<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------
Common Stock (without par value) New York Stock Exchange
Preferred Share Purchase Rights Chicago Stock Exchange
Pacific Stock Exchange
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 .
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the Company's voting stock held by non-affiliates
on March 7, 1995, based upon the closing price of the Company's Common Stock as
reported on the New York Stock Exchange Composite Transactions list for such
date: approximately $3,132,000,000.
At March 7, 1995 there were 65,757,111 shares of the Company's Common Stock
outstanding.
The following documents are incorporated by reference, in part:
1994 Annual Report to Stockholders (Parts I and II, to the extent described
therein).
Definitive Proxy Statement for the May 2, 1995 Annual Meeting of Stockholders
(Part III, to the extent described therein).
<PAGE>
PART I
ITEM 1. BUSINESS.
Tribune Company (the "Company") is an information and entertainment company.
Through its subsidiaries, the Company is engaged in the publishing of
newspapers, books and information in print and digital formats and the
broadcasting, production and syndication of information and entertainment in
metropolitan areas in the United States. The Company also has an ownership
interest in a Canadian newsprint manufacturer. The Company was founded in 1847
and incorporated in Illinois in 1861. As a result of a corporate restructuring
in 1968, the Company became a holding company incorporated in Delaware.
References in this report to "Tribune Company" or "the Company" include Tribune
Company and its subsidiaries, unless the context otherwise indicates. The
information in this Item 1 should be read in conjunction with the information
contained under the heading "Management's Discussion and Analysis of Results of
Operations and Financial Condition" in the Company's 1994 Annual Report to
Stockholders, which information is incorporated herein by reference.
BUSINESS SEGMENTS
The Company's operations are divided for reporting purposes into three
industry segments: Publishing, Broadcasting and Entertainment, and New
Media/Education. These segments operate in the United States. The New
Media/education segment was established in 1994 and consists of three recently
acquired businesses - Contemporary Books, Inc., Compton's NewMedia and The
Wright Group. Until the fourth quarter of 1994, the new media/education
segment's operating results were reported within the publishing segment. Prior
to 1993 the Company also had a segment called Newsprint Operations which
consisted entirely of QUNO Corporation ("QUNO") and which operated in Canada.
As a result of an initial public offering completed by QUNO in February 1993,
the Company's ownership interest in the newsprint operations segment was reduced
from 100% to 59%, and its voting interest was reduced to 49%. On April 14, 1994
the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million
shares of QUNO common stock. Newsprint operations is no longer reported as a
business segment as the Company began accounting for its investment in QUNO
using the equity method in 1993. On March 20, 1991, the Company sold its New
York newspaper, the Daily News. The following table sets forth operating
revenue and profit information regarding each segment of the Company (in
millions).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
-----------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues: (1)
Publishing (2)...................... $1,292.4 $1,199.1 $1,166.6 $1,142.1 $1,521.2
Broadcasting and Entertainment (3).. 764.2 727.2 684.0 617.5 624.0
New Media/Education................. 98.3 21.2 - - -
-------- -------- -------- -------- --------
Total........................... 2,154.9 1,947.5 1,850.6 1,759.6 2,145.2
Newsprint Operations................ - - 366.3 422.1 351.7
Intercompany........................ - - (117.2) (142.5) (138.0)
-------- -------- -------- -------- --------
Total Operating Revenues........ $2,154.9 $1,947.5 $2,099.7 $2,039.2 $2,358.9
-------- -------- -------- -------- --------
Operating Profit (1) (4):
Publishing (2) (5).................. $ 287.6 $ 253.0 $ 224.5 $ 217.0 $ 164.1
Broadcasting and Entertainment (3).. 132.4 125.7 121.3 100.2 107.5
New Media/Education................. 2.8 2.1 - - -
Corporate expenses.................. (26.2) (24.4) (23.6) (22.2) (22.6)
-------- -------- -------- -------- --------
Total........................... 396.6 356.4 322.2 295.0 249.0
Newsprint Operations................ - - (53.8) (7.0) (11.1)
-------- -------- -------- -------- --------
Total Operating Profit.......... $ 396.6 $ 356.4 $ 268.4 $ 288.0 $ 237.9
-------- -------- -------- -------- --------
</TABLE>
1
<PAGE>
- ----------
(1) Amounts have been restated to conform to the 1994 presentation.
(2) 1990 includes revenues of $321.8 million and an operating loss of $114.5
million for the New York Daily News.
(3) 1992 includes $12.3 million of Major League Baseball expansion fees.
(4) Operating profit for each segment excludes interest income and expense,
non-operating gains and losses, equity in QUNO net loss and income taxes.
(5) 1992 includes a $15.3 million charge for the disposition of The Peninsula
Times Tribune.
The following table sets forth asset information for each industry segment
(in millions).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
-------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Assets:
Publishing........................ $ 757.9 $ 880.4 $ 856.4 $ 861.9 $ 924.3
Broadcasting and Entertainment.... 1,321.8 1,155.3 1,149.5 1,120.0 1,065.0
New Media/Education............... 210.4 108.0 - - -
Corporate (1)..................... 495.7 392.7 133.2 132.2 148.6
Intercompany receivables.......... - - (10.8) (18.7) (12.3)
-------- -------- -------- -------- --------
Total......................... 2,785.8 2,536.4 2,128.3 2,095.4 2,125.6
Newsprint Operations.............. - - 623.3 699.9 700.5
-------- -------- -------- -------- --------
Total Assets.................. $2,785.8 $2,536.4 $2,751.6 $2,795.3 $2,826.1
-------- -------- -------- -------- --------
- ----------
</TABLE>
(1) Corporate assets include the investment in and advances to QUNO.
The Company's results of operations, when examined on a quarter-by-quarter
basis, reflect the seasonality of advertising that affects both publishing and
broadcasting operations. Second and fourth quarter advertising revenues are
typically higher than first and third quarter revenues. Results for the second
quarter usually reflect spring advertising, while the fourth quarter includes
advertising related to the holiday season.
PUBLISHING
The publishing segment represented 60% of the Company's consolidated operating
revenues for 1994. The combined average circulation of the Company's daily
newspapers was approximately 1.4 million daily and 2.0 million Sunday, according
to Audit Bureau of Circulation ("ABC") averages for the six-month period ended
September 1994. The Company's primary newspapers are the Chicago Tribune, the
Fort Lauderdale-based Sun-Sentinel and The Orlando Sentinel. In Virginia, the
Company owns the Newport News Daily Press. In California, the Company owns two
daily newspapers and a weekly newspaper located in suburban areas in the San
Diego market. The Company also operated one daily newspaper and several weekly
newspapers in Palo Alto, California, which ceased publication in March 1993.
The Company recorded a $15.3 million pre-tax charge in 1992 for the closure of
these Palo Alto-based papers. For 1994, the portion of total publishing
operating revenues represented by each of the Company's principal newspapers was
as follows: Chicago Tribune--54%; Sun-Sentinel--21%; The Orlando Sentinel--16%;
and California and Virginia Newspapers--5%. In addition, the Company owns a
newspaper syndication and media marketing company, direct mail operations and
other publishing-related businesses.
Each of the Company's newspapers operates independently to most effectively
meet the needs of the area it serves. Editorial policies are established by
local management. The Company coordinates certain aspects of operations and
resources in order to provide greater efficiency and economies of scale.
2
<PAGE>
The Company's newspapers compete for readership and advertising in varying
degrees with other metropolitan, suburban and national newspapers, as well as
with television, radio and other media. Competition for newspaper advertising
is based upon circulation levels, readership demographics, price, service and
advertiser results, while competition for circulation is based upon the content
of the newspaper, service and price.
The Company's newspapers are printed in Company-owned production facilities.
The principal raw material is newsprint. In 1994, the Company's newspapers
utilized approximately 408,000 metric tons of newsprint. Approximately 67% of
the newspapers' supply was purchased from QUNO, with the remainder purchased
from outside sources. The Company is party to a contract with QUNO expiring in
2007 to supply newsprint based on market prices. Under the contract, the
Company has agreed to purchase specified minimum amounts of newsprint each year
subject to certain limitations. The specified minimum annual volume is 250,000
metric tons in years 1995 to 1999, 225,000, 200,000 and 175,000 metric tons in
years 2000 to 2002, respectively, and 150,000 metric tons in each of years 2003
to 2007. See "QUNO Corporation" for a discussion of the Company's investment in
the newsprint manufacturing business.
The North American newsprint industry has begun to increase newsprint prices
due to increased demand for newsprint in the U.S. and overseas. Price increases
in 1994 and announced 1995 increases for March 1 and May 1 would result in an
approximate 40% increase in average newsprint selling prices in 1995 over 1994.
This will increase newsprint expense at the Company's newspapers in 1995 by
approximately $70 million. The Company expects to offset the increase, at least
in part, through cost controls and expected revenue increases. QUNO Corporation,
a Canadian newsprint manufacturer in which the Company has a 34% equity
investment, will benefit from the price increases in 1995.
The following table provides a breakdown of revenues for the publishing
segment for the last five years, excluding revenues at the Daily News.
OPERATING REVENUES EXCLUDING DAILY NEWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Advertising:
Retail....................... $ 461,119 $ 435,107 $ 427,997 $ 429,340 $ 442,946
General...................... 135,267 120,589 128,501 124,391 129,481
Classified................... 385,127 336,828 311,553 300,795 356,356
---------- ---------- ---------- ---------- ----------
Total.................... 981,513 892,524 868,051 854,526 928,783
Circulation.................... 242,767 246,093 238,302 234,720 222,992
Other (1) (2).................. 68,105 60,486 60,227 52,870 47,619
---------- ---------- ---------- ---------- ----------
Total.................... $1,292,385 $1,199,103 $1,166,580 $1,142,116 $1,199,394
---------- ---------- ---------- ---------- ----------
- -----------
</TABLE>
(1) Amounts have been restated to conform to the 1994 presentation.
(2) Primarily includes revenues from advertising placement services, the
syndication of columns, features, information and comics to newspapers,
commercial printing operations, direct mail operations and other
publishing-related activities.
Total advertising revenues improved in 1994 due to linage increases in all
categories and higher advertising rates. The increase in retail advertising
reflects increases in the department store and food and drug categories at
nearly all of the newspapers. General advertising revenues increased in 1994
due to higher advertising in the transportation and media categories.
Classified advertising also increased in 1994 as help wanted, automotive and
real estate advertising improved.
3
<PAGE>
Chicago Tribune Company
Founded in 1847, the Chicago Tribune is published daily, including Sunday, and
primarily serves an eight-county market in northern Illinois and Indiana. This
market ranks third in the United States in number of households. For the six
months ended September 1994, the Chicago Tribune ranked 8th in average daily
circulation and 6th in average Sunday circulation in the nation, based on ABC
averages. Approximately 72% and 52% of the Tribune's daily and Sunday
circulation, respectively, is sold through home delivery, with the remainder
primarily sold at newsstands and vending boxes. The daily edition's newsstand
price increased by $.15 to $.50 and its home delivery price increased $.05 to
$.40 effective September 27, 1992. The Sunday edition's newsstand price
increased by $.25 to $1.50 effective April 8, 1990. The following tables set
forth selected information for the Chicago Tribune daily newspaper and other
related activities.
<TABLE>
<CAPTION>
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CIRCULATION:
Daily.......................... 682,000 700,000 715,000 733,000 728,000
Sunday......................... 1,092,000 1,113,000 1,114,000 1,121,000 1,119,000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ADVERTISING INCHES:
Full Run (all zones)
Retail........................ 1,211 1,198 1,202 1,195 1,181
General....................... 338 318 345 347 386
Classified.................... 1,320 1,214 1,183 1,213 1,452
---------- ---------- ---------- ---------- ----------
Total........................ 2,869 2,730 2,730 2,755 3,019
Part Run....................... 5,017 4,672 4,442 4,299 4,523
Preprinted Inserts............. 2,852 2,437 2,210 2,002 1,874
---------- ---------- ---------- ---------- ----------
Total Inches................. 10,738 9,839 9,382 9,056 9,416
---------- ---------- ---------- ---------- ----------
OPERATING REVENUES.............. $ 696,946 $ 647,112 $ 619,670 $ 604,703 $ 632,001
---------- ---------- ---------- ---------- ----------
</TABLE>
The 1994 improvement in advertising volume is due to increases in classified
part run and preprinted inserts as additional targeted zoning options were
offered to advertisers. The daily edition price increase on September 27, 1992
contributed to the decrease in circulation volume since 1992.
Based on ABC averages for the six months ended September 1994, the Chicago
Tribune had a 31% lead in total daily paid circulation and a 117% lead in Sunday
paid circulation over its principal competitor, the Chicago Sun-Times. The
Chicago Tribune's total advertising volume and operating revenues are estimated
to be substantially greater than those of the Sun-Times. The Chicago Tribune
also competes with other city, suburban and national daily newspapers, direct
mail operations and other media. In September 1993, the Chicago Tribune began
publishing Exito!, a weekly newspaper targeted to Spanish-speaking households.
The Chicago Tribune also operates Chicago Online, a local interactive computer
service that offers news and entertainment information through a joint venture
with America Online, and audiotex services and publications targeted to specific
consumer market segments.
4
<PAGE>
Sun-Sentinel Company
The Sun-Sentinel is published daily, including Sunday, and leads the Fort
Lauderdale market in circulation. Approximately 66% and 64% of the Sun-
Sentinel's daily and Sunday circulation, respectively, is sold through home
delivery, with the remainder sold at newsstands and vending boxes. The paper's
principal competition comes from the Miami Herald and national and local
publications, as well as other media. The Miami/Fort Lauderdale market ranks
16th in the nation in terms of households. The newsstand price of all Sunday
editions was increased by $.25 to $1.00 on November 20, 1989. In January 1992,
the newsstand price of the Palm Beach Sunday edition increased by $.25 to $1.25.
Prior to March 27, 1992, the News and the Sun-Sentinel, based in Fort
Lauderdale, Florida, were published in the afternoon and morning, respectively.
The paper was combined for Saturday and Sunday editions as the Fort Lauderdale
Sun-Sentinel. The News, which accounted for approximately 3% of 1991
circulation, discontinued publication after the March 27, 1992 edition. The
following tables set forth selected information for the Sun-Sentinel daily
newspaper and other related activities.
<TABLE>
<CAPTION>
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CIRCULATION:
Daily.......................... 266,000 263,000 259,000 251,000 245,000
Sunday......................... 365,000 362,000 350,000 338,000 328,000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ADVERTISING INCHES: (1)
Full Run (all zones)
Retail........................ 1,237 1,155 1,105 1,182 1,221
General....................... 237 203 214 214 252
Classified.................... 2,442 2,261 2,091 2,159 2,520
-------- -------- -------- -------- --------
Total........................ 3,916 3,619 3,410 3,555 3,993
Part Run....................... 2,979 2,831 2,889 2,629 2,326
Preprinted Inserts............. 1,660 1,564 1,473 1,314 1,269
-------- -------- -------- -------- --------
Total Inches................. 8,555 8,014 7,772 7,498 7,588
-------- -------- -------- -------- --------
OPERATING REVENUES.............. $267,095 $241,621 $227,519 $219,524 $228,841
-------- -------- -------- -------- --------
</TABLE>
(1) Excludes inches for Gold Coast Publications.
The 1994 improvement in advertising volume is primarily due to increased help
wanted, real estate and department store advertising. The 1991 reduction in
advertising volume is attributable primarily to a slowdown in the south Florida
economy.
The Sun-Sentinel Company also owns Gold Coast, a shopper publication located
in Fort Lauderdale. During 1990, 13 other shoppers and weekly publications
located on Florida's Gulf Coast were sold. The Sun-Sentinel also has a
commercial printing operation. In 1991, two weekly publications, XS and
Exito!, targeted to young adults and Spanish-speaking households, respectively,
were launched and have continued to expand readership. Like the Chicago
Tribune, the Sun-Sentinel also operates audiotex services and publications
targeted to specific consumer market segments.
