UBS Media Conference News

NY Times Questioned on Credit Facility, Dividend Cuts

Company Assures It's Still Profitable

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NEW YORK (AdAge.com) -- The New York Times Co. assured analysts and investors Tuesday that it isn't facing a credit crunch, has cut costs further than anticipated and is already benefiting from advertisers' "flight to quality." But some audience members at the presentation, delivered to the annual UBS media conference in New York, suggested that the company just might not get it.

Is The Times Co. really not going to replace, one attendee asked, the $400 million revolving credit facility expiring next May? Chief Financial Officer Jim Follo had just assured the audience that the company wouldn't have trouble trying to line up new financing. "We have no intention or need of fully replacing the $400 million facility expiring next year," he said. The company is also looking to borrow against its new headquarters building.

But maybe a newspaper company shouldn't limit its flexibility to borrow in times like this, the attendee suggested. "I'm just sort of surprised by that," he said.

Dividend cuts
He then asked why the company recently cut shareholders' dividend by 74% instead of ditching the dividend altogether. "It just seems the reality is, it's a very, very difficult business right now, newspapers," the questioner said to Mr. Follo. "And the notion that cash is flowing out of the company to the equity seems—it seems like you may not understand the gravity of the situation."

It was an unusually frank statement for these sorts of affairs.

In response, Mr. Follo said he meant that the company didn't need to fully replace that revolving credit next year—not that it would avoid securing financing if it were available on good terms. "We're certainly in the process of speaking with banks and lenders about replacing some of that liquidity that goes away," he said.

'As much as you can get'
"My comments are simply to state that in this tough market it's not necessary to get $400 million. You'll get as much as you can get and as much as we need, but there's just not a need to get a full $400 million.

"As far as the dividend goes, we still continue to be a profitable company," Mr. Follo added. "We still have good cash flows. We think the dividend level right now is a good balance between maintaining as much cash flow in the business as we can and returning certain capital to our shareholders."

The dividend, which had been increased as recently as last year, provides much of the income to the company's controlling Ochs-Sulzberger family. Cutting it provides relief to a company under pressure from recession, but also reduces the financial incentive to own the stock.

That dynamic prompted another audience member to ask: Are there circumstances in which the family would sell? President-CEO Janet Robinson said no. "The family has made it very clear internally and externally that they have no intention of selling the company," she said.

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