Question

6. 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   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 $2,417,690 Required: a. Compute net operating profit after tax (NOPAT) for 2016 and 2015. Assume that combined federal and state statutory tax rates are 37% for both years. 2015 NOPAT= 101604 x (1-37%) NOPAT= 64 010$ 2016 NOPAT= 136585 x (1-37%) NOPAT= 86 049$ b. Compute net operating assets (NOA) for 2016 and 2015. Net Operating assets= Operating assets – Operating liabilities Operating assets= Total assets – (Cash+investments+marketable securities) Operating liabilities= Total liabilities – (Long term debt – Current portion of LTD) 2015 Operating assets= 2 417 690 – (105776+507639+291136) Operating assets= 1 513 139 Operating liabilities= 1 589 235 – (188377+242851) Operating liabilities= 1 158 007 Net Operating assets= 1 513 139 – 1 158 007 Net operating assets for 2015 is $355 132 2016 Operating assets= 2 185 395 – (100 692+ 449 535+ 187299) Operating assets= 1 447 869 Operating liabilities= 1 341 151 – (246978+0) Operating liabilities= 1 094 173 Net Operating assets= 1 447 869 – 1 094 173 Net operating assets for 2016 is $353 696 c. Compute return on net operating assets (RNOA) for 2016 and 2015. Net operating assets are $397,299 thousand in 2014. 2015 Average of NOA= (355 132 + 397 299) / 2 Average of NOA= 376 215 RNOA= 64010/376215 RNOA for 2015= 17.01% 2016 Average of NOA= (355 132 + 353 696) / 2 Average of NOA= 354 414 RNOA= 86049/354 414 RNOA for 2016= 24.27% 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. ROE= Net income / average shareholders’ equity 2015 Average shareholders’ equity= (828455+726328) / 2 Average shareholders’ equity= 777 391 ROE= 63 246 / 777 391 ROE= 8.14% 2016 Average shareholders’ equity= (828455+844244) / 2 Average shareholders’ equity= 836 349 ROE= 29 068 / 836 349 ROE= 3.48% e. What is nonoperating return component of ROE for 2016 and 2015? ROE= Operating return – Non-operating return Non-Operating return= ROE – Operating return. 2015 2016 Non-operating return= 8.14 – 17.01 Non-operating return= 3.48%-24.27% Non-operating return= -8.87% Non-operating return= -20.79% f. Comment on the difference between ROE and RNOA. What inference do you draw from this comparison? The RNOA for 2015 and 2016 is much higher than the ROE ratios. However, we still have a decrease in both ratios (ROE and RNOA) for 2016 comparing to 2015 since there’s a significant decrease in the net income by 34K comparing to 2015. I still believe that New York Times Company have a good management, and very efficient and profitable on every dollar invested. New York times has a positive financial leverage.

Answer 1

A.Computation of net operating profit after tax.

Sr.No.	Purticulers	2016	2015
A	Revenue
	Revenues Circulation	880,543	851790
	Advertising revenue	580732	638709
	Other revenue	94067	88716
	Total Revenue(A)	1557358	1581230
B	Less:Operating Expenses
	Production costs Wages and benefits	363051	354516
	Raw materials	72325	77176
	Other	192728	186120
	Selling, general and administrative costs	721083	713837
	Depreciation and amortization	61723	61597
	Toatl oparating expenses	1410910	1393246
C	Net operating profit	146448	187984
	Less:Restructing Charges	14804	0
	Less:Multiemployer pension plan withdrawal expense	6730	9055
D	Net operating profit before tax	101604	136585
E	Tax @37%	37594	50537
F	Net operating profit after tax	64010	86048

b.Computation of Net oparating assets,

Sr.No.	Purticulers	2016	2015
A	Operating Assets
	Total Assets	2185395	2417690
	Less:Cash	100692	105776
	Less:Investment	449535	507639
	Less:Marketable securities	187299	291136
	Total Oparating assets(A)	1447879	1513139
B	Opearating Liabilities
	Total Liabilities	1341151	1589235
	Less:Long term debt	246978	188377
	Less:Current portion of LTD	0	242851
	Total oparating Liabilities(B)	1094173	1158007
C	Net Operating Asset	353696	355132

C.computation of Net operating assets,

Net operating assets are $397,299 thousand in 2014.

For=2015

Average of NOA= (355 132 + 397 299) / 2

Average of NOA= 376 215

RNOA= 64010/376215

RNOA for 2015= 17.01%

For 2016

Average of NOA= (355 132 + 353 696) / 2

Average of NOA= 354 414

RNOA= 86049/354 414

RNOA for 2016= 24.27%

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.

ROE= Net income / average shareholders’ equity

For 2015

Average shareholders’ equity= (828455+726328) / 2

Average shareholders’ equity= 777 391

ROE= 63 246 / 777 391

ROE= 8.14%

For 2016

Average shareholders’ equity= (828455+844244) / 2

Average shareholders’ equity= 836 349

ROE= 29 068 / 836 349

ROE= 3.48%