5
<PAGE>
Sentinel Communications Company (Orlando)
The Orlando Sentinel is published daily, including Sunday, and serves
primarily a five-county area in central Florida. It is the only major daily
newspaper in the Orlando market, although it competes with other Florida and
national newspapers as well as other media. Approximately 74% of the paper's
daily and 67% of its Sunday circulation is sold on a home delivery basis, with
the remainder sold at newsstands and vending boxes. On October 12, 1992, the
weekly home delivery price was increased by $.50 to $3.75. On March 30, 1992,
the newsstand price of the daily edition increased $.15 to $.50, except for most
Thursday editions, which had been priced at $.50 since February 1991. The
newsstand price of the Sunday edition was increased to $1.50 from $1.25 at the
end of 1990. The Orlando/Daytona Beach/Melbourne market ranks 22nd among U.S.
markets in terms of households. The following tables set forth selected
information for The Orlando Sentinel daily newspaper and other related
activities.
<TABLE>
<CAPTION>
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CIRCULATION:
Daily.......................... 269,000 269,000 281,000 283,000 280,000
Sunday......................... 390,000 387,000 387,000 382,000 384,000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ADVERTISING INCHES:
Full Run (all zones)
Retail........................ 971 956 985 1,074 1,074
General....................... 99 83 90 93 118
Classified.................... 1,842 1,665 1,522 1,468 1,796
-------- -------- -------- -------- --------
Total........................ 2,912 2,704 2,597 2,635 2,988
Part Run....................... 1,884 1,766 2,024 2,157 1,890
Preprinted Inserts............. 2,741 2,508 2,220 1,877 1,924
-------- -------- -------- -------- --------
Total Inches................. 7,537 6,978 6,841 6,669 6,802
-------- -------- -------- -------- --------
OPERATING REVENUES.............. $214,125 $202,327 $196,043 $196,180 $203,307
-------- -------- -------- -------- --------
</TABLE>
The central Florida economy continued to strengthen in 1994. Advertising
volume was up overall due to improved help wanted, automotive and food and drug
advertising and increased preprint volume from increased zoning. The 1991
reduction in advertising volume is attributable primarily to a slowdown in the
central Florida economy.
In 1990, The Orlando Sentinel launched US Express, a free weekly entertainment
publication that is used to distribute advertising to non-subscribers. US
Express is syndicated nationally.
California and Virginia Newspapers
The Times Advocate, located in Escondido, California, serves the northern
portion of San Diego County. The Times Advocate was published weekday
afternoons and Saturday and Sunday mornings until April 1992, when the weekday
afternoon edition was converted to a morning edition. In 1988, the Times
Advocate acquired two weekly newspaper publications, which complement the
paper's daily coverage with more local news and advertising. In June 1990, one
of these weekly publications, The Californian, began publishing six days a week.
The Palo Alto-based Times Tribune ceased publication in March 1993.
6
<PAGE>
In 1986, the Company purchased the Daily Press/The Times-Herald in Newport
News, Virginia. The Daily Press is published every morning including Sunday.
The Times-Herald was published each weekday afternoon until September 1, 1991,
when this edition was discontinued. The Daily Press constitutes the only major
daily newspaper in the market, although it competes with other regional and
national newspapers, as well as other media. In addition to Newport News, the
Daily Press market includes Hampton, Williamsburg and eight other cities and
counties in Virginia. This market area is commonly called the Virginia
Peninsula and, together with Norfolk, Portsmouth and Virginia Beach, is the 40th
largest U.S. market in terms of households. The weekly home delivery price was
increased by $.30 to $2.75 in September 1992. The newsstand price of the daily
edition increased by $.10 to $.35, and the Sunday edition newsstand price was
increased to $1.25 from $1.00, both effective October 1, 1990. Approximately
78% of the paper's daily and 77% of its Sunday circulation is sold on a home
delivery basis, with the remainder sold at newsstands and vending boxes.
The following tables set forth selected combined information for the
California and Virginia daily newspapers and other related activities.
<TABLE>
<CAPTION>
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CIRCULATION (1):
Daily.......................... 153,000 154,000 153,000 154,000 159,000
Sunday......................... 180,000 179,000 178,000 175,000 177,000
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ADVERTISING INCHES (1) (2):
Full Run (all zones)
Retail........................ 1,204 1,111 1,114 1,154 1,269
General....................... 80 61 61 88 99
Classified.................... 1,311 1,362 1,227 1,176 1,319
-------- -------- -------- -------- --------
Total........................ 2,595 2,534 2,402 2,418 2,687
Part Run (3)................... 764 781 801 922 948
Preprinted Inserts (3)......... 3,393 3,313 3,198 3,129 2,962
-------- -------- -------- -------- --------
Total Inches................. 6,752 6,628 6,401 6,469 6,597
-------- -------- -------- -------- --------
OPERATING REVENUES (3)......... $ 68,526 $ 65,146 $ 82,506 $ 86,323 $ 92,233
-------- -------- -------- -------- --------
- -----------
</TABLE>
(1) The Peninsula Times Tribune was closed on March 12, 1993. Circulation and
inches relating to the Times Tribune have been excluded from all years
presented.
(2) The Times-Herald (afternoon edition) was discontinued on September 1, 1991.
Inches relating to this edition have been excluded from all years
presented.
(3) Includes related weekly publications.
The increased inches in 1994 reflect the improving economies of both Virginia
and California.
Related Businesses
The Company is also involved in syndication activities, primarily through
Tribune Media Services, Inc. ("TMS"), involving the marketing of columns,
features, information and comic strips to newspapers; direct mail operations
through AmeriComm/Illinois, acquired in 1991, and other publishing-related
activities. TMS is also engaged in advertising placement services for
television listings in newspapers and the development of news products and
services for electronic and print media. Total operating revenues for these
related businesses are shown below, net of intercompany revenues. Amounts have
been restated to conform to the 1994 presentation.
7
<PAGE>
<TABLE>
<CAPTION>
RELATED BUSINESS REVENUES
-------------------------
(IN THOUSANDS)
<S> <C>
1994............ $45,693
1993............ 42,897
1992............ 40,842
1991............ 35,386
1990............ 43,012
</TABLE>
Sale of the New York Daily News
On March 20, 1991 the Company sold the New York Daily News to Maxwell
Newspapers, Inc. ("Maxwell"). Daily News operating losses for 1991 through the
date of sale were recorded in the Company's 1990 financial statements. The
following table sets forth selected historical information for the New York
Daily News included as part of the publishing segment in 1990 (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 1990
-----------------
<S> <C>
OPERATING REVENUES:
Advertising:
Retail................................... $114,151
General.................................. 47,981
Classified............................... 43,147
--------
Total................................. 205,279
Circulation................................ 116,222
Other...................................... 322
--------
Total................................. $321,823
--------
ADVERTISING INCHES:
Full Run (all zones)
Retail................................... 467
General.................................. 141
Classified............................... 189
--------
Total................................. 797
Part Run................................... 919
Preprinted Inserts......................... 854
--------
Total Inches.......................... 2,570
--------
</TABLE>
BROADCASTING AND ENTERTAINMENT
The broadcasting and entertainment segment represented 35% of the Company's
consolidated operating revenues for 1994. The segment currently includes
independent VHF television stations located in New York, Los Angeles, Chicago
and Denver, independent UHF television stations located in Philadelphia, Boston
and New Orleans, a CBS television affiliate (effective December 1994) in
Atlanta, and six radio stations in New York, Chicago, Denver (2 stations) and
Sacramento (2 stations). The Company acquired independent television station
WLVI-Boston in April 1994, for approximately $25 million in cash. In June 1994
the Company acquired Farm Journal Inc., publisher of The Farm Journal, the
nation's leading farm magazine, for approximately $17.5 million in cash. Farm
Journal results are reported in radio. In January 1993, the Company acquired
its two Denver radio stations, KOSI-FM and KEZW-AM, for $19.9 million in cash.
These acquisitions were accounted for as purchases. In June 1992, the Company
exercised its warrant to acquire a controlling common equity interest in
8
<PAGE>
WPHL-TV, Inc., in Philadelphia. This warrant was acquired by the Company in
1991 for $19 million in cash. The exercise of the warrant was accounted for as a
purchase and the results of WPHL are included in the Company's consolidated
statements of income since June 1992. In entertainment/Chicago Cubs, the
Company owns the Chicago Cubs baseball team and produces and syndicates
television programming. Cable programming/development includes CLTV News, a
Chicago area news cable channel, and the Company's equity losses in TV Food
Network, a basic cable channel specializing in nutrition and fitness
programming. The following table shows sources of revenue for the broadcasting
and entertainment segment for the last five years.
<TABLE>
<CAPTION>
OPERATING REVENUES
(IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER
-----------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Television (1)..................... $598,532 $536,773 $477,193 $445,883 $458,897
Radio (2).......................... 68,817 58,740 49,552 49,167 47,380
Entertainment/Chicago Cubs (3)(4).. 92,080 130,054 157,306 122,464 117,704
Cable Programming/Development...... 4,768 1,646 - - -
-------- -------- -------- -------- --------
Total............................. $764,197 $727,213 $684,051 $617,514 $623,981
-------- -------- -------- -------- --------
</TABLE>
(1) Includes WLVI-Boston and WPHL-Philadelphia since their acquisition on April
4, 1994 and June 5, 1992, respectively.
(2) Includes Farm Journal Inc., and KOSI/KEZW-Denver since their acquisition on
June 30, 1994 and January 6, 1993, respectively.
(3) 1992 includes $12.3 million of Major League Baseball expansion fees.
(4) 1994 reflects the impact of the Major League baseball strike which began
August 10, 1994.
Television
In 1994, television contributed 78% of broadcasting and entertainment
operating revenues. The Company's television stations compete for audience and
advertising with other television and radio stations, cable television and other
media serving the same markets. Competition for audience and advertising is
based upon various interrelated factors including programming content, audience
acceptance and price. Selected data for the Company's television stations is
shown in the following table.
<TABLE>
<CAPTION>
MARKET (1) MAJOR
----------------------- COMMERCIAL EXPIRATION
HOUSEHOLDS NATIONAL STATIONS IN OF FCC
(000'S) RANK CHANNEL MARKET (2) LICENSE (3)
----------- -------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
WPIX - New York, New York........ 6,716 1 11-VHF 6 1994 (4)
KTLA - Los Angeles, California... 4,936 2 5-VHF 7 1993 (5)
WGN - Chicago, Illinois......... 3,102 3 9-VHF 7 1997
WPHL - Philadelphia, Pennsylvania 2,682 4 17-UHF 6 1994 (6)
WLVI - Boston, Massachusetts..... 2,105 6 56-UHF 7 1999
WGNX - Atlanta, Georgia.......... 1,567 10 46-UHF 7 1997
KWGN - Denver, Colorado.......... 1,142 18 2-VHF 6 1998
WGNO - New Orleans, Louisiana.... 615 41 26-UHF 5 1997
</TABLE>
9
<PAGE>
- -----------
(1) Source: Nielsen Station Index, September 1994. Ranking of markets is
based on number of television households in DMA (Designated
Market Area).
(2) Source: 1994 Television & Cable Fact Book
(3) See "Governmental Regulation."
(4) Expired on June 1, 1994. Renewal application filed on February 1, 1994 is
pending.
(5) Expired on December 1, 1993. Renewal application filed on August 2, 1993
is pending.
(6) Expired on August 1, 1994. Renewal application filed on April 1, 1994 is
pending.
Programming emphasis at the Company's stations is placed on syndicated series,
feature motion pictures, local and regional sports coverage, news and children's
programs. The stations acquire most of their programming from outside sources,
although a significant amount is produced locally or supplied by Tribune
Entertainment (see "Entertainment"). Contracts for purchased programming
generally cover a period of one to seven years, with payment also typically made
over several years. The expense for amortization of television broadcast rights
in 1994 was approximately $223 million, which represents approximately 37% of
total television operating revenues. In December 1994, WGNX-Atlanta became a
CBS network affiliate. In January 1995, the Company's other television stations
began broadcasting WB Network programming two hours a week.
The Company has entered into an agreement to make a less than 50% equity
investment in Qwest Broadcasting, L.L.C., a new company formed to acquire and
operate television and radio stations. In November 1994, Qwest agreed to
acquire television stations in Atlanta (WATL) and New Orleans (WNOL) for
approximately $167 million in the aggregate. These acquisitions are pending
approvals of the Federal Communications Commission and other regulatory agencies
and are expected to close in 1995. The Company will provide certain services to
each of the stations under a cost-sharing agreement with Qwest. As part of this
transaction, Qwest has agreed to pay $150 million to WATL's current owner on
December 14, 1995 even if regulatory approvals have not been received. The
Company has guaranteed this payment.
Average audience share information for the Company's television stations for
the past five years is shown in the following table.
<TABLE>
<CAPTION>
AVERAGE AUDIENCE SHARE (1)
YEAR ENDED DECEMBER
--------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
WPIX - New York, New York................ 9.8% 10.8% 11.5% 10.5% 9.8%
KTLA - Los Angeles, California........... 9.3 9.5 9.5 9.8 9.8
WGN - Chicago, Illinois................. 10.8 11.5 12.0 13.0 13.0
WPHL - Philadelphia, Pennsylvania (2).... 4.8 5.8 5.0 5.0 4.8
WLVI - Boston, Massachusetts (3)......... 5.0 5.0 5.0 5.0 5.0
WGNX - Atlanta, Georgia.................. 7.0 7.0 7.3 7.5 6.8
KWGN - Denver, Colorado.................. 9.8 12.0 9.8 10.3 9.8
WGNO - New Orleans, Louisiana............ 9.5 8.0 7.8 7.3 6.8
</TABLE>
- -----------
(1) Represents the estimated number of television households tuned to a
specific station as a percent of total viewing households in a defined
area. The percentages shown reflect the average Nielsen ratings shares for
the February, May, July and November measurement periods for 7 a.m. to
1 a.m. daily.
(2) Acquired June 5, 1992.
(3) Acquired April 4, 1994.
10
<PAGE>
Radio
In 1994, the Company's radio operations contributed 9% of broadcasting and
entertainment operating revenues. The largest radio station owned by the
Company, measured in terms of operating revenues, is WGN. Radio operations
include Tribune Radio Networks, which produces and distributes farm and sports
programming to radio stations, primarily in the Midwest, and Farm Journal Inc.,
which was acquired June 30, 1994. Selected information for the Company's radio
operations is shown in the following table.
<TABLE>
<CAPTION>
NUMBER OF
NATIONAL OPERATING
MARKET STATIONS IN AUDIENCE
FORMAT FREQUENCY RANK (1) MARKET (2) SHARE (3)
------------------------- --------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
WQCD - New York, New York...... New Adult
Contemporary/Jazz 101.9-FM 1 49 3.7%
WGN - Chicago, Illinois........ Personality/Infotainment/
Sports 720-AM 3 38 6.6%
KOSI - Denver, Colorado (4)..... Adult Contemporary 101.1-FM 23 29 6.3%
KEZW - Denver, Colorado (4)..... Nostalgia 1430-AM 23 29 3.0%
KYMX - Sacramento, California... Adult Contemporary 96.1-FM 29 25 4.7%
KCTC - Sacramento, California... Nostalgia 1320-AM 29 25 3.6%
</TABLE>
- -----------
(1) Source: Radio markets ranked by Arbitron Metro Survey Area, Arbitron
Company 1994.
(2) Source: Arbitron Company 1994.
(3) Source: Average of Winter, Spring, Summer and Fall 1994 Arbitron shares
for persons 12 years old and over, 6 a.m. to midnight daily during
the period measured.
(4) Acquired January 1993.
Entertainment/Chicago Cubs
In 1994, entertainment/Chicago Cubs contributed 12% of the segment's operating
revenues. This portion of the broadcasting and entertainment segment includes
Tribune Entertainment Company, the Chicago Cubs baseball team and two minor
league baseball teams. The Major League Baseball players' contract expired on
December 31, 1993. The Major League Baseball Players Association initiated a
strike on August 12, 1994, and on August 28, 1994, the owners cancelled the
remainder of the Major League Baseball season. Negotiations to settle the
strike are continuing. The strike impacted the Company's Chicago Cubs baseball
operations, and, to a lesser extent, television and radio operations. In total,
the baseball strike negatively impacted the Company's primary earnings per share
by approximately $.10. The Company cannot predict the ultimate outcome of the
negotiations.
