New York Times Considers Cutting Dividend, Posts Loss (Update4)

By Sarah Rabil

Oct. 23 (Bloomberg) -- New York Times Co., the third- largest U.S. newspaper publisher, will consider cutting its dividend after reporting a loss on severance costs and a steeper drop in advertising sales.

The payout will be reviewed ``to determine what is most prudent in light of the overall market conditions,'' Chief Executive Officer Janet Robinson said today in a statement. Standard & Poor's cut its debt rating on New York Times to junk after the results, increasing the pressure on the company to reduce the dividend that pays the controlling Ochs-Sulzberger family $25.1 million a year.

``On the dividend front, it's a fairly dynamic discussion,'' Chief Financial Officer James Follo said on a conference call. He declined to say if the board is considering reducing the dividend or eliminating it altogether.

The publisher plans to write down the value of its New England newspapers, including the Boston Globe, by as much as $150 million. The third-quarter loss from continuing operations totaled $2.08 million, or 1 cent a share.

New York Times rose 2 cents to $10.70 at 4:06 p.m. in New York Stock Exchange composite trading. The shares have lost 39 percent of their value this year. The current dividend offers an indicated yield of 8.7 percent.

Internet Slowdown

Ad sales at the newspapers and their Web sites slid 16 percent in the third quarter, the most since at least 2001. September newspaper ad sales fell 14 percent.

``To date in October, print advertising revenue declines are similar to those in September, but we are seeing slowing in digital advertising revenues, mainly because of less display advertising,'' Robinson said in the statement.

Third-quarter revenue fell 8.9 percent to $687 million, missing the $691.5 million average of six analysts' estimates compiled by Bloomberg. Excluding costs of $18.1 million to cut jobs, profit of 6 cents a share topped the 4-cent average of estimates.

Last year, New York Times raised its quarterly dividend by 31 percent to 23 cents a share, the biggest increase in a decade. A significant cut to the payout may fracture family unity and lead to the sale of the company to outsiders or a private-equity group that includes some family members, said Richard Dorfman, managing director of the investment firm Richard Alan Inc. in New York.

``The dynamics here are that they will no longer be able to stay in control of the company,'' Dorfman said in an interview.

Credit Line

When Rupert Murdoch's News Corp. bid for Dow Jones & Co. last year, a divided Bancroft family debated his potential effect on the Wall Street Journal's news coverage for three months. Family members controlling at least 37 percent of the company eventually approved the $5.2 billion deal.

S&P today cut its rating on New York Times' debt three levels to BB-, a junk rating, from BBB-, the lowest investment grade.

A likely recession in the U.S. means the decline in advertising may not begin to moderate until 2010, S&P said. New York Times' profit, excluding interest and non-cash costs, may decline more than 30 percent this year and another 30 percent in 2009, S&P analyst Emile Courtney said.

John Puchalla, an analyst with Moody's Investors Service, has said savings from a cut in the $132 million-a-year dividend could lower debt or fund investments.

New York Times is working to reduce its total debt of $1.1 billion, which includes a $400 million credit line that expires in May 2009. The company finished the quarter with $46 million in cash and equivalents.

Lender Talks

``Based on the conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature,'' Robinson said. ``We plan to continue to explore opportunities to reduce our debt levels.''

Newspaper publishers McClatchy Co., Media General Inc., A.H. Belo Corp. and GateHouse Media Inc. have already slashed their dividends this year.

The Sulzberger family has a 19 percent equity stake in the company, including Class B shares, held by a trust, that elect 70 percent of board members. Arthur O. Sulzberger Jr., 57, is chairman of the company and publisher of the New York Times.

The company's largest shareholder, Harbinger Capital Partners, mounted a proxy fight earlier this year, pressuring for board seats, more online investments and asset sales, including the Globe. The hedge fund, which owns almost 20 percent, dropped the fight after gaining two board seats.

Last month, Mexican billionaire Carlos Slim, dubbed the world's second-richest man by Forbes magazine, acquired a passive 6.4 percent stake in the publisher, making him the third-biggest investor outside of the family.

Writedown

The non-cash charge to reduce goodwill for the Boston newspapers will be disclosed in a regulatory filing, New York Times said. The company wrote down the publications by $814.4 million at the end of 2006. New York Times paid $1.6 billion for the Globe and nearby Worcester Telegram & Gazette.

New York Times has confronted falling revenue with job cuts, newsstand price increases and narrower pages. The company said it will exceed a 2009 goal of saving $230 million annually by an even larger amount than it previously projected.

New York Times reported third-quarter net income of $6.53 million, or 5 cents a share, including a tax gain from the sale of its broadcast business last year. That compared with $13.4 million, or 9 cents, a year earlier. Profit from continuing operations totaled $14.1 million, or 10 cents, in last year's third quarter.

To contact the reporters on this story: Sarah Rabil in New York at srabil@bloomberg.net

Last Updated: October 23, 2008 17:40 EDT

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