarily through its Newspaper Group (including The New York Times, The Boston Globe, and the International Herald Tribune), Broadcast Group, and New York Times Digital Group. A significant event during the period was the acquisition of the remaining 50% interest in the International Herald Tribune (IHT) on January 1, 2003, for approximately $65 million, funded via commercial paper.

Key Financial Metrics

Segment Performance: The Newspaper Group generated $735.1 million in revenue (94% of total) and $125.6 million in operating profit. The Broadcast Group reported $32.2 million in revenue and $5.0 million in operating profit. New York Times Digital reported $19.6 million in revenue and $3.2 million in operating profit.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 6.3% year-over-year. Advertising revenues rose 5.0% and circulation revenues increased 9.8%, driven by higher advertising rates and subscription price increases at The Times.
• Profitability: Operating profit increased 24.1% and Net Income increased 26.4%. This outperformance was aided by a favorable reimbursement of remediation costs at a major printing facility and the absence of workforce reduction charges that impacted the prior year.
• Costs: Total production costs rose 4.3%, primarily due to higher wages and benefits, partially offset by a 3.6% decrease in raw material (newsprint) costs. SGA expenses increased 2.8%.
• Joint Ventures: The Company recorded a loss of $6.2 million from joint ventures in Q1 2003, compared to income of $0.1 million in Q1 2002, largely due to losses at New England Sports Ventures and Discovery Times.

Guidance, Outlook, and Risks

2003 Guidance (GAAP Basis):

• Newspaper Group Advertising Revenue: Up 3% to 5% (excludes IHT).
• Newspaper Group Circulation Revenue: Up 3% to 5% (excludes IHT).
• Total Company Expenses: Up 4.5% to 5.5%.
• Capital Expenditures: $210 million to $240 million (includes $75-$80 million for the new headquarters).
• Joint Ventures: Expected loss of $4 million to breakeven.
• Diluted EPS Growth: Mid-single digits to low-double digits.

Management Commentary & Risks: Management expects newsprint prices to be higher in 2003 than 2002. The Company is constructing a new headquarters in New York City, with occupancy expected in 2006. Key risks include national and local economic conditions affecting advertising volume, competition, and potential material increases in newsprint prices. The Company maintains $600 million in revolving credit availability and $375.8 million available under its commercial paper facility.

Investor Verification Checklist

• Acquisition Impact: Verify the final purchase price allocation for the International Herald Tribune (IHT) acquisition, as the current allocation is preliminary.
• Remediation Reimbursement: Confirm the sustainability of the expense reduction related to the printing facility remediation cost reimbursement, which boosted Q1 operating profit.
• Joint Venture Exposure: Monitor the performance of New England Sports Ventures (NESV) and Discovery Times, which contributed to the $6.2 million joint venture loss.
• Capital Expenditures: Track progress and costs associated with the new headquarters project, which accounts for a significant portion of the 2003 CapEx guidance.
• Circulation Trends: Review the impact of recent price increases on circulation volume, noting the 3.4% weekday decline at The Times attributed to 9/11 volume comparisons and price sensitivity.