Tribune Entertainment Company was formed in 1982 to acquire and develop
programming for Company television stations and for syndication. Tribune
Entertainment participates in the production or distribution of first-run
programming, including two daily talk shows, music and variety shows, television
movies and specials. Tribune Entertainment's most popular program is "Geraldo,"
a one-hour, daily talk show which is aired on 152 stations that cover 91% of
U.S. television households and is sold internationally to many cities in Canada,
as well as to several countries in Latin America and Europe. During the 1994-
1995 television season, Tribune Entertainment originated approximately 13.5
hours of first-run programs per week. On average, the Company's eight
television stations utilize over nine hours per week of programming furnished by
Tribune Entertainment.
The Company owns the Chicago Cubs baseball team. In addition to providing
local sports entertainment, the Cubs represent an important source of live
programming for the Company's Chicago-based broadcasting operations and regional
cable programming service. In 1992, the Company acquired a Class AA Southern
League franchise in Orlando and a Class A Midwest League franchise in Rockford,
Illinois. The Chicago Cubs baseball team received $12.3 million in Major League
Baseball expansion fees in December 1992.
11
<PAGE>
Cable Programming/Development
Cable programming/development contributed 1% of the segment's operating
revenues in 1994. CLTV News, a regional 24-hour cable news programming service,
was launched in January 1993 and currently is available to more than 1.3 million
cable households in the Chicago-area market. In 1993, the Company acquired a
31% equity share in Television Food Network, a 24-hour basic cable channel
focusing on nutrition and fitness.
NEW MEDIA/EDUCATION
The new media/education segment represented 5% of the Company's consolidated
operating revenues for 1994. Until the fourth quarter of 1994, the new
media/education segment's operating results were reported within the publishing
segment. In July 1993, the Company acquired Contemporary Books, Inc., a
publisher of nonfiction trade titles and educational books and materials, for
approximately $22.0 million in cash and $18.5 million in common stock. In
September 1993, the Company acquired Compton's Multimedia Publishing Group for
approximately $57 million in cash. Compton's develops and distributes
interactive multimedia software for the consumer and education markets. In
February 1994, the Company acquired substantially all of the assets of The
Wright Group, a leading publisher of supplemental education materials for the
elementary school market, for approximately $100 million in cash. The
acquisitions were accounted for as purchases.
New media/education operating revenues in 1994 were $98 million. Revenues are
derived from publishing supplemental education and adult education materials,
trade books, and multimedia products. The multimedia products are sold
primarily by Compton's and include the "Compton's Interactive Encyclopedia" and
other CD-ROM titles.
QUNO CORPORATION
In February 1993, QUNO completed an initial public offering of 9 million
shares of common stock. As a result of the offering, the Company held 49% of
the voting common shares and 59% of QUNO's total 22 million outstanding common
shares. On April 14, 1994, the Company reduced its ownership holdings in QUNO
to 34% by selling 5.5 million shares of QUNO common stock. 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 was $39 million. The Company also
holds a $138.8 million subordinated debenture, convertible into 11.7 million
voting common shares of QUNO. The Company has accounted for its investment in
QUNO using the equity method since the beginning of 1993. QUNO is no longer a
business segment for reporting purposes.
Based in Canada, QUNO's principal operation is the manufacturing and marketing
of newsprint. QUNO's related operations presently include a sawmill, a
materials recycling company and 60% ownership of a hydro-electric power company
in Baie-Comeau, Quebec. QUNO operates two newsprint mills, in Thorold, Ontario
and Baie-Comeau, Quebec. QUNO ranks seventh in production capacity among
newsprint-producing groups in North America.
The following table shows sources of revenue for QUNO from 1990 through 1992,
the last year QUNO's balance sheet and income statement were consolidated in the
Company's financial statements.
12
<PAGE>
OPERATING REVENUES
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
----------------------------
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Newsprint:
Affiliated Customers.... $117,195 $142,585 $137,986
Unaffiliated Customers.. 224,781 255,603 185,597
Lumber and Other.......... 24,293 23,940 28,155
-------- -------- --------
Total.............. $366,269 $422,128 $351,738
-------- -------- --------
</TABLE>
Diminished newsprint revenues for 1992 reflect lower transaction prices.
The Company's paper mills in Baie-Comeau and Thorold currently have annual
newsprint production capacities of approximately 469,000 and 346,000 metric
tons, respectively. Competition for newsprint sales is based upon price, product
quality and customer service. Sales of newsprint through 1994 are shown in the
following table.
<TABLE>
<CAPTION>
NEWSPRINT SALES
(IN THOUSANDS OF METRIC TONS)
FISCAL YEAR ENDED DECEMBER
----------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Affiliated customers........... 256 271 266 269 250
Unaffiliated customers......... 531 471 508 473 332
---- ---- ---- ---- ----
Total sales................... 787 742 774 742 582
---- ---- ---- ---- ----
</TABLE>
QUNO supplies newsprint to most of the Company's newspapers. The newspapers
also purchase newsprint from other suppliers to maintain diversified sources of
supply. Approximately 33% of QUNO's 1994 sales (in metric tons) were to the
Company's newspapers. See "Publishing" for a discussion of the supply contract
between the Company and QUNO.
QUNO sells newsprint to approximately 100 unaffiliated customers located
primarily in North America. The majority of such sales are to medium and small
newspapers and commercial printers, with no single unaffiliated customer
accounting for more than 10% of total newsprint revenue.
Generally, QUNO sells newsprint under renewable contracts varying in length
from one to five years. These contracts base the selling price on the list
price for comparable newsprint at the date of shipment, with negotiated
discounts from the list price.
13
<PAGE>
GOVERNMENTAL REGULATION
Various aspects of the Company's operations are subject to regulation by
governmental authorities in the United States and Canada.
The Company's television and radio broadcasting operations are subject to
Federal Communications Commission ("FCC") jurisdiction under the Communications
Act of 1934, as amended. FCC rules, among other things, govern the term,
renewal and transfer of radio and television broadcasting licenses, prohibit
concentrations of broadcasting control inconsistent with the public interest,
strictly limit common ownership of most communications media in the same market
and regulate network programming and syndication of programs. The FCC also
regulates certain commercial practices of local broadcast stations, including
the rates charged for political advertising and the quantity of advertising
within children's programs. The Company is permitted to own both newspaper and
broadcast operations in the Chicago market by virtue of "grandfather" provisions
in the FCC regulations. Licensees are currently permitted to own up to 12
television stations, 18 AM radio stations and 18 FM radio stations. These
numerical limits are subject to other FCC regulations which impose geographic
market restrictions and limit the percentage of the national television audience
that may be reached by a licensee's television stations in the aggregate.
Television and radio broadcasting licenses are subject to renewal by the FCC at
five-year and seven-year intervals, respectively, and at such times may be
subject to competing applications for the licensed frequencies. The Company
presently has FCC authorization to operate eight television stations and three
AM and three FM radio stations.
From time to time, the FCC revises existing regulations and policies in ways
that could affect the Company's broadcasting operations. In addition, Congress
from time to time considers and adopts substantive amendments to the
Communications Act of 1934 and related legislation. The Company cannot predict
what regulations or legislation may be proposed or finally enacted or what
effect, if any, such regulations or legislation could have on the Company's
broadcasting operations.
EMPLOYEES
The average number of full-time equivalent employees of the Company in 1994
was 10,500, approximately 600 more than the average for 1993. This increase was
due to the acquisition of The Wright Group, WLVI-Boston and Farm Journal Inc.
Pension and other employee benefit plans are provided for substantially all
employees of the Company. Eligible employees also participate in the Company's
Employee Stock Ownership Plan.
During 1994, the Company's publishing segment employed approximately 7,800
full-time equivalent employees, about 8% of whom were represented by a total of
five unions. Contracts with unionized employees of the publishing segment
expire at various times through October 1996.
Broadcasting and entertainment had an average of 2,300 full-time equivalent
employees in 1994. Approximately 23% of these employees are represented by a
total of 22 unions.
New media/education had an average of 400 full-time equivalent employees in
1994. None of these employees are represented by unions.
14
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to the executive officers of the Company is set forth
below. The descriptions of the business experience of these individuals include
the principal positions held by them since March 1990.
Robert D. Bosau (48)
Executive Vice President/General Manager, Tribune New Media since August 1994;
Vice President/Administration of Tribune Publishing Company* from 1991 to
August 1994; Vice President/Human Resources of the Company from 1987 to 1991.
Charles T. Brumback (66)
Chairman since January 1993, Chief Executive Officer since August 1990 (Chief
Operating Officer until July 1990) and President from January 1989 to May 1994
of the Company; Director of the Company since 1981.
Joseph D. Cantrell (50)
Executive Vice President, Tribune Publishing Company* since August 1994;
President of The Daily Press, Inc.* and Publisher of the Daily Press from 1986
to August 1994.
James C. Dowdle (61)
Executive Vice President/Media Operations since August 1994, Executive Vice
President of the Company since August 1991; President and Chief Executive
Officer of Tribune Broadcasting Company* since 1981; Director of the Company
since 1985.
Dennis J. FitzSimons (44)
Executive Vice President, Tribune Broadcasting Company* since August 1994;
President of Tribune Television* from 1992 to August 1994; Vice
President/General Manager of WGN-TV* from 1987 to 1992.
Donald C. Grenesko (46)
Senior Vice President and Chief Financial Officer (since March 1993) and Vice
President and Chief Financial Officer (from October 1991 to March 1993) of the
Company; President and Chief Executive Officer (until September 1991), Chicago
National League Ball Club, Inc.*
David D. Hiller (41)
Senior Vice President/Development since November 1993; Senior Vice President and
General Counsel (from March to November 1993) and Vice President and General
Counsel (until March 1993) of the Company; Partner, Sidley & Austin until
November 1993.
John S. Kazik (52)
Senior Vice President/Information Systems since March 1993; Vice
President/Information Systems from December 1989 to March 1993 of the Company
and Vice President of Chicago Tribune Company* since 1982.
John W. Madigan (57)
President and Chief Operating Officer of the Company since May 1994; Executive
Vice President of the Company and President and Chief Executive Officer of
Tribune Publishing Company* from August 1991 to May 1994; Publisher of the
Chicago Tribune from August 1990 to May 1994 and President and Chief Executive
Officer of Chicago Tribune Company* until September 1993. Director of the
Company since 1975.
John T. Sloan (43)
Senior Vice President/Administration since March 1993 and Vice President/Human
Resources of the Company from August 1991 to March 1993; Vice President and
Director of Human Resources of the New York Daily News until July 1991.
- -----------
* A subsidiary of the Company.
15
<PAGE>
ITEM 2. PROPERTIES.
The corporate headquarters of the Company are located at 435 North Michigan
Avenue, Chicago, Illinois. The general character, location and approximate size
of the principal physical properties used by the Company at December 25, 1994
are listed below. In addition to those listed, the Company owns or leases
transmitter sites, parking lots and other properties aggregating approximately
450 acres in 58 separate locations, and owns or leases an aggregate of
approximately 1,590,000 square feet of space in 185 separate locations. Included
in these figures are 62 acres and 233,000 square feet of space owned by the
Company which had previously been owned by the New York Daily News. On March 20,
1991, the Company sold the Daily News, and these properties are in the process
of being sold. Also included in these figures are 82,000 square feet of space
owned by The Peninsula Times Tribune. On March 12, 1993 the Times Tribune ceased
publication. Since then, the Company has been in the process of selling the
property owned in Palo Alto, California. The Company also owns the 39,000-seat
stadium used by the Chicago Cubs baseball team. The Company considers its
various properties to be in good condition and suitable for the purposes for
which they are used.
<TABLE>
<CAPTION>
APPROXIMATE AREA IN SQUARE FEET
-------------------------------
GENERAL CHARACTER OF PROPERTY OWNED LEASED
--------- -------
<S> <C> <C>
Publishing:
Printing plants, business and editorial
offices, and warehouse space located in:
Chicago, Illinois.............................. 1,327,000 (1) 74,000
Orlando, Florida............................... 406,000 101,000
Fort Lauderdale, Florida....................... 279,000 (2) 44,000
Deerfield Beach, Florida....................... 386,000 -
Newport News, Virginia......................... 207,000 -
Escondido, California.......................... 62,000 -
Broadcasting and Entertainment:
Business offices, studios, garages and
transmitters located in:
Chicago, Illinois.............................. 99,000 4,000
Oak Brook, Illinois............................ - 69,000
Los Angeles, California........................ 253,000 -
Boston, Massachusetts.......................... 28,000 -
Denver, Colorado............................... 43,000 7,000
Philadelphia, Pennsylvania..................... 137,000 3,000
New York, New York............................. - 100,000 (3)
New Orleans, Louisiana......................... - 17,000
Atlanta, Georgia............................... - 21,000
New Media/Education:
Business offices and warehouse space located in:
Chicago, Illinois.............................. 185,000 34,000
Carlsbad, California........................... - 74,000
Bothell, Washington............................ - 60,000
</TABLE>
- -----------
(1) Includes Tribune Tower, an approximately 630,000 square foot office
building in downtown Chicago, and Freedom Center, the approximately 697,000
square feet production center of the Chicago Tribune. Tribune Tower houses
the Company's corporate headquarters, the Chicago Tribune's business and
editorial offices, offices of various subsidiary companies and
approximately 80,630 square feet of space leased to unaffiliated tenants.
Freedom Center houses the Chicago Tribune's printing, packaging and
distribution operations.
16
<PAGE>
(2) Represents New River Center, an approximately 279,000 square feet office
building in downtown Fort Lauderdale. New River Center houses the business
and editorial offices of the Sun-Sentinel, which occupies approximately
91,000 square feet. The remaining space is leased to or available for
commercial tenants.
(3) Includes space leased by subsidiary companies in the New York Daily News
building, which is owned by a limited partnership in which the Company has
a minority interest. No portion of this building is listed as "owned"
property in the table.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are defendants from time to time in actions
for libel and other matters arising out of their business operations. In
addition, the Company and its subsidiaries are involved from time to time as
parties in various regulatory, environmental and other proceedings with
governmental authorities and administrative agencies.
The State of Florida Department of Environmental Protection ("DEP") has issued
a preliminary draft report identifying the Company's subsidiary, Sentinel
Communications Company (the "Sentinel"), as a source of certain trichloroethene
(TCE) groundwater contamination in downtown Orlando, Florida. Based upon
separate environmental reviews performed by the Company's environmental
consultants, management believes that many of the findings contained in the
DEP's preliminary draft report are inaccurate and that the Sentinel is not the
source of the extensive contamination.
The Company does not believe that any of the matters or proceedings presently
pending will have a material adverse effect on its consolidated financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is presently listed on the New York, Chicago and
Pacific stock exchanges. The high and low sales prices of the Common Stock by
fiscal quarter for the two most recent fiscal years, as reported on the New York
Stock Exchange Composite Transactions list, were as follows:
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
First............................... $61 7/8 $55 $56 7/8 $47 5/8
Second.............................. 64 1/2 54 56 1/4 50
Third............................... 56 5/8 50 1/4 55 48 3/8
Fourth.............................. 56 1/8 48 7/8 61 1/4 50 7/8
</TABLE>
At March 7, 1995 there were 4,554 record holders of the Company's Common
Stock.
Quarterly cash dividends declared on Common Stock were $.26 per share in 1994
and were $.24 per share in 1993. Total cash dividends declared on Common Stock
by the Company were $69,907,000 for 1994 and $63,799,000 for 1993.
ITEM 6. SELECTED FINANCIAL DATA.
