<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1994
Commission file number 1-8572
TRIBUNE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-1880355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
435 North Michigan Avenue, Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 222-9100
No Changes
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
At July 29, 1994 there were 67,517,894 shares outstanding of the
Company's Common Stock (without par value).
1
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
<TABLE>
<CAPTION> TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except per share data)
(Unaudited)
Second Quarter Ended First Half Ended
------------------------------ -----------------------------
June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues....................................... $ 573,749 $ 517,443 $1,056,571 $ 951,991
Operating expenses
Cost of sales (exclusive of
items shown below)................................... 287,201 275,472 529,046 514,890
Selling, general and administrative ..................... 135,175 110,284 265,199 221,328
Depreciation and amortization
of intangible assets................................. 28,588 24,596 54,939 49,581
--------- --------- ---------- ----------
Total operating expenses................................. 450,964 410,352 849,184 785,799
--------- --------- ---------- ----------
Operating profit......................................... 122,785 107,091 207,387 166,192
Equity in QUNO net loss.................................. (636) (2,757) (9,759) (5,468)
Gain on sale of QUNO stock............................... 39,381 - 39,381 -
Interest income.......................................... 5,167 5,805 9,789 10,141
Interest expense......................................... (5,135) (5,878) (10,983) (13,993)
--------- --------- --------- ---------
Income before income taxes............................... 161,562 104,261 235,815 156,872
Income taxes............................................. (76,530) (41,976) (110,714) (64,936)
--------- --------- --------- ---------
Net income .............................................. 85,032 62,285 125,101 91,936
Preferred dividends, net of tax.......................... (4,643) (4,628) (9,287) (9,256)
--------- --------- --------- ---------
Net income attributable
to common shares..................................... $ 80,389 $ 57,657 $ 115,814 $ 82,680
========= ========= ========= =========
Net income per share:
Primary.................................................. $ 1.19 $ .87 $ 1.72 $ 1.25
========= ========= ========= =========
Fully diluted............................................ $ 1.09 $ .80 $ 1.58 $ 1.16
========= ========= ========= =========
Dividends per common share............................... $ .26 $ .24 $ .52 $ .48
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
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<TABLE>
<CAPTION> TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
June 26, 1994 December 26, 1993
-------------- -----------------
<S> (Unaudited)
ASSETS
Current assets <C> <C>
Cash and short-term investments......................... $ 47,639 $ 18,524
Accounts receivable, net................................ 313,956 284,110
Broadcast rights........................................ 157,527 144,233
Inventories, prepaid expenses and other................. 53,595 44,392
----------- -----------
Total current assets.................................... 572,717 491,259
----------- -----------
Investment in and advances to QUNO...................... 258,942 250,923
Property, plant and equipment........................... 1,274,071 1,201,167
Accumulated depreciation................................ (636,909) (599,552)
----------- -----------
Net properties.......................................... 637,162 601,615
----------- -----------
Broadcast rights........................................ 200,031 217,229
Intangible assets, net.................................. 829,268 719,965
Mortgage notes receivable from affiliates............... 83,732 119,437
Other................................................... 176,162 135,982
----------- -----------
Total assets............................................ $ 2,758,014 $ 2,536,410
=========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities
Accounts payable........................................ $ 92,953 $ 85,334
Contracts payable for broadcast rights.................. 150,725 142,686
Accrued expenses and other current liabilities.......... 316,270 277,007
---------- ----------
Total current liabilities............................... 559,948 505,027
---------- ----------
Long-term debt.......................................... 456,206 510,838
Deferred income taxes................................... 141,479 87,605
Contracts payable for broadcast rights.................. 195,723 194,846
Other................................................... 147,450 142,467
---------- ----------
Total liabilities....................................... 1,500,806 1,440,783
---------- ----------
