The New York Times Co. (NYSE: NYT) reported a fourth quarter profit decline of 48% yesterday, but that actually managed to top analysts' expectations and the stock moved up 6.79%.But there could be more trouble for the company. The Wall Street Journal reports (subscription required) that the market meltdown "blew out the Times's unfunded pension obligation to $625 million from $48 million at the end of 2007. The new figure is a whopping 73% of the Times' market capitalization."
Unless the market makes a miraculous rebound reminiscent of the Boston Red Sox (which the Times is in the process of trying to sell its stake in) 2004 ALCS comeback. the Times will have to fund that obligation over the next seven years.
Given the way the markets have behaved over the past year, the New York Times is certainly not alone in facing this problem. Investors would do well to scan through the 10-Ks for companies in their portfolios to see what kinds of pension obligations they have, and look for updates in more recent quarterly reports. Old economy companies with bloated cost structures are the most likely to run into pension problems. Google (NASDAQ: GOOG), for instance, does not have a pension program meaning that the burden of declining 401(k)s is the problem of its employees, not its investors.
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