New York Times Slashes Dividend to Save Cash in Slump (Update2)

By Sarah Rabil

Nov. 20 (Bloomberg) -- New York Times Co. slashed its dividend by almost three-fourths, calling the decision ``difficult but necessary'' as revenue crumbles amid the U.S. recession.

The quarterly payout was reduced to 6 cents a share from 23 cents, the New York-based company said today in a statement. The company also reported a 9.4 percent drop in revenue from continuing operations in October to $296.8 million.

The move is a retreat for Chief Executive Officer Arthur Sulzberger Jr., who last year pushed through the biggest dividend increase in a decade. A lower payout ``will provide us with greater financial flexibility in these uncertain economic times,'' he said in the statement.

The company said last month it would look at the dividend after reporting a third-quarter loss because of costs to eliminate jobs and a steeper ad drop.

``They could only hold out so long,'' said Richard Dorfman, managing director of the investment firm Richard Alan Inc. in New York. ``We are going into one of the worst advertising environments in decades, maybe since the Depression, and their business is going to be significantly impacted by it.''

Dorfman said he owns stock in the New York Times and has sold about 40 percent of it in the last year.

The stock fell 63 cents, or 9.9 percent, to $5.72 at 4:15 p.m. in New York Stock Exchange composite trading, before the announcement. The shares have lost 67 percent this year.

Lowering Debt

At the new rate, the dividend will cost New York Times about $34.6 million a year, down from $132 million, based on 144 million class A and class B shares outstanding.

The extra cash can be used to lower debt or make investments, Alexia Quadrani, an analyst with JPMorgan Chase & Co., said in a note to clients.

The company is confronting a prolonged advertising slump. The New York Times Group, which includes the flagship newspaper, the International Herald Tribune and their Web sites, reported a 15 percent decline in ad sales for October, citing weakness in entertainment, health care and home furnishings.

The controlling Ochs-Sulzberger family will lose about $19 million a year in payouts. The family's 19 percent equity stake, including class B shares held by a trust, will receive about $6.55 million annually, down from $25.1 million.

``It was just unsustainable no matter how much the families wanted to keep it in play,'' Dorfman said.

Family Support

Family trustees that sit on the board backed the move.

``While this is very difficult for all shareholders, it is the appropriate and prudent business response given the extraordinary challenges of the current economic environment,'' the trustees said in an e-mailed statement.

Standard & Poor's cut its debt rating on New York Times to junk after third-quarter earnings results. Advertising declines in the industry may not begin to moderate until 2010, according to S&P analyst Emile Courtney.

In March 2007, the company raised the dividend 31 percent. Newspaper publishers McClatchy Co., Media General Inc., A.H. Belo Corp. and GateHouse Media Inc. have already slashed their dividends this year.

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

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

Last Updated: November 20, 2008 18:19 EST

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