Income statements and balance sheets follow for The New York

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

Solution

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.