Stockholders' investment
Series B convertible preferred stock.................... 329,286 335,532
Common stock............................................ 1,018 1,018
Additional paid-in capital.............................. 108,392 105,819
Retained earnings....................................... 1,670,588 1,589,695
Treasury stock (at cost)................................ (593,264) (607,332)
Unearned compensation related to ESOP................... (297,479) (298,969)
Cumulative translation adjustment....................... (20,222) (30,136)
Unrealized gain on investments.......................... 58,889 -
----------- -----------
Total stockholders' investment.......................... 1,257,208 1,095,627
----------- -----------
Total liabilities and stockholders' investment.......... $ 2,758,014 $ 2,536,410
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
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<TABLE>
<CAPTION> TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
First Half Ended
------------------------------
June 26, 1994 June 27, 1993
-------------- --------------
<S> <C> <C>
Operations
Net income................................................... $125,101 $ 91,936
Adjustments to reconcile net income to net cash
provided by operations:
Equity in QUNO net loss.............................. 9,759 5,468
Gain on sale of QUNO stock........................... (39,381) -
Depreciation and amortization of intangible
assets............................................. 54,939 49,581
Other, net........................................... 47,400 20,577
--------- ---------
Net cash provided by operations.............................. 197,818 167,562
--------- ---------
Investments
Capital expenditures......................................... (40,264) (37,900)
Acquisitions................................................. (118,920) (19,920)
Proceeds from sale of QUNO stock............................. 94,936 -
Repayment of note receivable from QUNO....................... - 179,846
Purchase of mortgage note.................................... - (35,500)
Other, net................................................... (15,949) (11,822)
--------- ---------
Net cash provided by (used for) investments.................. (80,197) 74,704
--------- ---------
Financing
Repayments of long-term debt................................. (54,670) (207,798)
Sale of common stock to employees, net....................... 10,372 28,136
Dividends.................................................... (44,208) (40,890)
Redemption of preferred stock................................ - (3,905)
--------- ---------
Net cash used for financing.................................. (88,506) (224,457)
--------- ---------
Net increase in cash and short-term investments.............. 29,115 17,809
--------- ---------
Cash and short-term investments at the beginning of year..... 18,524 16,768
--------- ---------
Cash and short-term investments at the end of quarter........ $ 47,639 $ 34,577
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
4
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TRIBUNE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1:
- ------
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Tribune Company and its subsidiaries as of June 26, 1994
and the results of their operations for the quarters and first halves ended
June 26, 1994 and June 27, 1993 and cash flows for the first halves ended June
26, 1994 and June 27, 1993. All adjustments reflected in the accompanying
unaudited condensed consolidated financial statements are of a normal recurring
nature. Results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Certain prior year
amounts have been reclassified to conform with the 1994 presentation.
Note 2:
- ------
Primary net income per share has been computed by dividing net income
attributable to common shares by the weighted average number of common shares
outstanding during the periods. Fully diluted net income per share has been
computed based on the assumption that all of the convertible preferred shares
have been converted into common shares. The numbers of common shares used for
computing primary and fully diluted net income per share were as follows (in
thousands):
Second Quarter Ended First Half Ended
1994 1993 1994 1993
------- ------ ------ ------
Primary 67,379 66,230 67,232 66,010
Fully diluted 74,411 73,268 74,309 73,115
5
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Note 3:
- ------
On April 14, 1994, Tribune reduced its ownership holdings in QUNO Corporation
("QUNO") by selling 5.5 million shares of QUNO common stock. With this sale,
Tribune reduced its ownership interest in QUNO from 59% to 34%. The sale of
the shares resulted in an after-tax gain of approximately $13 million, or $.19
per share on a primary basis, which was recorded in the second quarter of 1994.
The Company retains 7.5 million shares of QUNO's 22 million common shares
outstanding and also holds a U.S. $138.8 million (face value) subordinated
debenture, convertible into 11.7 million voting common shares of QUNO.