The information for the years 1990 through 1994 contained under the heading
"Eleven Year Financial Summary" in the Company's 1994 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information contained under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Company's 1994
Annual Report to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's Consolidated Financial Statements and Notes thereto and the
information contained under the heading "Business Segments" appearing on pages
43 through 60 of the Company's 1994 Annual Report to Stockholders, together with
the report thereon of Price Waterhouse LLP dated January 27, 1995, appearing on
page 42 of such Annual Report and the information contained under the heading
"Quarterly Results" on pages 62 and 63, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Executive Officers of the
Company" in Item 1 hereof, and the information under the heading "Election of
Directors" in the definitive Proxy Statement for the Company's May 2, 1995
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the heading "Executive Compensation" (except
those portions relating to Item 13, below) in the definitive Proxy Statement for
the Company's May 2, 1995 Annual Meeting of Stockholders is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the subheadings "Principal Stockholders" and
"Management Ownership" under the heading "Ownership Information" in the
definitive Proxy Statement for the Company's May 2, 1995 Annual Meeting of
Stockholders, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Executive Compensation" (except
those portions relating to Item 11, above) and the subheadings "Compensation of
Directors" and "Other Transactions" in the definitive Proxy Statement for the
Company's May 2, 1995 Annual Meeting of Stockholders, is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)&(2) Financial Statements and Financial Statement Schedules filed as part
of this report
As listed in the Index to Financial Statements and Financial
Statement Schedule on page 22 hereof.
(a)(3) Index to Exhibits filed as part of this report
As listed in the Exhibit Index beginning on page 25 hereof.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed in the last quarter of the period
covered by this report.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 22, 1995.
TRIBUNE COMPANY
By: Charles T. Brumback
Chairman/CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 22, 1995.
Signature Title
--------- -----
Charles T. Brumback Chairman/CEO and Director
(principal executive officer)
John W. Madigan President and Chief Operating Officer and Director
James C. Dowdle Executive Vice President and Director
Donald C. Grenesko Senior Vice President and Chief Financial Officer
(principal financial officer)
20
<PAGE>
Signature Title
--------- -----
R. Mark Mallory Vice President and Controller
(principal accounting officer)
Stanton R. Cook Director
Diego E. Hernandez Director
Newton N. Minow Director
Donald H. Rumsfeld Director
21
<PAGE>
TRIBUNE COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statements of Income for each of the three fiscal years in the
period ended December 25, 1994............................................................ *
Consolidated Statements of Financial Position at December 25, 1994 and
December 26, 1993......................................................................... *
Consolidated Statements of Cash Flows for each of the three fiscal years in
the period ended December 25, 1994........................................................ *
Consolidated Statements of Stockholders' Investment for each of the three
fiscal years in the period ended December 25, 1994........................................ *
Notes to Consolidated Financial Statements................................................. *
Report of Independent Accountants on Consolidated Financial Statements..................... *
Report of Independent Accountants on Financial Statement Schedule.......................... 23
Financial Statement Schedule for each of the three fiscal years in the
period ended December 25, 1994............................................................ 24
Schedule II Valuation and qualifying accounts and reserves.
</TABLE>
- -----------
* Incorporated by reference to the Company's 1994 Annual Report to
Stockholders. See Item 8 of this Annual Report on Form 10-K.
---------------
All other schedules required under Regulation S-X are omitted because they are
not applicable, not required or the required information is shown in the
consolidated financial statements or notes thereto. Financial statements of
entities accounted for by the equity method have been omitted because they do
not constitute significant subsidiaries.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Tribune Company
Our audits of the consolidated financial statements referred to in our report
dated January 27, 1995 appearing in the 1994 Annual Report to Stockholders of
Tribune Company (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 27, 1995
23
<PAGE>
SCHEDULE II
TRIBUNE COMPANY AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS OF DOLLARS)
================================================================================
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Valuation accounts deducted from assets
to which they apply:
Year ended December 25, 1994
Allowance for doubtful accounts:
Bad debts............................. $17,589 $18,024 $11,149 $24,464
Rebates, volume discounts and other... 7,843 18,284 16,593 9,534
------- ------- ------- -------
Total................................ $25,432 $36,308 $27,742 $33,998
======= ======= ======= =======
Year ended December 26, 1993
Allowance for doubtful accounts:
Bad debts............................. $19,329 $12,932 $14,672(1) $17,589
Rebates, volume discounts and other... 4,082 19,460 15,699 7,843
------- ------- ------- -------
Total................................ $23,411 $32,392 $30,371 $25,432
======= ======= ======= =======
Year ended December 27, 1992
Allowance for doubtful accounts:
Bad debts............................. $19,423 $14,924 $15,018 $19,329
Rebates, volume discounts and other... 3,926 15,299 15,143 4,082
------- ------- ------- -------
Total................................ $23,349 $30,223 $30,161 $23,411
======= ======= ======= =======
</TABLE>
- --------------
(1) For 1993, $4,612 represents deductions pertaining to QUNO Corporation. As
a result of an initial public offering by QUNO in February 1993, QUNO's
balance sheet is no longer consolidated in the Company's financial
statements.
================================================================================
24
<PAGE>
TRIBUNE COMPANY
EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by reference to documents
previously filed by Tribune Company with the Securities and Exchange Commission,
as indicated. Exhibits marked with a circle (o) are management contracts or
compensatory plan contracts or arrangements filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with
this Report.
NUMBER DESCRIPTION
------ -----------
3.1 * Restated Certificate of Incorporation of Tribune Company, dated
April 21, 1987; Certificate of Designations of Series A Junior
Participating Preferred Stock, dated December 31, 1987; Certificate
of Designations of Series B Convertible Preferred Stock, dated April
4, 1989 (Exhibit 3.1 to Annual Report on Form 10-K for 1991).
3.2 * By-laws of Tribune Company.
4 * Rights Agreement between Tribune Company and The First National
Bank of Chicago, as Rights Agent, dated as of December 22, 1987
(Exhibit 1 to Form 8-K Current Report dated January 6, 1988); First
Amendment thereto dated as of July 31, 1990 (Exhibit 4 to Form 10-Q
Quarterly Report for the quarter ended July 1, 1990); Second
Amendment thereto dated as of October 31, 1990 (Exhibit 4 to Form
10-Q Quarterly Report for the quarter ended September 30, 1990).
10.1a o* Employment agreement dated as of July 31, 1990 between Tribune
Company and Stanton R. Cook (Exhibit 19.1 to Form 10-Q Quarterly
Report for the quarter ended September 30, 1990).
10.1b o* Consulting agreement dated as of December 14, 1993 between Tribune
Company and Stanton R. Cook (Exhibit 10.1b to Annual Report on Form
10-K for 1993).
10.2a o* Employment agreement dated as of July 27, 1993 between Tribune
Company and Charles T. Brumback (Exhibit 10.2a to Annual Report on
Form 10-K for 1993).
10.2b o* Amendment dated February 15, 1994 to employment agreement dated as
of July 27, 1993 between Tribune Company and Charles T. Brumback
(Exhibit 10.2b to Annual Report on Form 10-K for 1993).
10.2c o Termination of Employment Agreement dated December 22, 1994 between
Tribune Company and Charles T. Brumback.
10.3 o* Chicago Tribune Company Split-Dollar Insurance Plan dated June
29, 1978, together with first amendment dated August 28, 1981,
covering certain employees of Tribune Company and Chicago Tribune
Company (Exhibit 10.4 in File No. 2-86087).
10.4a o* Tribune Company Supplemental Retirement Plan, as amended and
restated on January 1, 1989 (Exhibit 10.6 to Annual Report on Form
10-K for 1988).
25
<PAGE>
NUMBER DESCRIPTION
------ -----------
10.4b o* First Amendment of Tribune Company Supplemental Retirement Plan,
effective January 1, 1994 (Exhibit 10.4b to Annual Report on Form
10-K for 1993).
10.5 o* Quebec and Ontario Paper Company Ltd. Supplemental Retirement Plan
dated January 1, 1989 (Exhibit 10.7 to Annual Report on Form 10-K
for 1988).
10.6 o* Tribune Company Deferred Compensation Administration Plan, as
adopted on July 29, 1982, and first amendment thereto dated
December 1, 1982 (Exhibit 10.16 in File No. 2-86087); second
amendment thereto dated October 29, 1984, and third amendment
thereto dated December 16, 1986 (Exhibit 10.8b to Annual Report on
Form 10-K for 1989).
10.7 o Tribune Company Directors' Deferred Compensation Plan, as amended
and restated on July 1, 1994.
10.8 o* Tribune Company Bonus Deferral Plan, dated as of December 14, 1993
(Exhibit 10.8 to Annual Report on Form 10-K for 1993).
10.9a o* Tribune Company Management Incentive Plan, dated as of January 1,
1991 (Exhibit 10.10 to Annual Report on Form 10-K for 1990).
10.9b o* Amendment effective January 1, 1992 to the Tribune Company
Management Incentive Plan dated as of January 1, 1991 (Exhibit
10.9b to Annual Report on Form 10-K for 1991).
10.10 o* Tribune Company Amended and Restated 1984 Long-Term Performance
Plan, effective as of July 25, 1989 (Exhibit 19.2 to Form 10-Q
Quarterly Report for the quarter ended June 25, 1989); Forms of
Incentive Stock Option Agreement and Non-Qualified Stock Option
Agreements for Tribune Company Amended and Restated 1984 Long-Term
Performance Plan (Exhibit 19.2 to Form 10-Q Quarterly Report for
the quarter ended July 1, 1990).
10.11 o Tribune Company 1992 Long-Term Incentive Plan, dated as of April
29, 1992 and as amended and in effect on April 19, 1994.
10.12a o* 1988 Restricted Stock Plan For Outside Directors, dated February
16, 1988 (Exhibit 10.12 to Annual Report on Form 10-K for 1992).
10.12b o* Amendment effective April 28, 1992 to the 1988 Restricted Stock
Plan For Outside Directors (Exhibit 10.12b to Annual Report on
Form 10-K for 1993).
10.13 o* Tribune Company Executive Financial Counseling Plan, dated
October 19, 1988 and as amended effective January 1, 1994 (Exhibit
10.13 to Annual Report on Form 10-K for 1993).
10.14 o Tribune Company Amended and Restated Transitional Compensation
Plan for Executive Employees, effective as of January 1, 1995.
26
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.15 o* Tribune Company Supplemental Defined Contribution Plan, effective
as of January 1, 1994 (Exhibit 10.15 to Annual Report on Form 10-K
for 1993).
10.16 * Amended and Restated Agreement of Limited Partnership of Two
Twenty East Limited Partnership, dated as of November 5, 1982, and
first amendment thereto dated December 6, 1982 (Exhibit 10.25 in
File No. 2-86087).
10.17 * Asset Purchase Agreement dated March 14, 1991 by and among
Maxwell Newspapers, Inc., Mirror Group PLC, New York News Inc. and
Tribune Company; and letter amendment thereto dated March 20, 1991
(Exhibits 10.1 and 10.2 to Form 8-K Current Report dated March 14,
1991).
10.18 * Newsprint Agreement dated December 2, 1992 between Tribune Company
and QUNO Corporation (Exhibit 10.17 to Annual Report on Form 10-K
for 1992).
11 Statements of Computation of Primary and Fully Diluted Net Income
Per Share.
12 Computation of Ratios of Earnings to Fixed Charges.
13 The portions of the Company's 1994 Annual Report to Stockholders
which are specifically incorporated herein by reference.
21 Table of subsidiaries of Tribune Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule
99 Form 11-K financial statements for Tribune Company Savings
Incentive Plan (to be filed by amendment).
27
<PAGE>
Exhibit 10.2c
TERMINATION OF
EMPLOYMENT AGREEMENT
Charles T. Brumback of Chicago, Illinois ("Brumback") and Tribune Company, a
Delaware corporation (the "Company") agree as follows:
1. Continued Employment. For value received, Brumback and the Company hereby
terminate the Employment Agreement effective July 27, 1993, as amended (the
"Employment Agreement"). Notwithstanding such termination, Brumback shall
continue in the employ of the Company for such period and on such terms as he
and the Company's Board of Directors shall mutually agree and he shall render
such services to the Company and its subsidiaries as the Company's Board of
Directors may from time to time direct.
2. Deferred Compensation.
---------------------
(a) Notwithstanding the termination of the Employment Agreement, at such
time as Brumback is no longer employed full-time by the Company, he shall be
entitled to receive, as deferred compensation as originally provided in the
Employment Agreement and in lieu of any other employment compensation, one
hundred twenty-five thousand dollars ($125,000) per year for a period of ten
(10) years. Such amount shall be paid in quarterly installments and shall
commence within ninety (90) days after the last day of Brumback's full-time
employment.
(b) If Brumback's employment is terminated as a result of Brumback's
death or if otherwise Brumback dies prior to the date on which the payments
provided for in paragraph 2(a) begin, or if Brumback dies within ten (10) years
after the payments provided for in paragraph 2(a) have begun, the amounts that
would otherwise have been paid to Brumback during such ten (10) year period (or
the remainder thereof) shall be paid to the beneficiary or beneficiaries named
in the last written instrument signed by Brumback for such purpose and received
by the Company prior to his death; provided, that if Brumback fails to so name
any beneficiary, such amounts shall be paid to Brumback's estate. Such amounts
may be paid in annual or quarterly installments, in the Company's discretion,
and shall commence within ninety (90) days after the date of Brumback's death.
(c) If Brumback is living at the end of the ten (10) year period
specified under paragraph 2(a), he shall be entitled to receive, as deferred
compensation, payments at the rate of sixty thousand dollars ($60,000) per year
for the remainder of his life. Such amounts shall be paid in quarterly
installments and shall commence within ninety (90) days after the last day for
which he received payments provided in paragraph 2(a).
1
<PAGE>
(d) If Mary H. Brumback survives Brumback, is married to him at the time of
his death and is living on the tenth (10th) anniversary of the date on which the
payments provided for in paragraph 2(a) began, she shall be entitled to receive
payments at the rate of sixty thousand dollars ($60,000) per year for the
remainder of her life following Brumback's death. Such amounts shall be paid in
quarterly installments, and shall commence within ninety (90) days after the
later of the tenth (10th) anniversary of the date on which the payments provided
for in paragraph 2(a) began or the date of Brumback's death.
(e) Brumback agrees that he and his beneficiaries shall be unsecured,
general creditors of the Company with respect to his or their right to receive
such amounts.
3. Consulting and Advisory Services.
--------------------------------
(a) Due to Brumback's wide and intimate knowledge of all aspects of the
operations of the Company and its subsidiaries, the Company desires to retain
the benefit of Brumback's consulting and advisory services after the termination
of his full-time employment period. Accordingly, Brumback agrees that,
subsequent to his full-time employment period, he will render such consulting
and advisory services to the Company as its Board of Directors may reasonably
request. Brumback will inform the Company of any plans he may from time to time
make for holidays or travel and the Company will not, except in emergencies,
call for consulting or advisory services at times which would interfere with
such plans; provided, that such plans shall not render Brumback unavailable for
consultation for more than two (2) months in any calendar year.
(b) The Company shall compensate Brumback at the rate of Two Hundred
Fifty Dollars ($250.00) per hour for the performance of consulting and advisory
services rendered to the Company. Brumback shall keep, and shall submit to the
Company upon request, adequate records of the time spent in the performance of
such services. Brumback agrees that any amounts paid to him pursuant to this
paragraph 3 shall, for purposes of federal, state, and local income taxes, be
treated as compensation for the performance of services rendered as an
independent contractor, and neither Brumback nor his successor shall take any
position inconsistent with such treatment.
4. Competition.
-----------
(a) In consideration of his continued employment by the Company, and of
his entitlement to the amounts payable under paragraphs 2 and 3 of this
Agreement, Brumback covenants and agrees that for a period of three (3) years
after the termination of his employment , he will not, except with the express
written consent of the Board of Directors of the Company, engage directly or
indirectly in, or permit his name to be used in connection with, a business
similar to the business of, or any business being developed by, the Company or
any of its subsidiaries during a period of eighteen (18) months preceding the
last day of his employment, in an area within a radius of one hundred (100)
miles of any city in which such business is then
2
<PAGE>
being engaged or developed by the Company or any of its subsidiaries.
