Income statements and balance sheets follow for The New York Times Company. Refe
ID: 2824889 • Letter: I
Question
Income statements and balance sheets follow for The New York Times Company. Refer to these financial statements to answer the requirements.
The New York Times Company
Consolidated Statements of Income
Fiscal year ended
(in thousands)
Dec. 29, 2016
Dec. 30, 2015
Revenues
Circulation
$ 880,543
$ 851,790
Advertising
580,732
638,709
Other
94,067
88,716
Total revenues
1,555,342
1,579,215
Production costs
Wages and benefits
363,051
354,516
Raw materials
72,325
77,176
Other
192,728
186,120
Total production costs
628,104
617,812
Selling, general and administrative costs
721,083
713,837
Depreciation and amortization
61,723
61,597
Total operating costs
1,410,910
1,393,246
Restructuring charge
14,804
0
Multiemployer pension plan withdrawal expense
6,730
9,055
Pension settlement charges
21,294
40,329
Early termination charge
0
0
Operating profit
101,604
136,585
Loss from joint ventures
(36,273)
(783)
Interest expense, net
34,805
39,050
Income from continuing operations before income taxes
30,526
96,752
Income tax expense/(benefit)
4,421
33,910
Income from continuing operations
26,105
62,842
Loss from discontinued operations, net of income taxes
(2,273)
0
Net income
23,832
62,842
Net loss attributable to the noncontrolling interest
5,236
404
Net income attributable to The New York Times Company common stockholders
$29,068
$63,246
Continued next page
The New York Times Company
Consolidated Balance Sheets
As of
(in thousands)
Dec. 29, 2016
Dec. 30, 2015
Cash and cash equivalents
$ 100,692
$ 105,776
Short-term investments
449,535
507,639
Accounts receivable, net
197,355
207,180
Prepaid assets
15,948
19,430
Other current assets
32,648
22,507
Total current assets
796,178
862,532
Long-term marketable securities
187,299
291,136
Investments in joint ventures
15,614
22,815
Property plant and equipment, net
596,743
632,439
Goodwill
134,517
109,085
Deferred income taxes
301,342
309,142
Miscellaneous assets
153,702
190,541
Total assets
$2,185,395
$2,417,690
Accounts payable
$ 104,463
$ 96,082
Accrued payroll and other related liabilities
96,463
98,256
Unexpired subscriptions
66,686
60,184
Current portion of long-term debt
0
188,377
Accrued expenses and other
131,125
120,686
Total current liabilities
398,737
563,585
Long-term debt and capital lease obligations
246,978
242,851
Pension benefits obligation
558,790
627,697
Postretirement benefits obligation
57,999
62,879
Other
78,647
92,223
Total other liabilities
942,414
1,025,650
Stockholders’ equity
Common stock of $0.10 par value
Class A common stock
16,921
16,826
Class B convertible stock
82
82
Additional paid-in capital
149,928
146,348
Retained earnings
1,331,911
1,328,744
Common stock held in treasury, at cost
(171,211)
(156,155)
Accumulated other comprehensive loss, net of tax
(479,816)
(509,094)
Total New York Times Company stockholders’ equity
847,815
826,751
Noncontrolling interest
(3,571)
1,704
Total stockholders’ equity
844,244
828,455
Total liabilities and stockholders’ equity
$2,185,395.
$2,185,395
d. Compute return on common shareholders equity (ROE) for 2016 and 2015. Stockholders’ equity attributable to New York Times Company in 2014 is $726,328 thousand.
e. What is nonoperating return component of ROE for 2016 and 2015?
f. Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?
The New York Times Company
Consolidated Statements of Income
Fiscal year ended
(in thousands)
Dec. 29, 2016
Dec. 30, 2015
Revenues
Circulation
$ 880,543
$ 851,790
Advertising
580,732
638,709
Other
94,067
88,716
Total revenues
1,555,342
1,579,215
Production costs
Wages and benefits
363,051
354,516
Raw materials
72,325
77,176
Other
192,728
186,120
Total production costs
628,104
617,812
Selling, general and administrative costs
721,083
713,837
Depreciation and amortization
61,723
61,597
Total operating costs
1,410,910
1,393,246
Restructuring charge
14,804
0
Multiemployer pension plan withdrawal expense
6,730
9,055
Pension settlement charges
21,294
40,329
Early termination charge
0
0
Operating profit
101,604
136,585
Loss from joint ventures
(36,273)
(783)
Interest expense, net
34,805
39,050
Income from continuing operations before income taxes
30,526
96,752
Income tax expense/(benefit)
4,421
33,910
Income from continuing operations
26,105
62,842
Loss from discontinued operations, net of income taxes
(2,273)
0
Net income
23,832
62,842
Net loss attributable to the noncontrolling interest
5,236
404
Net income attributable to The New York Times Company common stockholders
$29,068
$63,246
Explanation / Answer
Soln : d) We need to calculate the ROE for year 2015 and 2016
Step1 : Calculate the Shareholders equity on average basis, it can be done taking shareholders equity at end and beginning of year.
For 2015 : Stockholders equity in beginning of 2015 = $726328 thousand and in the end of 2015 = $828455
Avg. of both = (726328+828455)/2 = 1554783/2 = $777391.50
Step 2 : get the net profit from the P & L statement at the end of year, NP = $63246
Step 3: Return on Equity = NP/Avg. stakeholders value = 63246/777391.50 = 8.14% (approx.)
Similarly we will calculate for year 2016:
Average value of stockholders equity = (828455 + 844244)/2 = 1672699/2 = 886349.50
Reurn on equity for 2016 = 29068/886349.50 = 3.28%
e) For nonoperating return component of ROE , we need to calculate RNOA = Return on net operating assets
RNOA = NOPAT/Avg. net operating asset
Again avg. can be claculated using the data from balance sheet
NOA = Total asset of company - All liabilities - All financial assets and liabilities = Operating assets - operating liabilities
For 2015
NOA = (2417690 -507639-291136-22815) -(96082++98256+120686+627697+62879+92223) = 498277
Similarly for 2016, NOA = (2185395-449535-187299-15614) - (1027487) = 505460
NOPAT for year 2015 = operating profit*(1-tax rate) = 136585*(1-0.35) = 88780.25
NOPAT for 2016 = operating profit*(1-tax rate) = 101604*(1-0.35) = 66042.60
RNOA for 2015 = NOPAT /NOA = 88780.25/498277= 17.82%
RNOA for 2016 = 66042.60/501868.50 = 13.16%
Non operating component of ROE = ROE - RNOA
For 2015 , it is = 8.14 - 17.82 = -9.68%
For 2016 , it is = 3.28 - 13.16 = -9.88%
f) As we can see here that in 2015, the value of ROE <RNOA in both the cases, that means the losses from the other activities than operations is more, which makes it a risky company. As all its profit are being eaten by the investments outside the company.