Note 4:
- ------
Tribune acquired The Wright Group on February 18, 1994, for approximately $100
million in cash. The Wright Group is a leading publisher of "whole language"
educational materials for the elementary school market. On April 6, 1994,
Tribune completed the purchase of Boston independent television station WLVI
(Ch. 56) for approximately $25 million in cash. The acquisition increases the
number of Tribune-owned TV stations to eight. On June 30, 1994, Tribune
completed the acquisition of Farm Journal Inc. for approximately $17.5 million
in cash. Farm Journal Inc. is the publisher of Farm Journal, the nation's
leading farm magazine. These acquisitions are being accounted for by the
purchase method, and accordingly, the results of operations of the companies
have been or will be included in the consolidated financial statements since or
from their respective dates of acquisition.
6
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Note 5:
- ------
The Company adopted Financial Accounting Standards Board Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", in the
first quarter of 1994. This statement generally requires that the Company
record investments in debt securities and publicly traded equity securities at
their market value, except for non-convertible debt securities which the
Company intends to hold to maturity and equity securities which are accounted
for using the equity method. The market value of the Company's long-term
investments in less-than-20% owned publicly traded companies was approximately
$36 million in excess of the investments' $10 million carrying value at June
26, 1994. The Company also holds a $138.8 million (face value) convertible
debenture issued by QUNO Corporation. The market value of this debenture,
based on the $23.875 Canadian quoted market price per share of the underlying
QUNO common stock at June 26, 1994, was approximately $201 million. FAS 115
requires that changes in market value from historical cost for these
investments be reported, net of tax, in a separate component of stockholders'
investment until realized. Accordingly, the Company's June 26, 1994, Condensed
Consolidated Statement of Financial Position reflects net unrealized gain on
investments of approximately $59 million. The adoption of this statement had
no impact on net income, and prior year financial statements are not restated.
Note 6:
- ------
Financial data for each of the Company's business segments is as follows (in
thousands):
<TABLE>
<CAPTION> Second Quarter Ended First Half Ended
------------------------------ ------------------------------
June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993
------------- ------------- ------------- -------------
<S>
Operating revenues <C> <C> <C> <C>
Publishing.............................................. $ 351,918 $ 301,536 $ 688,990 $ 596,119
Broadcasting and Entertainment.......................... 223,085 216,903 370,033 357,884
Intercompany............................................ (1,254) (996) (2,452) (2,012)
--------- --------- ---------- ----------
Total operating revenues................................ $ 573,749 $ 517,443 $1,056,571 $ 951,991
========= ========= ========== ==========
Operating profit
Publishing.............................................. $ 78,956 $ 63,697 $ 149,523 $ 119,426
Broadcasting and Entertainment.......................... 50,247 49,254 70,622 58,424
Corporate expenses...................................... (6,418) (5,860) (12,758) (11,658)
--------- --------- --------- ----------
Total operating profit.................................. $ 122,785 $ 107,091 $ 207,387 $ 166,192
========= ========= ========= ==========
</TABLE>
7
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Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
----------------------
The following discussion compares the results of operations of Tribune
Company and its subsidiaries (the "Company") for the second quarter of
1994 to the second quarter of 1993 and for the first half of 1994 to the
first half of 1993.
SIGNIFICANT EVENTS AND TRENDS
- -----------------------------
The major league baseball players' contract expired on December 31,
1993. During 1994, representatives of the Major League Baseball Players
Association ("MLBPA") and the owners have continued to negotiate for a new
players' contract. On July 28, 1994, the MLBPA declared that its
membership may initiate a strike on Friday, August 12, 1994. This action,
if taken, will impact the Company's Chicago Cubs baseball, television and
radio operations. While the broadcast stations have contingency plans in
place for replacement programming, the Cubs would experience a loss of
revenues and operating profit that would reduce the Company's earnings
growth in the third quarter of 1994. The actual impact on the Cubs' operating
results is uncertain due to the unknown length of a possible work stoppage.
In addition, the Company cannot predict the ultimate outcome of the
negotiations.
RESULTS OF OPERATIONS
- ---------------------
The Company's results of operations, when examined on a quarterly
basis, reflect the seasonality of advertising, which affects the results
of both publishing and broadcasting and entertainment. Second and fourth
quarter advertising revenues are typically higher than first and third
quarter revenues. Results for the 1994 second quarter reflect this
seasonal pattern.