(b) For the purposes of this paragraph 4, the phrase, "engage directly or
indirectly in" shall encompass: (i) all of Brumback's activities whether on his
own account or as an employee, director, officer, agent, consultant, independent
contractor, or partner of or in any person, firm, or corporation (other than the
Company and its subsidiaries), and (ii) Brumback's ownership of more than
fifteen (15%) of the voting capital stock of any corporation, three percent (3%)
or more of the gross income of which is derived from any business or businesses
in which Brumback may not then engage.
5. Confidential Information. Brumback agrees that he will not, without the
prior written consent of the Board of Directors of the Company, during and after
his employment with the Company, directly or indirectly disclose to any
individual, corporation, or other entity (other than the Company or any
subsidiary thereof, their officers, directors, or employees entitled to such
information, or to any other person or entity to whom such information is
regularly disclosed in the normal course of the Company's business) or use for
his own or such another's benefit, any information, whether or not reduced to
written or other tangible form, which:
(a) is not generally known to the public or in the industry;
(b) has been treated by the Company or any of its subsidiaries as
confidential or proprietary; and
(c) is of competitive advantage to the Company or any of its subsidiaries
and in the confidentiality of which the Company or any of its
subsidiaries has a legally protectible interest;
(such information being referred to in this paragraph 5 as "Confidential
Information"). Confidential Information which becomes generally known to the
public or in the industry, or in which the Company and its subsidiaries cease to
have a legally protectible interest, shall cease to be subject to the
restrictions of this paragraph.
6. Enforcement. If, at the time of enforcement of any provision of
paragraphs 4 and 5, a court of competent jurisdiction shall finally determine
that the period, scope, or geographical area restrictions stated therein are
unreasonable under circumstances then existing, the maximum period, scope, or
geographical area reasonable under the circumstances shall be substituted for
the stated period, scope, or area. In the event of a breach by Brumback of any
of the provisions of paragraphs 4 and 5, the Company may, in addition to any
other rights and remedies existing in its favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
thereof.
7. Rights in the Event of a Dispute. If a claim or dispute arises concerning
the rights of
3
<PAGE>
Brumback or a beneficiary to benefits under the Agreement, regardless of the
party by whom such claim or dispute is initiated, the Company shall, upon
presentation of appropriate vouchers, pay all legal expenses, including
reasonable attorneys' fees, court costs, and ordinary and necessary out-of-
pocket costs of attorneys, billed to and payable by Brumback or by anyone
claiming under or through Brumback (such person being hereinafter referred to as
"claimant"), in connection with the bringing, prosecuting, defending,
litigating, negotiating, or settling such claim or dispute; provided, that
Brumback or the claimant shall repay to the Company such expenses theretofore
paid or advanced by the Company if and to the extent that the party disputing
Brumback's rights obtains a judgment in its favor from a court of competent
jurisdiction from which no appeal may be taken, whether because the time to do
so has expired or otherwise, and it is determined that such expenses were not
incurred by Brumback or the claimant while acting in good faith.
8. General Provisions.
------------------
(a) Assignments. This Agreement shall be binding upon, and shall inure
to the benefit of, the Company and any successor to all or substantially all of
the business or assets of the Company. Brumback's rights and interests under
this Agreement may not be assigned, pledged, or encumbered by him without the
Company's written consent.
(b) Effect of Headings. The headings of paragraphs and subparagraphs of
this Agreement are inserted for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement.
(c) Modification, Amendment, Waiver. No modification, amendment, or
waiver of any provision of this Agreement shall be effective unless approved in
writing by both parties. The failure of either party at any time to enforce any
of the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of either party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
(d) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
(e) No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against either party.
(f) Choice of Law. All questions concerning the construction, validity,
and interpretation of this Agreement shall be governed by the laws of the State
of Illinois.
4
<PAGE>
(g) Notices. Any notice to be served under this Agreement shall be in
writing and shall be mailed by registered mail, return receipt requested,
addressed:
If to the Company, to:
Tribune Company
435 North Michigan Avenue
Chicago, Illinois 60611
Attention: Corporate Secretary; or
If to Brumback, to:
Charles T. Brumback
1500 Lake Shore Drive
Chicago, Illinois 60610;
or to such other place as either party may specify in writing, delivered in
accordance with the provisions of this subparagraph.
(h) Survival. The rights and obligations of the parties shall survive
Brumback's employment to the extent that any performance is required under this
Agreement after the expiration or termination of such employment.
(i) Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter thereof, and supersedes all
previous agreements between the parties relating to the same subject matter,
including specifically the Employment Agreement.
9. No Other Inducements. Other than stated herein, Brumback attests that no
promise or inducement has been offered for this Agreement and that he is legally
competent to execute this Agreement and accepts the full responsibility
therefor. Brumback further attests that he has read and voluntarily entered
into this Agreement and that he has been encouraged to consult with any person
or attorney of his choosing regarding this Agreement and that this Agreement
reflects his informed judgment and consent regarding the subject matter of this
Agreement. Brumback acknowledges that he has been given up to twenty-one (21)
days to consider and enter into this Agreement, and that he will have seven (7)
days thereafter within which to revoke this
5
<PAGE>
Agreement. This Agreement shall become effective immediately upon the
expiration of the revocation period.
Dated: December 22, 1994
TRIBUNE COMPANY
By Andrew J. McKenna
______________________________________
Charles T. Brumback
________________________________________
Charles T. Brumback
6
<PAGE>
EXHIBIT 10.7
TRIBUNE COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
(AS AMENDED EFFECTIVE JULY 1, 1994)
The purpose of this Plan is to enable eligible directors of Tribune Company
to defer the receipt of cash payments that otherwise would be payable to them
for their services as directors of Tribune Company.
1. DEFINITIONS.
Where the following words and phrases are used in this Plan, they shall
have the meanings set forth below, unless their context clearly indicates to the
contrary:
(a) ACCOUNT. Each Deferred Compensation Account or subsidiary account
established on behalf of a Participant pursuant to this Plan.
(b) COMMITTEE. The Committee appointed by the Board of Directors of
Tribune to administer the Plan.
(c) DEFERRED COMPENSATION. The cash stipends and fees for services as a
director of Tribune which an Eligible Director has elected to have treated as
Deferred Compensation pursuant to paragraph 2(a).
(d) ELIGIBLE DIRECTOR. Any member of the Board of Directors of Tribune who
is entitled to stipends and fees for his or her services as a director.
(e) PARTICIPANT. An Eligible Director who has elected to receive Deferred
Compensation pursuant to paragraph 2(a).
(f) PLAN. The Tribune Company Directors' Deferred Compensation Plan, as
set forth herein and as from time to time in effect.
(g) TRIBUNE. Tribune Company, a Delaware corporation, and its successor or
successors.
2. ELECTION OF DEFERRED COMPENSATION.
(a) Subject to the provisions of paragraph 2(b), any Eligible Director may
at any time, and from time to time, elect to defer receipt of the cash stipends
and fees that he or she is entitled to receive for services as a director of
Tribune. Any such election shall be exercised by the Eligible Director in
writing filed with the Secretary of Tribune prior to the beginning of the
calendar quarter for which any such stipends and fees are earned. The director
may designate 25%, 50%, 75% or 100% of the cash amount payable to such director
to be deferred, and such election shall remain in effect until it is amended or
terminated pursuant to paragraph 2(b).
<PAGE>
(b) An Eligible Director may at any time, and from time to time, amend or
terminate his or her election under paragraph 2(a). Any such amendment or
termination shall take effect with respect to the amounts payable to such
Eligible Director for calendar quarters commencing after his or her written
direction to amend or terminate such election is received by the Secretary of
Tribune. An Eligible Director who has terminated an election under paragraph
2(a) may not make another such election until a period of twenty-four (24)
months has lapsed from the date as of which the previous such election was
terminated.
(c) Deferred Compensation shall be subject to the rules set forth in this
Plan and each Eligible Director shall have the right to receive cash payments on
account of previously Deferred Compensation only in the amounts and under the
circumstances hereinafter set forth.
3. COMMITTEE.
Full power and authority to construe, interpret and administer this Plan
shall be vested in the Committee. In particular, the Committee shall have full
power and authority to make each determination provided for in this Plan. All
determinations made by the Committee shall be conclusive upon Tribune, upon each
Eligible Director, and upon their designees. If one or more members of the
Committee are disqualified by personal interest from taking part in a particular
decision, the remaining member or members of the Committee (although less than a
quorum) shall have full power to act on such matter.
4. DEFERRED COMPENSATION ACCOUNT.
(a) A Participant's Deferred Compensation shall be held, accounted for, and
deemed to be invested in accordance with this paragraph 4.
(b) Tribune shall establish a Deferred Compensation Account for each
Participant based on his or her election to participate in the Plan. Tribune
shall credit to each Participant's Account an amount equal to the Deferred
Compensation earned by the Participant. Each Account shall also be credited with
the interest, dividends, income or other distributions which would be received
if the amounts held in the Account were invested in the manner elected pursuant
to paragraph 4(c), and each Account shall be credited or charged for any
appreciation or depreciation in the fair market value of the deemed
investment(s) elected pursuant to paragraph 4(c) whether or not Tribune actually
holds such investments. The balance credited to an Account at a given date
shall be referred to as the "Deferred Amount".
(c) Each Participant may elect the manner in which his or her Account shall
be deemed invested subject to the following rules:
(i) Accounts may be deemed invested and reinvested in the following assets:
(A) Any common or preferred stock, except a security issued by Tribune,
traded on the New York Stock Exchange, American Stock Exchange or
the NASDAQ National Market at the time the deemed investment is to
be made.
2
<PAGE>
(B) A registered mutual fund that is open and accepts new
investments;
(C) A time deposit, saving certificate or other bank investment
at a bank selected by the Committee;
(D) A fixed income account credited with interest at the same
rate as credited to participants in the Tribune Company
Bonus Deferral Plan;
(E) Tribune Company common stock.
(ii) A Participant may designate the amount in his or her Account to
be deemed invested in no more than two investments, other than
amounts deemed invested as described in paragraph 4(c)(i)(D), at
any one time.
(iii) Amounts may be reallocated to other investments no more than
once per calendar quarter. Amounts deemed invested as described
in paragraph 4(c)(i)(E) may not subsequently be reallocated to
other investments and any amounts once invested as described in
paragraphs 4(c)(i)(A) through (D) may not be reallocated to
Tribune common stock while the Participant is serving as a
Tribune director.
(iv) If a Participant does not specify a choice of deemed investment,
the balance in his or her Account shall be deemed invested as
described in paragraph 4(c)(i)(D).
(v) A Participant shall elect a choice of deemed investment(s) or
changes therein by written direction delivered to the Secretary
of Tribune.
(vi) Each selected investment shall be deemed to have been made or
withdrawn on a date which is not more than thirty (30) days
after the date on which Tribune receives a written direction
from the Participant with respect to such investment.
(d) Although the amount of payments to be made to each Participant
pursuant to the Plan are measured by the value of and income on certain deemed
investments designated by the Participant, Tribune need not actually make any of
such investments. Rather, the value of and income on the designated investments
are merely a measuring device to determine the amount to be paid to a
Participant. Accordingly, each Participant is and shall remain an unsecured
creditor of Tribune with respect to any amounts owed to such Participant
hereunder. If Tribune, in its discretion, should from time to time make any of
the investments designated by a Participant, or set aside amounts for the
purposes of payment of Deferred Amounts hereunder, such investments or amounts
shall be solely for Tribune's own account and shall not in any way be considered
to create a fund or trust for the benefit of the Participant or his or her
beneficiaries, the Participant shall have no right, title or interest in any
such investments, and the Participant's rights hereunder shall be solely those
of an unsecured creditor to receive the payments described herein.
3
<PAGE>
5. PAYMENTS OF DEFERRED AMOUNTS.
(a) Each participant shall elect in writing at the time he or she
makes an election described in paragraph 2(a) that the Deferred Amount payable
to him or her shall be paid in from one (1) to ten (10) annual installments
commencing after:
(i) the date on which such Participant ceases to be a director of
Tribune; or
(ii) the date which is twelve (12) months after the date as of which
such election was terminated pursuant to paragraph 2(b);
whichever first occurs.
(b) Upon the happening of the relevant event described in paragraph
5(a)(i) or (ii), the Deferred Amount with respect to the affected Participant
shall be calculated as of the December 31st immediately following the happening
of such event. If such Deferred Amount is less than Fifty Thousand Dollars
($50,000), it shall be paid to the Participant in one installment,
notwithstanding any prior election by the Participant to receive a greater
number of installments. If such Deferred Amount is Fifty Thousand Dollars
($50,000) or more, it shall be paid to the Participant in that number of
installments which is equal to the lesser of:
(i) the number of installments elected by the Participant with
respect to such Deferred Amount pursuant to paragraph 5(a); or
(ii) the largest number of installments which, when divided into the
Deferred Amount, produces a result which is not less than Twenty-
Five Thousand Dollars ($25,000);
notwithstanding any prior election by the Participant to receive a greater
number of installments. The first installment shall be paid on the February 15th
following the December 31st first following the happening specified in paragraph
5(a), and succeeding installments, if any, shall be paid on the annual
anniversaries of the first payment. The amount of each installment shall be in
an amount equal to the Deferred Amount calculated as of the December 31st
immediately preceding the payment date and payable to the Participant at the
time for payment of such installment multiplied by a fraction (the "Installment
Fraction"), the numerator of which is one and the denominator of which is the
number of installments remaining to be paid, including the current installment.
At the time each such installment is paid, the amount credited to such Account
shall be reduced by the amount so paid. Each installment payment shall be
deemed to have been made first from amounts held in the Participant's Account
and deemed invested as described in paragraph 4(c)(i)(D), then from a deemed
sale or redemption of a pro rata share of the other investments deemed held for
the Participant's Account (unless otherwise agreed by the Committee and the
Participant).
(c) All payments due under this Plan shall be paid in cash to the
Participant except that:
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(i) In the event a Participant's Board service terminates by reason
of his or her death, or in the event any installments are unpaid
at the time of a Participant's death, payments shall be made at
the same time and in the same amounts as if the Participant were
living to, and instructions regarding investments and sales of
amounts credited to the Participant's Accounts shall be given by,
such person or persons (including a trustee or trustees) as are
named in the last written instrument signed by the Participant
and received by Tribune prior to his or her death, or if the
Participant fails to so name any person, the amounts shall be
paid to, and such instructions shall be given by, his or her
estate. Tribune shall be fully protected in making any payments
due hereunder and in following such instructions in accordance
with what Tribune believes to be such last written instrument
received.
(ii) Tribune may make payments due to a legally incompetent person in
such of the following ways as the Committee shall determine:
(A) directly to such incompetent person;
(B) to the legal representative of such incompetent person; or
(C) to some near relative of the incompetent person to be used
for the latter's benefit.
(d) Notwithstanding the foregoing, in the event of a Change in Control as
defined in Section 12.2 of the Tribune 1992 Long-Term Incentive Plan, all
Deferred Amounts (except those related to the Tribune Company Common Stock
Account while the participant is a member of the Tribune Board of Directors)
shall be accelerated and become immediately payable.
6. EMERGENCY PAYMENTS.
In the event of an emergency as determined hereunder, Tribune may pay any
unpaid installments, or determine the Deferred Amount payable to such
Participant and pay such amount, without regard to the payment dates otherwise
provided herein (except those related to the Tribune Company Common Stock
Account while the participant is a member of the Tribune Board of Directors), to
the extent required to meet such emergency where the Committee determines that
such action is necessary to prevent undue hardship to a Participant. Such
action shall be taken only if a Participant (or his legal representatives or
successors) shall sign an application describing fully the circumstances which
are deemed to justify the payment, together with an estimate of the amounts
necessary to prevent great hardship.
7. MISCELLANEOUS.
(a) Except as limited by paragraph 5(c), and except that each
Participant shall have a continuing power to designate a new beneficiary in the
event of his or her death at any time without the consent or approval of any
person theretofore named as a beneficiary, this
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document shall be binding upon and inure to the benefit of Tribune, the
Committee, the Participants, their legal representatives, successors and
assigns, and all persons entitled to benefits hereunder.