8
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CONSOLIDATED
The Company's consolidated operating results for 1994 and the
percentage changes from 1993 were as follows:
(Dollars in millions, Second Quarter First Half
except per share amounts) 1994 Change 1994 Change
------ ------- ------- -----
Operating revenues $ 574 +11% $1,057 +11%
Operating profit $ 123 +15% $ 207 +25%
Equity in QUNO net loss $ (1) +77% $ (10) -78%
Gain on sale of QUNO stock $ 39 * $ 39 *
Net income $ 85 +37% $ 125 +36%
Primary net income per share $1.19 +37% $ 1.72 +38%
* Not Meaningful
On April 14, 1994, the Company reduced its ownership holdings in QUNO
Corporation ("QUNO") by selling 5.5 million shares of QUNO common stock.
With this sale, the Company reduced its ownership interest in QUNO from
59% to 34%. The sale of the shares resulted in an after-tax gain of
approximately $13 million, or $.19 per share on a primary basis. The
pretax gain on the sale was $39 million.
Net Income Per Share -- Primary net income per share for the 1994 second
quarter rose 37% to $1.19 from $.87 in 1993. For the 1994 first half,
primary net income per share rose 38% to $1.72 from $1.25 in 1993.
Excluding the $13 million net-of-tax gain on the sale of QUNO common
stock, primary net income per share increased 15% for the 1994 second
quarter and 22% for the 1994 first half. These increases were due to
higher operating profit from the media businesses and, in the second
quarter, lower equity losses from QUNO.
Operating Profit and Revenues -- The Company's 1994 consolidated operating
profit by business segment and the percentage changes from 1993 were as
follows:
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(Dollars in millions) Second Quarter First Half
1994 Change 1994 Change
------ ------- ----- ------
Publishing $ 79 +24% $149 +25%
Broadcasting & Entertainment 50 + 2% 71 +21%
Corporate expenses (6) +10% (13) + 9%
----- -----
Total operating profit $123 +15% $207 +25%
Publishing reported a 24% increase in operating profit for the 1994
second quarter and a 25% increase for the first half, due primarily to
higher advertising revenues and, to a lesser extent, contributions from
three acquisitions - Contemporary Books in July 1993, Compton's Multimedia
in September 1993 and The Wright Group in February 1994. Broadcasting and
entertainment improved in both periods of 1994 due primarily to increased
television revenues, offset in the second quarter by lower baseball
revenues. Second quarter 1994 broadcasting and entertainment results
include independent Boston television station WLVI (Ch.56), acquired on
April 6, 1994.
Consolidated operating revenues for the 1994 second quarter rose 11%
to $574 million from $517 million. Publishing operating revenues
increased 17%, and broadcasting and entertainment revenues increased 3%.
Consolidated operating revenues also rose 11% for the 1994 first half to
$1.06 billion from $952 million. Publishing revenues increased 16% and
broadcasting and entertainment revenues increased 3%.
Operating Expenses -- Consolidated operating expenses increased for both
the quarter and the first half as follows:
(Dollars in millions) Second Quarter First Half
1994 Change 1994 Change
------ ------- ----- ------
Cost of sales $287 + 4% $529 + 3%
Selling, general & administrative 135 +23% 265 +20%
Depreciation & amortization
of intangible assets 29 +16% 55 +11%
------ -----
Total operating expenses $451 +10% $849 + 8%
10
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The increases in cost of sales in 1994 were primarily due to the new
businesses acquired and higher compensation costs, partially offset by
lower newsprint and ink expense and programming costs. Excluding expenses
of the four recent acquisitions, cost of sales increased less than 1%, or
$1 million, in the second quarter and decreased 2%, or $8 million, in the
first half. Excluding acquisitions, compensation expense increased $4
million, or 4%, for the quarter and $8 million, or 5%, for the half.