(b) Any notice given in connection with this document shall be in
writing and shall be delivered in person or by registered mail, return receipt
requested. Any notice given by registered mail shall be deemed to have been
given upon the date of delivery indicated on the registered mail return receipt,
if correctly addressed.
(c) All payments to persons entitled to benefits hereunder shall be
made to such persons in person, or upon their personal receipt or endorsement,
and shall not be grantable, transferable, or otherwise assignable in
anticipation of payment thereof, in whole or in part, by the voluntary or
involuntary acts of any such persons, or by operation of law, and shall not be
liable or taken for any obligation of such person.
8. TERMINATION OR AMENDMENT.
The Board of Directors of Tribune may in its discretion terminate or
amend this Plan from time to time, provided, however, that no such termination
or amendment shall (without the Participant's consent) alter a Participant's
right to payments of amounts previously credited to such Participant's Accounts,
the amount or times of payment of such amounts, the rights to change investments
in his or her Accounts, or the rights set forth to designate beneficiaries in
the event of his or her death, except that if Tribune is liquidated, merged or
otherwise ceases to exist as a separate publicly-owned company, it shall have
the right to determine the amount in each Participant's Account established for
a Participant with respect to any Deferred Compensation awarded by Tribune,
treating a date established by the Committee as the valuation date under
paragraph 5(a), and to pay the amount so determined in one or more installments
or upon such other terms and conditions as the Committee determines to be just
and equitable.
9. EXPENSES OF ADMINISTRATION.
The expenses of administering the Plan shall be borne by Tribune.
As Amended by the Board of Directors:
Stanley J. Gradowski
____________________________________
Stanley J. Gradowski, Secretary
April 19, 1994
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Exhibit 10.11
TRIBUNE COMPANY
----------------------------
1992 LONG-TERM INCENTIVE PLAN
(As Amended and In Effect on 4-19-94)
----------------------------
ARTICLE I
Purpose
The purpose of the 1992 Long-Term Incentive Plan (this "Plan") is to
enable Tribune Company (the "Company") to offer key management employees of the
Company and Subsidiaries (defined below) performance-based stock incentives and
other equity interests in the Company and other incentive awards, thereby
attracting, retaining and rewarding such employees, and strengthening the
mutuality of interests between the employees and the Company's stockholders.
ARTICLE II
Definitions
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Award" shall mean any form of Stock Option, Stock Appreciation Right,
Stock Award, Performance Shares, Performance Units or Other Stock-Based Award
granted under this Plan, whether singly, in combination, or in tandem, to a
Participant by the Committee pursuant to such terms, conditions, restrictions
and/or limitations, if any, as the Committee may establish by the Award Notice
or otherwise.
2.2 "Award Notice" shall mean a written notice from the Company to a
Participant that establishes the terms, conditions, restrictions, and/or
limitations applicable to an Award.
2.3 "Beneficiary" shall mean a person or persons designated by a
Participant to succeed to, in the event of death, any outstanding Award held by
the Participant. Any Participant may, subject to such limitations as may be
prescribed by the Committee, designate one or more persons primarily or
contingently as beneficiaries in writing by notice delivered to the Company, and
may revoke such designations in writing. If a Participant fails effectively to
designate a beneficiary, then the Participant's estate shall be the
Participant's beneficiary.
2.4 "Board" shall mean the Board of Directors of the Company.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor legislation.
2.6 "Committee" shall mean the Governance and Compensation Committee or
such other committee of the Board appointed from time to time by the Board
consisting of two or more Directors, none of whom can participate in this Plan.
Members of the Committee must qualify as disinterested persons within the
meaning of Securities and Exchange Commission Regulation (S) 240.16b-3 or any
successor regulation.
2.7 "Common Stock" shall mean the common stock (without par value) of the
Company.
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2.8 "Disability" shall mean a disability qualifying the Participant to
receive benefits under the Company's or a Subsidiary's long-term disability
plan. Disability shall be deemed to occur on the date eligibility for such
benefit payments begins.
2.9 "Fair Market Value" unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder shall mean, as of any
date, the closing price of the applicable security as reported on the New York
Stock Exchange Composite Transactions list (or such other consolidated
transaction reporting system on which the applicable security is primarily
traded) for such day, or if the applicable security was not traded on such day,
then the next preceding day on which the security was traded, all as reported by
such source as the Committee may select. If the applicable security is not
readily tradeable on a national securities exchange or other market system, its
Fair Market Value shall be set under procedures established by the Committee on
the advice of an investment advisor.
2.10 "Incentive Stock Option" shall mean any Stock Option awarded under
Article VI of this Plan intended to be and designated as an "Incentive Stock
Option" within the meaning of Section 422 of the Code or any successor
provision.
2.11 "Non-Qualified Stock Option" shall mean any Stock Option awarded
under Article VI of this Plan that is not an Incentive Stock Option.
2.12 "Officer" shall mean an employee of the Company or a Subsidiary who
is considered to be an officer under Securities and Exchange Commission
Regulation (S) 240.16a-1(f) or any successor regulation.
2.13 "Participant" shall mean an Eligible Employee (as defined in Section
5.1) to whom an Award has been made pursuant to this Plan.
2.14 "Replacement Option" shall mean a Non-Qualified Stock Option granted
pursuant to Section 6.3, upon the exercise of a Stock Option granted pursuant to
this Plan or the Company's 1984 Long-Term Performance Plan (the "1984 Plan")
where the option price is paid with previously owned shares of Common Stock.
2.15 "Retirement" shall mean any termination of employment by an employee
(other than by death or Disability) who is at least 55 years of age after at
least 10 years of employment by the Company and/or a Subsidiary.
2.16 "Stock Option" or "Option" shall mean any right to purchase shares
of Common Stock (including a Replacement Option) granted pursuant to Article VI
of this Plan.
2.17 "Subsidiary" shall mean any corporation (or partnership, joint
venture, or other enterprise) (i) of which the Company owns or controls,
directly or indirectly, 50.1% or more of the outstanding shares of stock
normally entitled to vote for the election of directors (or comparable equity
participation and voting power) or (ii) which the Company otherwise controls (by
contract or any other means). "Control" means the power to direct or cause the
direction of the management and policies of a corporation, partnership, joint
venture, or other enterprise.
2.18 "Termination of Employment" shall mean the termination of a
Participant's employment with the Company and any Subsidiary. A Participant
employed by a Subsidiary shall also be deemed to incur a Termination of
Employment if the Subsidiary ceases to be a Subsidiary and the Participant does
not immediately thereafter become an employee of the Company or another
Subsidiary.
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2.19 "Transfer" shall mean anticipation, alienation, attachment, sale,
assignment, pledge, encumbrance, charge or other disposition; and the terms
"Transferred" or "Transferable" shall have corresponding meanings.
ARTICLE III
Administration
3.1 The Committee. This Plan shall be administered and interpreted by the
Committee.
3.2 Awards. The Committee shall have full authority to grant, pursuant to
the terms of this Plan, to Eligible Employees: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Stock Awards, (iv) Performance Shares, (v)
Performance Units, and (vi) Other Stock-Based Awards. In particular, and
without limitation, the Committee shall have the authority:
(a) to select the Eligible Employees to whom Awards may from time to time
be granted hereunder;
(b) to determine the types of Awards, and combinations thereof, to be
granted hereunder to Eligible Employees and whether such Awards are to
operate on a tandem basis and/or in conjunction with or apart from other
awards made by the Company outside of this Plan;
(c) to determine the number of shares of Common Stock or monetary units to
be covered by each such Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of this Plan, of any Award granted hereunder (including, but not limited to,
any restriction or limitation on transfer, any vesting schedule or
acceleration thereof, or any forfeiture provisions or waiver thereof,
regarding any Award and the shares of Common Stock relating thereto, based
on such factors as the Committee shall determine, in its sole discretion);
(e) to determine whether Stock and other amounts payable with respect to
an Award under this Plan shall be deferred either automatically or at the
election of the Participant; and
(f) to modify or waive any restrictions or limitations contained in, and
grant extensions to or accelerate the vestings of, any outstanding Awards as
long as such modifications, waivers, extensions or accelerations are
consistent with the terms of this Plan; but no such changes shall impair the
rights of any Participant without his or her consent.
3.3 Guidelines. The Committee shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and practices governing this
Plan and perform all acts, including the delegation of its administrative
responsibilities, as it shall, from time to time, deem advisable; to construe
and interpret the terms and provisions of this Plan and any Award issued under
this Plan (and any Award Notices or agreements relating thereto); and to
otherwise supervise the administration of this Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in this Plan or
in any Award Notices or agreement relating thereto in the manner and to the
extent it shall deem necessary to carry this Plan into effect.
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3.4 Decisions Final. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board, or the
Committee (or any of its members) arising out of or in connection with this Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective Beneficiaries, heirs, executors,
administrators, successors and assigns.
ARTICLE IV
Shares Available
4.1 Shares. For each fiscal year of the Company from and including the
year ending December 27, 1992, the number of shares of Common Stock available
for Awards under this Plan shall be the sum of the following amounts:
(a) For Awards generally: a number of shares equal to (i) nine-tenths of
one percent (0.9%) of the adjusted average Common Stock outstanding used by
the Company to calculate fully diluted earnings per share for the preceding
year, plus (ii) any shares of Common Stock available for Awards under this
subsection in previous years but not actually awarded, plus (iii) any shares
of Common Stock subject to an Award hereunder (other than Replacement
Options) if there is a lapse, forfeiture, expiration or termination of any
such Award;
(b) For Replacement Options: a number of shares equal to (i) four-tenths
of one percent (0.4%) of the adjusted average Common Stock outstanding used
by the Company to calculate fully diluted earnings per share for the
preceding year, plus (ii) any shares of Common Stock which as of the
effective date of this Plan are authorized for awards under the 1984 Plan
and which have not been awarded, plus (iii) any shares of Common Stock
available for Awards under this subsection in previous years but not
actually awarded, plus (iv) any shares of Common Stock subject to an Award
hereunder of Replacement Options granted to persons who are Officers if
there is a lapse, forfeiture, expiration or termination of any such Award;
and
(c) For Replacement Options for Non-Officers: the number of shares of
Common Stock (i) exchanged by a Participant as full or partial payment to
the Company of the exercise price, or withheld to pay taxes in connection
with the exercise of, a Stock Option awarded under this Plan or the 1984
Plan, plus (ii) any shares of Common Stock available for Awards under this
subsection in previous years but not actually awarded, plus (iii) any shares
of Common Stock subject to an Award of a Replacement Option granted to a
person who is not an Officer if there is a lapse, forfeiture, expiration or
termination of any such Award.
The shares authorized under subsection (a) above shall be available for
any Awards made under this Plan; the shares authorized under subsection (b)
above shall be available only for Awards of Replacement Options; and the shares
authorized under subsection (c) above shall be available only for Awards of
Replacement Options to persons who are not Officers on the date of the Award.
Any shares of Common Stock delivered pursuant to an Award may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
No more than three million (3,000,000) shares of Common Stock shall be
cumulatively available for issuance under this Plan for Awards made pursuant to
Articles VIII and XI.
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Notwithstanding any provision in this Plan to the contrary, but subject to
the adjustment provisions of Section 4.4 hereof, the maximum number of shares of
Common Stock available for Awards under this Plan to any Participant in any
fiscal year of the Company shall not exceed 500,000 shares.
4.2 Use of Authorized Shares. The shares covered by any Award made under
this Plan shall be charged against the applicable pool of shares authorized by
Section 4.1 by first charging them, to the extent permitted in the next to last
paragraph of Section 4.1, against any shares available under Subsection 4.1(c),
next against any shares available under Subsection 4.1(b), and last against any
shares available under Subsection 4.1(a).
For purposes of this Article IV, if an Award is denominated in shares of
Common Stock, the number of shares covered by such Award, or to which such Award
relates, shall be counted on the date of grant of such Award against the
aggregate number of shares available for granting Awards under this Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or are substituted for, other
Awards granted under the 1984 Plan or this Plan may be counted or not counted
under procedures adopted by the Committee in order to avoid double counting.
4.3 Compliance with Rule 16b-3. To the extent that the provisions above
on the number of shares of Common Stock that can be issued under this Plan do
not conform with Securities and Exchange Commission Regulation (S) 240.16b-3,
the Committee may make such modification in the determination of share usage and
issuance so as to conform this Plan and any Awards granted hereunder to the
Rule's requirements.
4.4 Adjustment Provisions.
(a) If the Company shall at any time change the number of issued shares of
Common Stock without new consideration to the Company (such as by stock
dividend, stock split, recapitalization, reorganization, exchange of shares,
liquidation, combination or other change in corporate structure affecting the
Common Stock) or make a distribution of cash or property which has a substantial
impact on the value of issued Common Stock, the total number of shares available
for Awards under this Plan shall be appropriately adjusted and the number of
shares covered by each outstanding Award and the reference price or Fair Market
Value for each outstanding Award shall be adjusted so that the net value of such
Award shall not be changed.
(b) In the case of any sale of assets, merger, consolidation, combination
or other corporate reorganization or restructuring of the Company with or into
another corporation which results in the outstanding Common Stock being
converted into or exchanged for different securities, cash or other property, or
any combination thereof (an "Acquisition"), subject to the provisions of this
Plan and any limitation applicable to the Award:
(i) any Participant to whom an Option has been granted shall have the
right thereafter and during the term of the Option, to receive upon exercise
thereof the Acquisition Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of shares of Common Stock which might
have been obtained upon exercise of the Option or portion thereof, as the
case may be, immediately prior to the Acquisition;
(ii) any Participant to whom a Stock Appreciation Right has been granted
shall have the right thereafter and during the term of such right to receive
upon exercise thereof the difference on the exercise date between the
aggregate Fair Market Value of the Acquisition Consideration receivable upon
such acquisition by a holder of the number of shares of Common Stock which
are covered by such right and the aggregate reference price of such right;
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(iii) any Participant to whom Performance Shares or Performance Units
have been awarded shall have the right thereafter and during the term of the
Award, upon fulfillment of the terms of the Award, to receive on the date or
dates set forth in the Award, the Acquisition Consideration receivable upon
the Acquisition by a holder of the number of shares of Common Stock which
are covered by the Award; and
(iv) any Participant to whom Other Stock-Based Awards have been awarded
shall have the right thereafter and during the term of the Award to
substitute the Acquisition Consideration for the Common Stock upon which the
Award is valued or in which the Award is payable.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of one share of Common Stock upon consummation of an Acquisition.
(c) Notwithstanding any other provision of this Plan, the Committee may
authorize the issuance, continuation or assumption of Awards or provide for
other equitable adjustments after changes in the Common Stock resulting from any
other merger, consolidation, sale of assets, acquisition of property or stock,
recapitalization, reorganization or similar occurrence upon such terms and
conditions as it may deem equitable and appropriate.
(d) In the event that another corporation or business entity is being
acquired by the Company, and the Company assumes outstanding employee stock
options and/or stock appreciation rights and/or the obligation to make future
grants of options or rights to employees of the acquired entity, the aggregate
number of shares of Common Stock available for Awards under this Plan shall be
increased accordingly.
4.5 Purchase Price. Notwithstanding any provision of this Plan to the
contrary, if authorized but previously unissued shares of Common Stock are
issued for purchase under this Plan, such shares shall be issued for a
consideration which shall not be less than $1 per share.
ARTICLE V
Eligibility
5.1 Officers and key management employees of the Company and its
Subsidiaries ("Eligible Employees") are eligible to be granted Awards under this
Plan. Directors who are not full-time employees of the Company or a Subsidiary
shall not be eligible to be granted Awards under this Plan. Eligibility under
this Plan shall be determined by the Committee.
ARTICLE VI
Stock Options
6.1 Grants. Stock Options may be granted alone or in addition to other
Awards granted under this Plan. Each Stock Option granted under this Plan shall
be of one of two types: (i) an Incentive Stock Option or (ii) a Non-Qualified
Stock Option. The Committee shall have the authority to grant to any Eligible
Employee one or more Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options (in each case with or without Stock Appreciation
Rights).
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6.2 Incentive Stock Options. Anything in this Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under this Plan be so exercised, so as to disqualify this Plan under
Section 422 of the Code, or, without the consent of the Participants affected,
to disqualify any Incentive Stock Option under Section 422 of the Code. No
Incentive Stock Options may be awarded after the tenth anniversary of the date
this Plan is adopted by the Board, and no more than three million (3,000,000)
shares of Common Stock shall be cumulatively available under this Plan for
issuance upon exercise of Incentive Stock Options.
6.3 Replacement Options. The Committee may provide either at the time of
grant or subsequently that an Option include the right to acquire a Replacement
Option upon exercise of such Option (in whole or in part) prior to termination
of employment of the Participant and through payment of the exercise price in
shares of Common Stock. In addition to any other terms and conditions the
Committee deems appropriate, the Replacement Option shall be subject to the
following terms: (i) the number of shares of Common Stock subject to the
Replacement Option shall not exceed the number of whole shares used to satisfy
the exercise price of the original Option and the number of whole shares, if
any, withheld by the Company as payment for withholding taxes in accordance with
Section 14.4 hereof, (ii) the option grant date will be the date of the exercise
of the original Option, (iii) the exercise price per share shall be the Fair
Market Value on the option grant date, (iv) the Replacement Option shall be
exercisable no earlier than twelve (12) months after the option grant date, (v)
the Option term will not extend beyond the term of the original Option, and (vi)
the Replacement Option shall be a Non-Qualified Stock Option and shall otherwise
meet all conditions of this Article VI. A Replacement Option may also be
granted with respect to any option granted under the 1984 Plan. The Committee
may without the consent of the Participant rescind the right to receive a
Replacement Option grant at any time prior to an Option being exercised.
6.4 Terms of Options. Options granted under this Plan shall be subject to
the following terms and conditions and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) Exercise Price. The exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant but shall be not less than 100% of the Fair Market Value of
the Common Stock at the option grant date. In lieu of a fixed exercise
price, the Committee may establish an exercise price that increases
automatically on the anniversary of the Option grant date or that adjusts
periodically based on the relative performance of the Company or its stock
price as compared with the performance or stock prices of a group of
comparable companies selected by the Committee for comparison purposes at
the time of the Option grant date.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
(10) years after the date the Option is granted, and no Non-Qualified Stock
Option shall be exercisable more than eleven (11) years after the date the
Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at grant; provided, however, that, unless otherwise determined by
the Committee at grant, no Stock Option shall be exercisable prior to six
months after the option grant date.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option term, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the exercise price in
such form as the Committee may accept. If and to the extent determined by
the Committee at or after
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grant, payment in full or in part may also be made in the form of Common
Stock owned by the Participant for at least six months prior to exercise (or
by certification of such ownership) or by reduction in the number of shares
issuable upon such exercise based, in each case, on the Fair Market Value of
the Common Stock on the payment date.
In the discretion of the Committee, payment may also be made by delivering
a properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate
the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms.
(e) Non-Transferability of Options. No Stock Option shall be Transferable
by the Participant otherwise than by a qualified domestic relations order as
defined in the Code (but only with respect to Non-Qualified Stock Options)
or by will or the laws of descent and distribution, and all Stock Options
shall be exercisable, during the Participant's lifetime, only by the
Participant or his or her guardian, conservator or other legal
representative.
(f) Termination of Employment by Death, Disability or Retirement. If a
Participant's employment by the Company or a Subsidiary terminates by reason
of death, Disability or Retirement, any Stock Option held by such
Participant, unless otherwise determined by the Committee at or after grant,
shall be fully vested and may thereafter be exercised by the Participant or
by the Beneficiary or legal representative of the estate of a disabled or
deceased Participant, for a period of five years (or such shorter period as
the Committee may specify at grant) from the date of such death, Disability
or Retirement or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g) Other Termination of Employment. Unless otherwise determined by the
Committee at or after grant, if a Participant's employment by the Company or
a Subsidiary terminates for any reason other than death, Disability or
Retirement, the Stock Option shall terminate at such time as provided in the
Award, but in no event more than one year after termination.
(h) Buyout and Settlement Provisions. The Committee may at any time offer
to buy out an Option previously granted, based on such terms and conditions
as the Committee shall establish and communicate to the Participant at the
time that such offer is made.
ARTICLE VII
Stock Appreciation Rights
7.1 Tandem Stock Appreciation Rights. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a "Reference Stock
Option") granted under this Plan ("Tandem Stock Appreciation Rights"). In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the option grant date of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the option grant date
of such Reference Stock Option. Tandem Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
this Plan, as shall be determined from time to time by the Committee, including
the following:
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(a) Term. A Tandem Stock Appreciation Right granted with respect to a
Reference Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Reference Stock
Options to which they relate shall be exercisable.
(c) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by an optionee by surrendering the applicable portion of the
Reference Stock Option.
(d) Payment. Upon the exercise of a Tandem Stock Appreciation Right a
Participant shall be entitled to receive an amount in cash and/or shares of
Common Stock equal in value to the excess of the Fair Market Value of one
share of Common Stock over the exercise price per share specified in the
Reference Stock Option multiplied by the number of shares in respect of
which the Tandem Stock Appreciation Right shall have been exercised, with
the Committee having the right to determine the form of payment.
(e) Non-Transferability and Termination. Tandem Stock Appreciation Rights
shall be Transferable only to the extent provided in Subsection 6.4(e) of
this Plan and shall terminate in accordance with Subsections 6.4(f) or (g)
of this Plan.
7.2 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Options granted under
this Plan. Non-Tandem Stock Appreciation Rights shall be subject to such terms
and conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee, including the following:
(a) Term. The term of each Non-Tandem Stock Appreciation Right shall be
fixed by the Committee, but shall not be greater than eleven (11) years
after the date the right is granted.
(b) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee at or after grant.
(c) Method of Exercise. A Non-Tandem Stock Appreciation Right may be
exercised in whole or in part at any time during its term, by giving written
notice of exercise to the Company specifying the number of rights to be
exercised.
(d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation Right a
Participant shall be entitled to receive, for each right exercised, an
amount in cash and/or shares of Common Stock equal in value to the excess of
the Fair Market Value of one share of Common Stock on the date the Right is
exercised over the Fair Market Value of one share of Common Stock on the
date the Right was awarded to the Participant, with the Committee having the
right to determine the form of payment.
(e) Non-Transferability and Termination. Non-Tandem Stock Appreciation
Rights shall be Transferable only to the extent provided in Subsection
6.4(e) of this Plan and shall terminate in accordance with Subsections
6.4(f) or (g) of this Plan.
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ARTICLE VIII
Stock Awards
8.1 Grants. Restricted or unrestricted shares of Common Stock may be
granted either alone or in addition to other Awards granted under this Plan.
The Committee may grant Awards of Common Stock subject to the attainment of
specified performance goals, continued employment and such other limitations or
restrictions as the Committee may determine.
8.2 Awards and Certificates. Stock Awards shall be subject to the
following provisions:
(a) Stock Powers and Custody. The Committee may require the Participant
to deliver a duly signed stock power, endorsed in blank, relating to the
Common Stock covered by such an Award. The Committee may also require that
the stock certificates evidencing such shares be held in custody by the
Company until any restrictions thereon shall have lapsed.
(b) Rights as Stockholder. The Participant shall have, with respect to
the shares of Common Stock, all of the rights of a holder of shares of
Common Stock of the Company including the right to receive any dividends and
to vote the Common Stock.
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ARTICLE IX
Performance Shares
9.1 Award of Performance Shares. Performance Shares may be awarded either
alone or in addition to other Awards granted under this Plan and shall consist
of the right to receive Common Stock or cash of an equivalent value at the end
of a specified Performance Period (defined below). The Committee shall
determine the Eligible Employees to whom and the time or times at which
Performance Shares shall be awarded, the number of Performance Shares to be
awarded to any person, the duration of the period (the "Performance Period")
during which, and the conditions under which, receipt of the Shares will be
deferred, and the other terms and conditions of the Award in addition to those
set forth in Section 9.2.
The Committee may condition the grant of Performance Shares upon the
attainment of specified performance goals or such other factors or criteria as
the Committee shall determine.
9.2 Terms and Conditions. Performance Shares awarded pursuant to this
Article IX shall be subject to the following terms and conditions:
(a) Non-Transferability. Performance Share Awards shall be Transferable
only in accordance with the provisions of Section 6.4(e) of this Plan.
(b) Dividends. Unless otherwise determined by the Committee at the time
of the grant of the Award, amounts equal to any dividends declared during
the Performance Period with respect to the number of shares of Common Stock
covered by a Performance Share Award will not be paid to the Participant.
(c) Payment. Subject to the provisions of the Award Notice and this Plan,
at the expiration of the Performance Period, share certificates and/or cash
of an equivalent value (as the Committee may determine) shall be delivered
to the Participant, or his or her legal representative, in a number equal to
the vested shares covered by the Performance Share Award.
(d) Termination of Employment. Subject to the applicable provisions of
the Award Notice and this Plan, upon termination of a Participant's
employment with the Company or a Subsidiary for any reason during the
Performance Period for a given Award, the Performance Shares in question
will vest or be forfeited in accordance with the terms and conditions
established by the Committee.
ARTICLE X
Performance Units
10.1 Award of Performance Units. Performance Units may be awarded either
alone or in addition to other Awards granted under this Plan and shall consist
of the right to receive a fixed dollar amount, payable in cash or Common Stock
or a combination of both. The Committee shall determine the Eligible Employees
to whom and the time or times at which Performance Units shall be awarded, the
number of Performance Units to be awarded to any person, the duration of the
period (the "Performance Cycle") during which, and the conditions under which, a
Participant's right to Performance Units will be vested, the ability of
Participants to defer the receipt of payment of such Units, and the other terms
and conditions of the Award in addition to those set forth in Section 10.2.
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The Committee may condition the vesting of Performance Units upon the
attainment of specified performance goals or such other factors or criteria as
the Committee shall determine.
10.2 Terms and Conditions. The Performance Units awarded pursuant to
this Article X shall be subject to the following terms and conditions:
(a) Non-Transferability. Performance Unit Awards shall be Transferable
only in accordance with the provision of Section 6.4(e) of this Plan.
(b) Vesting. At the expiration of the Performance Cycle, the Committee
shall determine the extent to which the performance goals have been
achieved, and the percentage of the Performance Units of each Participant
that have vested.
(c) Payment. Subject to the applicable provisions of the Award Notice and
this Plan, at the expiration of the Performance Cycle, cash and/or share
certificates of an equivalent value (as the Committee may determine) shall
be delivered to the Participant, or his or her legal representative, in
payment of the vested Performance Units covered by the Performance Unit
Award.
(d) Termination of Employment. Subject to the applicable provisions of
the Award Notice and this Plan, upon termination of a Participant's
employment with the Company or a Subsidiary for any reason during the
Performance Cycle for a given Award, the Performance Units in question will
vest or be forfeited in accordance with the terms and conditions established
by the Committee.
ARTICLE XI
Other Stock-Based Awards
11.1 Other Awards. Other Awards of Common Stock and cash Awards that are
valued in whole or in part by reference to, or are payable in or otherwise based
on, Common Stock ("Other Stock-Based Awards") including, without limitation,
Awards valued by reference to performance concepts may be granted either alone
or in addition to or in tandem with Stock Options, Stock Appreciation Rights,
Stock Awards, Performance Shares or Performance Units.
Subject to the provisions of this Plan, the Committee shall have authority
to determine the persons to whom and the time or times at which such Awards
shall be made, the number of shares of Common Stock to be awarded pursuant to
such Awards, and all other conditions of the Awards.
11.2 Terms and Conditions. Other Stock-Based Awards made pursuant to
this Article XI shall be subject to the following terms and conditions:
(a) Non-Transferability. Other Stock-Based Awards shall be Transferable
only in accordance with the provisions of Section 6.4(e) of this Plan.
(b) Dividends. Unless otherwise determined by the Committee at the time
of the grant of the Award, amounts equal to any dividends declared during
the Performance Period with respect to the number of shares of Common Stock
covered by such Award will not be paid to the Participant.
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(c) Vesting. Any Award under this Article XI and any Common Stock covered
by any such Award shall vest or be forfeited to the extent so provided in
the Award Notice, as determined by the Committee.
(d) Price. Common Stock issued on a bonus basis under this Article XI may
be issued for no cash consideration; Common Stock purchased pursuant to a
purchase right awarded under this Article XI shall be priced as determined
by the Committee subject to the provisions of Section 4.5.
ARTICLE XII
Change in Control Provisions
12.1 Benefits. In the event of a Change in Control of the Company (as
defined below), and except as otherwise provided by the Committee upon the grant
of an Award:
(a) All outstanding Stock Options granted prior to the Change in Control
shall be fully vested and immediately exercisable in their entirety. The
Committee may provide for the purchase of any such Stock Options by the
Company or Subsidiary for an amount of cash equal to the excess of the
Change in Control price (as defined below) of the shares of Common Stock
covered by such Stock Options, over the aggregate exercise price of such
Stock Options.
(b) All outstanding Stock Appreciation Rights granted prior to the Change
in Control shall be fully vested and immediately exercisable in their
entirety. The Fair Market Value of the Common Stock on the date of exercise
shall be determined by the Committee and may be the Change in Control price
of the shares of Common Stock covered by such rights.
(c) All outstanding Stock Awards granted prior to the Change in Control
shall be fully vested and certificates shall be immediately delivered to the
Participants.
(d) All Performance Share and Performance Unit Awards granted prior to the
Change in Control shall vest as if (i) the applicable Performance Period had
ended upon such Change in Control, and (ii) the determination of the extent
to which any specified performance goals or targets had been achieved will
be made at such time.
(e) Any Other Stock-Based Awards granted prior to the Change in Control
shall be fully vested and payable, deliverable or exercisable, as
applicable, in accordance with the terms of the Award at the time of its
grant.
For purposes of this Section 12.1, Change in Control price shall mean the
higher of (i) the highest price per share of Common Stock paid in any
transaction related to a Change in Control of the Company, or (ii) the highest
Fair Market Value per share of Common Stock at any time during the 60-day period
preceding a Change in Control.
Notwithstanding any other provision hereof, if a Change in Control occurs
within six months of the date of grant of an Award to an Officer, such an Award
shall be cancelled in exchange for a cash payment to the Officer, effected on
the day which is six months and one day after the date of grant of such Award
(the "valuation date"), equal to the difference between the Fair Market Value of
the Award on the valuation date and the exercise price (if any) of the Award.
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Any determination by the Committee made pursuant to this Section 12.1 may
be made as to all outstanding Awards, and any such determination may be made
prior to or after a Change in Control.
12.2 Change in Control. For the purposes of this Plan, a "Change in
Control" of the Company shall mean:
(a) The acquisition, other than from the Company, by any person, entity or
"group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act")), excluding for this
purpose the Company, the Robert R. McCormick Tribune Foundation, the
Cantigny Foundation and any employee benefit plan (or related trust)
sponsored or maintained by the Company or its subsidiaries, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either the then outstanding shares of Common Stock or
the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors; or
(b) Individuals who, as of April 28, 1992, constitute the Board of
Directors of the Company (as of April 28, 1992 the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board, provided that
any person becoming a director subsequent to the date hereof whose election,
or nomination for election, by the stockholders of the Company was approved
by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the members of the Board, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be considered as though such person were a member of the
Incumbent Board; or
(c) Approval by the stockholders of the Company of a reorganization,
merger, or consolidation, in each case, with respect to which persons who
were the stockholders of the Company immediately prior to such approval do
not, immediately after such reorganization, merger or consolidation, own,
directly or indirectly, more than 60% of the combined voting power of the
then outstanding securities entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company, or a
liquidation or dissolution of the Company, or the sale of all or
substantially all of the assets of the Company.