Newsprint and ink expense decreased $3 million, or 5%, for the quarter and
$5 million, or 5%, for the first half. Programming costs declined $3
million, or 5%, in the second quarter and $13 million, or 11%, in the
first half of 1994. The increases in selling, general and administrative
(SG&A) expenses in 1994 were primarily attributable to the new businesses
acquired, higher compensation costs and increased sales costs. Excluding
the new businesses, SG&A expenses increased $10 million, or 9%, in the
second quarter and $21 million, or 9%, in the first half. These increases
were due primarily to higher compensation costs of $4 million, or 8%, for
the quarter and $6 million, or 6%, for the half and increased sales costs.
Sales expense increased $5 million for the quarter and $9 million for the
first half due to higher sales levels. The increases in depreciation and
amortization of intangible assets reflect the addition of the four
acquisitions and capital expenditures made in 1993, primarily at the
Company's Chicago newspaper printing facility.
PUBLISHING
Operating Profit and Revenues -- Publishing operating profit for the 1994
second quarter was up 24% to $79 million from $64 million, and for the
first half was up 25% to $149 million, due principally to higher
advertising revenues and, to a lesser extent, contributions of the
recently acquired businesses. Operating margins for the second quarter of
1994 increased to 22.4% from 21.1% in 1993. Excluding the profit
contributions of the recently acquired companies, operating profit grew
18% in the second quarter and 21% in the first half.
Operating revenues for the second quarter were up 17% to $352 million
from $302 million in 1993, and for the first half increased 16% to $689
million from $596 million. Excluding the three recently acquired
companies, revenues increased $22 million, or 7%, in the second quarter of
1994 and $45 million, or 7%, in the first half due in both periods to a 9%
increase in newspaper advertising revenues.
Publishing group revenues by classification for 1994 and the
percentage changes from 1993 were as follows:
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Second Quarter First Half
(Dollars in millions) 1994 Change 1994 Change
------ ------ ------ ------
Advertising
Retail $113 + 6% $217 + 5%
General 33 + 7% 69 + 12%
Classified 99 + 14% 194 + 13%
------ -----
Total advertising 245 + 9% 480 + 9%
Circulation 61 - 124 -
Other 46 +174% 85 +150%
------ -----
Total revenues $352 + 17% $689 + 16%
Retail advertising revenues for the 1994 second quarter and first
half increased mainly due to improvements reported in the department store
and food and drug categories in Chicago and Orlando, and the department
store category in Fort Lauderdale. General advertising revenues for both
the quarter and the first half increased due principally to higher
financial and transportation advertising in Chicago and Orlando.
Classified advertising revenues for the second quarter and year-to-date
periods rose mainly due to increased help wanted advertising.
Advertising linage for 1994 reflects increases in all categories for
both the quarter and the first half, led by part run and classified full
run advertising. Total linage increased 7% for both the quarter and the
first half, reflecting the generally improved advertising climate. The
following summary presents advertising linage for the second quarter and
first half.
Second Quarter First Half
(Inches in thousands) 1994 Change 1994 Change
------ ------- ----- ------
Full run
Retail 1,146 + 5% 2,224 + 5%
General 183 + 9% 362 +12%
Classified 1,773 + 6% 3,504 + 7%
------ ------
Total full run 3,102 + 6% 6,090 + 6%
Part run 2,768 +11% 5,316 + 8%
Preprint 2,597 + 4% 4,896 + 8%
------ ------
Total inches 8,467 + 7% 16,302 + 7%
12
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Circulation revenues were unchanged in both the 1994 second quarter
and first half. Total average daily circulation decreased 1% to 1,365,000
copies in the second quarter, and total average Sunday circulation also
decreased 1% to 2,003,000 copies. For the first half, total average daily
circulation decreased 1% to 1,385,000 copies from 1,402,000, while total
average Sunday circulation decreased 1% to 2,047,000 from 2,062,000.
Other revenues are derived from publishing books and information in
print and digital formats; advertising placement services; the syndication
of columns, features and comics to newspapers; commercial printing
operations; direct mail operations; and other publishing-related
activities. The increase in other revenues for both periods in 1994
resulted mainly from the 1993 acquisitions of Contemporary Books in late
July and Compton's in mid-September and the 1994 acquisition of The Wright
Group in February. Excluding these acquisitions, other revenues increased
7% for the quarter and 9% in the first half, reflecting higher revenues
from direct mail and advertising placement services.
Operating Expenses -- Publishing operating expenses increased 15%, or $35
million, in the second quarter of 1994 and 13%, or $63 million, in the
first half. Excluding the three acquisitions, operating expenses
increased 4% in both 1994 periods. These increases were mainly due to
higher compensation costs, increased circulation costs and start up costs
on new ventures. Compensation costs rose 5%, or $4 million, in the 1994
second quarter and 4%, or $7 million, in the first half. Circulation
costs rose 7% for both the quarter and the first half, or $2 million and
$5 million, respectively, primarily due to higher postage and delivery
expense for expanding total market coverage volume in Chicago. These
increases were partially offset by a decline in newsprint and ink expense
of $3 million, or 5%, in the 1994 second quarter and $5 million, or 5%, in
the first half. The average cost of newsprint consumed declined 14% in
the second quarter and 12% in the first half, while consumption increased
9% in the quarter and 8% in the half.
BROADCASTING AND ENTERTAINMENT
Operating Profit and Revenues -- Broadcasting and entertainment operating
profit for the second quarter of 1994 was $50 million, up 2% from $49
million, and was $71 million for the 1994 first half, up 21% from $58
million in 1993. The increased operating profit was mainly due to higher
television revenues and lower programming costs, offset in the second
quarter by lower radio and entertainment results. Entertainment results,
which include baseball, were impacted by lower revenues, startup losses
for new ventures such as "The Road" and TV Food Network and higher
expenses at the Chicago Cubs.
13
<PAGE>
Operating revenues for the group for 1994 and the percentage changes
from 1993 were as follows:
Second Quarter First Half
(Dollars in millions) 1994 Change 1994 Change
------ ------- ----- ------
Television $168 +11% $286 + 9%
Radio 16 - 4% 27 - 1%
Entertainment 39 -20% 57 -15%
------ -----
Total revenues $223 + 3% $370 + 3%
Television revenues for the second quarter and first half of 1994
increased largely due to higher revenues at WGN-Chicago, WPIX-New York and
WPHL-Philadelphia, and the addition of WLVI-Boston in April, 1994.
Excluding WLVI, television revenues were up 6% in both the 1994 second
quarter and first half. Radio revenues decreased in 1994, primarily due
to declines at WGN-Chicago in the second quarter. Entertainment revenues
decreased $10 million for both the second quarter and the first half due
to fewer shows in syndication, including the cancellation of "The Joan
Rivers Show," and lower national television revenues from Major League
Baseball. This decline reflects the expiration of baseball's contract
with CBS at the end of the 1993 season and the start of the new joint
venture agreements with NBC and ABC this season.
Operating Expenses -- Operating expenses for the group increased 3%, or $5
million, in the second quarter and were unchanged in the first half. The
second quarter increase was principally due to the addition of WLVI-
Boston, higher compensation costs and startup losses for "The Road" and TV
Food Network, offset partially by a decrease in programming costs.
Excluding WLVI, second quarter 1994 operating expenses were flat, and
first half expenses decreased 2%. Excluding WLVI, programming costs
decreased 8%, or $5 million, for the quarter and 13%, or $15 million, for
the first half due to the airing of lower cost programs at the television
stations and a reduction in production costs due to a lower level of
original programming at Tribune Entertainment. Compensation costs
increased 4%, or $2 million, in the second quarter and 5%, or $5 million,
in the first half. The increases were primarily due to increased
compensation at the television stations.
14
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EQUITY IN QUNO NET LOSS
The Company's equity in QUNO's net loss, after interest expense and
taxes, was $0.6 million for the second quarter of 1994 and $10 million for
the first half, which reduced primary net income per share by $.01 and
$.15, respectively. In 1993, Tribune's share of QUNO's net loss was $3
million in the second quarter and $5 million in the first half, which
reduced Tribune's primary net income per share by $.04 and $.08,
respectively.
QUNO had operating income in the 1994 second quarter of $1 million
versus an operating loss of $4 million in 1993. The improvement in the
second quarter was primarily due to lower non-cash foreign currency
exchange losses. Average newsprint selling prices declined 6% from the
1993 second quarter, while shipments declined 3%. QUNO's first half
operating loss was $14 million in 1994 compared to $4 million in 1993.
QUNO's first half 1994 operating loss was due to lower revenues, resulting
from lower newsprint selling prices, and $7 million higher non-cash
foreign currency exchange losses due to the weaker Canadian dollar since
year-end 1993. For the half, average newsprint prices declined 9%, while
shipments were down 1%.
INTEREST INCOME AND EXPENSE
Interest income decreased 11% to $5 million for the second quarter
and 3% to $10 million for the first half of 1994. Interest expense
decreased 13% to $5 million in the second quarter and 22% to $11 million
in the first half due to lower debt levels.
INCOME TAX EXPENSE
The Company's effective income tax rate, excluding equity in QUNO's
net loss and the gain on the sale of QUNO common stock, increased to 40.9%
in the first half of 1994 from 40.0% in the 1993 first half, and in the
1994 second quarter increased to 40.8% from 39.2% last year.
15
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
Net cash provided by operations for the first half of 1994 was $198
million compared to $168 million in the first half of 1993. The increase
was due primarily to higher net income and changes in working capital.
Net cash used for investments was $80 million for the first half of 1994
compared to $75 million provided by investments for the corresponding 1993
period. The 1994 first half included $95 million of proceeds from the sale
of 5.5 million shares of QUNO common stock, the acquisition of The Wright
Group in February 1994 for approximately $100 million in cash, the
acquisition of WLVI-Boston (Ch. 56) in April 1994 for approximately $25
million in cash and capital expenditures of $40 million. On June 30,
1994, the Company completed the acquisition of Farm Journal Inc. for
approximately $17.5 million in cash. Farm Journal Inc. is the publisher
of Farm Journal, the nation's leading farm magazine. These acquisitions
were financed with available cash. The 1993 period included intercompany
debt repayments of $180 million received from QUNO as a result of its
initial public offering and debt issuances. In March 1994, Tribune
contributed to a partnership in which it had a 50% interest, the $35
million mortgage note it held on a building owned by the partnership.
This increased the Company's ownership interest in the partnership to 99%.
The partnership's financial statements are consolidated in Tribune's
consolidated financial statements since the date of the mortgage note
contribution. Capital expenditures for fiscal year 1994 are expected to
be approximately $95 million, related to a variety of modernization and
normal replacement projects.
Net cash used for financing activities in the 1994 first half was $89
million compared to $224 million in 1993. Net cash used for financing
activities in 1994 included debt repayment of $55 million and dividends of
$44 million. The first half dividends increased 8% to $.52 per share from
$.48 per share. Net cash used for financing activities in 1993 included a
$208 million reduction in debt primarily funded from the proceeds received
from the QUNO stock offering and debt financing. At June 26, 1994, the
Company had authorization to repurchase an additional 900,000 share of its
common stock.
The Company expects to fund capital expenditures, dividends and other
operating requirements for the remainder of 1994 primarily with net cash
provided by operations.
16
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
-------------------
The computation of the ratios of earnings to fixed charges, filed
herewith as Exhibit 12, is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
11 - Statements of computation of primary and fully
diluted net income per share.
12 - Computation of ratios of earnings to fixed charges.
(b) Reports on Form 8-K.
No reports have been filed on Form 8-K during this quarter.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRIBUNE COMPANY
(Registrant)
Date: August 9, 1994 R. Mark Mallory
Vice President and Controller
(on behalf of the Registrant
and as chief accounting officer)
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<PAGE>
<TABLE>
<CAPTION> TRIBUNE COMPANY Exhibit 11
STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE
(In thousands, except per share amounts) Second Quarter Ended First Half Ended
June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993
<S> ------------- ------------- ------------- -------------
PRIMARY
- ------- <C> <C> <C> <C>
Net income $85,032 $62,285 $125,101 $91,936
Preferred dividends, net of tax (4,643) (4,628) (9,287) (9,256)
------------- ------------- ------------ -------------
Net income attributable to common shares $80,389 $57,657 $115,814 $82,680
------------- ------------- ------------ -------------
Weighted average common shares outstanding 67,379 66,230 67,232 66,010
------------- ------------- ------------- -------------
Primary net income per share $1.19 $ .87 $1.72 $1.25
============= ============= ============= =============
FULLY DILUTED
- -------------
Net Income $85,032 $62,285 $125,101 $91,936
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (2,970) (3,159) (5,940) (6,318)
Assumed elimination of tax benefit on certain ESOP
preferred dividends (704) (547) (1,409) (1,094)
------------- ------------- ------------- -------------
Adjusted net income $81,358 $58,579 $117,752 $84,524
------------- ------------- ------------- -------------
Weighted average common shares outstanding 67,379 66,230 67,232 66,010
Assumed conversion of preferred shares into common shares 6,027 6,129 6,027 6,129
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 1,005 909 1,050 976
------------- ------------- ------------- -------------
Adjusted weighted average common shares outstanding 74,411 73,268 74,309 73,115
------------- ------------- ------------- -------------
Fully diluted net income per share $1.09 $ .80 $1.58 $1.16
============= ============= ============= =============
See Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION> Exhibit 12
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands of dollars, except ratios)
First Half Full Year
Ended ---------------------------------------------------------
6/26/94 1993 1992 1991 1990 1989
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) before cumulative effects of
accounting changes $125,101 $188,606 $136,625 $141,981 ($63,533) $242,421
Add:
Income tax expense (benefit) 110,714 143,821 96,266 99,894 (30,695) 168,463
Loss on less than 50%-owned equity investments 15,047 20,212 1,903 1,107 2,285 2,221
---------- --------- --------- --------- --------- ---------
Sub total 250,862 352,639 234,794 242,982 (91,943) 413,105
---------- --------- --------- --------- --------- ---------
Fixed charge adjustments
Add:
Interest expense 10,983 24,660 49,254 63,083 53,576 47,866
Amortization of capitalized interest 1,195 2,392 5,304 5,258 4,850 4,098
Interest component of rental expense (A) 4,446 8,732 9,329 9,047 14,467 12,333
---------- --------- --------- --------- --------- ---------
Earnings (loss), as adjusted $267,486 $388,423 $298,681 $320,370 ($19,050) $477,402
========== ========= ========= ========= ========= =========
Fixed charges:
Interest expense $10,983 $24,660 $49,254 $63,083 $53,576 $47,866
Interest capitalized - 1,099 3,445 1,976 8,652 13,614
Interest component of rental expense (A) 4,446 8,732 9,329 9,047 14,467 12,333
Interest related to guaranteed ESOP debt (B) 12,314 25,742 27,019 27,500 27,757 20,508
---------- --------- --------- --------- --------- ---------
Total fixed charges $27,743 $60,233 $89,047 $101,606 $104,452 $94,321
========== ========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges 9.6 6.4 3.4 3.2 (C) 5.1
---------- --------- --------- --------- --------- ---------
(A) Represents a portion of rental expense incurred by the Company, which is a reasonable approximation of the interest cost
component of such expense.
(B) Tribune Company guarantees the debt of its Employee Stock Ownership Plan (ESOP).
(C) The net loss for 1990 reflects an after-tax non-recurring loss of $185 million ($295 million before income taxes) relating
to the sale of the New York Daily News. Excluding this non-recurring item, the ratio for 1990 was 2.6. As a result of the
loss incurred for the full-year 1990, the Company was unable to cover the indicated fixed charges. The Company's loss, as
adjusted, plus the indicated fixed charges for 1990 totaled $124 million.
</TABLE>
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