12.3 Taxes. If, for any reason, any part or all of the amounts payable
to a Participant pursuant to this Plan (or otherwise, if such amounts are paid
by the Company or any of its subsidiaries after there has been a Change in
Control) are deemed to be "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code, the Committee may provide in the Award that the
Company shall pay to such Participant, in addition to any other amounts that he
or she may be entitled to receive pursuant to this Plan, an amount which, after
all Federal, state, and local taxes (of whatever kind) imposed on the
Participant with respect to such amount are subtracted therefrom, is equal to
the excise taxes imposed on such excess parachute payments pursuant to Section
4999 of the Code.
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ARTICLE XIII
Termination or Amendment of this Plan
13.1 Termination or Amendment. Notwithstanding any other provision of
this Plan, the Board may at any time, and from time to time, amend, in whole or
in part, any or all of the provisions of this Plan, or suspend or terminate it
entirely; provided, however, that, unless otherwise required by law, the rights
of a Participant with respect to any Awards granted prior to such amendment,
suspension or termination, may not be impaired without the consent of such
Participant; and, provided further, no amendment may be made which would cause
this Plan to lose its exemption under Securities and Exchange Commission
Regulation (S) 240.16b-3 or which would increase the percentages set forth in
Section 4.1 without shareholder approval.
ARTICLE XIV
General Provisions
14.1 Unfunded Status of Plan. This Plan is intended to be unfunded.
With respect to any payments as to which a Participant has a fixed and vested
interest but which are not yet made to a Participant by the Company, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company.
14.2 No Right to Employment. Neither this Plan nor the grant of any
Award hereunder shall give any Participant or other employee any right with
respect to continuance of employment by the Company or any Subsidiary, nor shall
they be a limitation in any way on the right of the Company or any Subsidiary by
which an employee is employed to terminate his or her employment at any time.
14.3 Other Plans. In no event shall the value of, or income arising
from, any Awards under this Plan be treated as compensation for purposes of any
pension, profit sharing, life insurance, disability or any other retirement or
welfare benefit plan now maintained or hereafter adopted by the Company or any
Subsidiary, unless such plan specifically provides to the contrary.
14.4 Withholding of Taxes. The Company shall have the right to deduct
from any payment to be made pursuant to this Plan, or to otherwise require,
prior to the issuance or delivery of any shares of Common Stock or the payment
of any cash hereunder, payment by the Participant of any Federal, state or local
taxes required by law to be withheld.
The Committee may permit any such withholding obligation to be satisfied
by reducing the number of shares of Common Stock otherwise deliverable or by
accepting the delivery of previously owned shares of Common Stock. Any fraction
of a share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.
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14.5 No Assignment of Benefits. No Award or other benefit payable under
this Plan shall, except as otherwise specifically provided by law, be
Transferable in any manner, and any attempt to Transfer any such benefit shall
be void, and any such benefit shall not in any manner be subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be entitled
to such benefit, nor shall it be subject to attachment or legal process for or
against such person.
14.6 Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware (without regard to applicable Delaware principles of conflict of laws).
14.7 Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
14.8 Liability. No member of the Board, no member of the Committee and
no employee of the Company shall be liable for any act or failure to act
hereunder, by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated or, except
in circumstances involving his bad faith, gross negligence or fraud, for any act
or failure to act by the member or employee.
ARTICLE XV
Effective Date of Plan
This Plan was adopted by the Board on February 18, 1992 and shall become
effective on the date it is approved by the stockholders of the Company. This
Plan shall continue in effect until terminated by the Board pursuant to Article
XIII.
2/21/94
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Exhibit 10.14
Tribune Company
Transitional Compensation Plan for Executive Employees
Tribune Company, by resolution of its Board of Directors, adopted the Tribune
Company Transitional Compensation Plan for Executive Employees (the "Plan") on
December 9, 1985, to attract and retain executives of outstanding competence and
to provide additional assurance that they will remain with Tribune Company and
its subsidiaries on a long-term basis. The following provisions constitute an
amendment and restatement of the Plan effective as of January 1, 1995.
1. PARTICIPATION. Any full-time, key executive employee of Tribune Company or
of any of its subsidiaries shall be eligible to participate in the Plan in one
of two separate tiers, if at the time his employment terminates he has been
designated by the Committee as being covered by the Plan within a specific tier,
and such designation has not been revoked; provided, however, that no revocation
of such designation shall be effective if made: (a) on the day of, or within 36
months after, occurrence of a "Change in Control," as such term is hereinafter
defined; or (b) prior to a Change in Control, but at the request of any third
party participating in or causing the Change in Control; or (c) otherwise in
connection with or in anticipation of a Change in Control.
For the purposes of the Plan, the term "subsidiary" shall mean any
corporation, more than 50 percent of the outstanding, voting stock in which is
owned by Tribune Company or by a subsidiary.
2. ADMINISTRATION. The Plan shall be administered by the Governance and
Compensation Committee of the Board of Directors of Tribune Company (the
"Committee") or by a successor committee. The Committee shall have the authority
to make rules and regulations governing the administration of the Plan, to
designate executive employees to be covered by the Plan, to revoke such
designations, and to make all other determinations or decisions, and to take
such actions, as may be necessary or advisable for the administration of the
Plan. The Committee's determinations need not be uniform, and may be made
selectively among eligible employees, whether or not they are similarly
situated.
3. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. An executive who is a
Participant in the Plan shall be eligible to receive transitional compensation,
in the amounts and at the times described in paragraph 5, if:
(a) His employment with the Company and all of its subsidiaries is
terminated:
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(i) On the day of, or within 36 months after, occurrence of a
"Change in Control," as such term is hereinafter defined; or
(ii) Prior to a Change in Control, but at the request of any third
party participating in or causing the Change in Control; or
(iii) Otherwise in connection with or in anticipation of a Change in
Control; and
(b) The Participant's termination of employment was not:
(i) On account of his death;
(ii) On account of a physical or mental condition that would entitle
him to long-term disability benefits under the Tribune Company
Salary Continuation Plan, as then in effect (whether or not he is
actually a Participant in such plan);
(iii) For conduct involving dishonesty or willful misconduct which, in
either case, is detrimental in a significant way to the business
of Tribune Company or any of its subsidiaries; or
(iv) On account of the employee's voluntary resignation; provided that
a resignation shall not be considered to be "voluntary" for the
purposes of the Plan in the following situations: (x) if the
termination by a Tier I Participant occurs during the 30-day
period immediately following the first anniversary of the Change
in Control (i.e., this provision is not available for Tier II
Participants); or (y) if the termination occurs under the
circumstances described in paragraph 13(a) of the Plan; or (z) if,
subsequent to the Change in Control and prior to such resignation,
there has been a reduction in the nature or scope of the
Participant's compensation or benefits, or a change in the city in
which he is required to perform his duties.
4. CHANGE IN CONTROL. For the purposes of the Plan, a "Change in Control"
shall mean:
(a) The acquisition, other than from Tribune Company, by any person,
entity, or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act")), excluding for this
purpose the Robert R. McCormick Tribune Foundation, the Cantigny Foundation (or
any charitable trust, foundation, organization, or similar entity or entities
succeeding to one or both of those Foundations or any substantial part thereof)
and any employee benefit plan or trust of Tribune Company or its subsidiaries,
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20 percent or more of either the
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then outstanding shares of common stock or the combined voting power of Tribune
Company's then outstanding voting securities entitled to vote generally in the
election of directors; or
(b) Individuals who, as of January 1, 1995, constitute the Board of Directors
of Tribune Company (as of January 1, 1995 the "Incumbent Board" and, generally,
the "Board") cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election, by the shareholders of
Tribune Company was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the members of the Board
of Tribune Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be considered as though such persons
were a member of the Incumbent Board; or
(c) Approval by the shareholders of Tribune Company of a reorganization,
merger, or consolidation, in each case, with respect to which persons who were
the shareholders of Tribune Company immediately prior to such reorganization,
merger, or consolidation do not, immediately thereafter, own, directly or
indirectly, more than 60 percent of the combined voting power for the then
outstanding securities entitled to vote generally in the election of directors
of the reorganized, merged, or consolidated company, or a liquidation or
dissolution of Tribune Company, or the sale of all or substantially all of the
assets of Tribune Company.
5. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. A Participant who is
eligible for transitional compensation shall receive:
(a) A lump-sum cash payment, payable within 30 calendar days after the date on
which his employment terminates, in an amount equal to the sum of:
(i) For Tier I Participants, three (3) multiplied by the sum of the
Participant's highest annual rate of Base Salary in effect within the
three years prior to or upon the effective date of termination, and by
the Participant's average annual bonus paid over the prior three
years, or shorter period equal to the Participant's total years of
prior service (a target bonus will be paid to Participants with less
than one year of prior service); or
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(ii) For Tier II Participants, two (2) multiplied by the sum of the
Participant's highest annual rate of Base Salary in effect within the
three years prior to or upon the effective date of termination, and by
the Participant's average annual bonus paid over the prior three
years, or shorter period equal to the Participant's total years of
prior service (a target bonus will be paid to Participants with less
than one year of prior service);
(b) Outplacement services at a qualified agency selected by Tribune Company;
(c) Continuation of coverage under his employer's group medical, group life,
and group long-term disability plans, if any, and under any policy or policies
of "split dollar" life insurance maintained by his employer, until the earliest
to occur of:
(i) The expiration of 36 months for Tier I Participants, and the
expiration of 24 months for Tier II Participants, from the date on
which his employment terminates; or
(ii) The date on which he obtains comparable coverage provided by a new
employer.
For purposes of this paragraph 5, a Participant's annual rate of base salary
shall be determined prior to any reduction for deferred compensation, "401(k)"
plan contributions, and similar items, provided that any reduction in a
Participant's annual rate of salary, group insurance or split dollar coverage,
occurring within 36 months after a Change in Control shall be disregarded, and
the payments and coverage under this paragraph shall be governed by the annual
salary, group insurance and split dollar coverage, provided to such Participant
immediately prior to such reduction.
6. TAXES. If, for any reason, any part or all of the amounts payable to a
Tier I or Tier II Participant pursuant to the Plan (or otherwise, if such
amounts are paid by Tribune Company or any of its subsidiaries after there has
been a Change in Control) are deemed to be "excess parachute payments" within
the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), Tribune Company shall pay to such Participant, in addition
to any other amounts that he may be entitled to receive pursuant to the Plan, an
amount which, after all federal, state, and local taxes (of whatever kind)
imposed on the Participant with respect to such amount are subtracted therefrom,
is equal to the excise taxes imposed on such excess parachute payments pursuant
to Section 4999 of the Code.
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7. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained shall
require or be deemed to require Tribune Company or a subsidiary to segregate,
earmark, or otherwise set aside any funds or other assets to provide for any
payments required to be made hereunder, and the rights of a terminating
Participant to transitional compensation hereunder shall be solely those of a
general, unsecured creditor of Tribune Company. However, Tribune Company may, in
its discretion, deposit cash or property, or both, equal in value to all or a
portion of the amounts anticipated to be payable hereunder for any or all
Participants into a trust, the assets of which are to be distributed at such
times as are provided for in the Plan; provided that such assets shall be
subject at all times to the rights of Tribune Company's general creditors.
8. DEATH. In the event of a Participant's death, any amount or benefit
payable or distributable to him pursuant to paragraph 5(a) and paragraph 6 shall
be paid to the beneficiary designated by such Participant for such purpose in
the last written instrument received by the Committee prior to the Participant's
death, if any, otherwise, to the Participant's estate.
9. RIGHTS IN THE EVENT OF DISPUTE. If a claim or dispute arises concerning
the rights of a Participant or beneficiary to benefits under the Plan,
regardless of the party by whom such claim or dispute is initiated, Tribune
Company shall, upon presentation of appropriate vouchers, pay all legal
expenses, including reasonable attorneys' fees, court costs, and ordinary and
necessary out-of-pocket costs of attorneys, billed to and payable by the
Participant or by anyone claiming under or through the Participant (such person
being hereinafter referred to as the Participant's "claimant"), in connection
with the bringing, prosecuting, defending, litigating, negotiating, or settling
such claim or dispute; provided that:
(a) The Participant or the Participant's claimant shall repay to Tribune
Company any such expenses theretofore paid or advanced by Tribune Company if and
to the extent that the party disputing the Participant's rights obtains a
judgment in its favor from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so has expired or otherwise,
and it is determined that such expenses were not incurred by the Participant or
the Participant's claimant while acting in good faith; provided further that
(b) In the case of any claim or dispute initiated by a Participant or the
Participant's claimant, such claim shall be made, or notice of such dispute
given, with specific reference to the provisions of this Plan, to the Committee
within one year after the occurrence of the event giving rise to such claim or
dispute.
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10. AMENDMENT OR TERMINATION. The Board of Directors of Tribune Company
reserves the right to amend, modify, suspend, or terminate the Plan at any time;
provided that:
(a) Without the consent of the Participant, no such amendment, modification,
suspension, or termination shall reduce or diminish his right to receive any
payment or benefit which becomes due and payable under the Plan as then in
effect by reason of his termination of employment prior to the date on which
such amendment, modification, suspension, or termination becomes effective; and
(b) No such amendment, modification, suspension, or termination which has the
effect of reducing or diminishing the right of any Participant to receive any
payment or benefit under the Plan will become effective prior to the expiration
of the 36 consecutive month period commencing on the date of a Change in
Control, if such amendment, modification, suspension, or termination was
effected: (i) on the day of or subsequent to the Change in Control; (ii) prior
to the Change in Control, but at the request of any third party participating in
or causing the Change in Control; or (iii) otherwise in connection with or in
anticipation of a Change in Control.
11. NO OBLIGATION TO MITIGATE DAMAGES. In the event a Participant becomes
eligible to receive benefits hereunder, the Participant shall have no obligation
to seek other employment in an effort to mitigate damages. To the extent a
Participant shall accept other employment after his termination of employment,
the compensation and benefits received from such employment shall not reduce any
compensation and benefits due under this Plan, except as provided in paragraph
5(c).
12. OTHER BENEFITS. The benefits provided under the Plan shall, except to the
extent otherwise specifically provided herein, be in addition to, and not in
derogation or diminution of, any benefits that a Participant or his beneficiary
may be entitled to receive under any other plan or program now or hereafter
maintained by Tribune Company or by any of its subsidiaries.
13. SUCCESSORS.
(a) Tribune Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all of
the business and/or assets of Tribune Company, to expressly assume and agree to
perform Tribune Company's obligations under this Plan in the same manner and to
the same extent that Tribune Company would be required to perform them if no
such succession had taken place unless, in the opinion of legal counsel mutually
acceptable to a majority of the Participants, such obligations have been assumed
by the successor as a matter of law. Failure of Tribune Company to obtain such
agreement prior to the effectiveness of any such succession (unless the
foregoing opinion is rendered to the Participants) shall entitle each
Participant to terminate his employment and to receive the payments provided for
in paragraphs 5 and 6 above. As used in this Plan, "Tribune Company" shall mean
such company, as presently constituted, and any successor to its business and/or
6
<PAGE>
assets which executes and delivers the agreement provided for in this paragraph
13 or which otherwise becomes bound by all the terms and provisions of the Plan
as a matter of law.
(b) A Participant's rights under this Plan shall inure to the benefit of, and
shall be enforceable by, the Participant's legal representative or other
successors in interest, but shall not otherwise be assignable or transferable.
14. NOTICES. Any notices referred to herein shall be in writing and shall be
sufficient if delivered in person or sent by U.S. registered or certified mail
to the Participant at his address on file with his employer (or to such other
address as the Participant shall specify by notice), or to Tribune Company at
435 North Michigan Avenue, Chicago, Illinois 60611, Attention: Governance and
Compensation Committee.
15. WAIVER. Any waiver of any breach of any of the provisions of the Plan
shall not operate as a waiver of any other breach of such provisions or any
other provisions, nor shall any failure to enforce any provision of the Plan
operate as a waiver of any party's right to enforce such provision or any other
provision.
16. SEVERABILITY. If any provision of the Plan or the application thereof is
held invalid or unenforceable by a court of competent jurisdiction, the
invalidity or unenforceability thereof shall not affect any other provisions or
applications of this Plan which can be given effect without the invalid or
unenforceable provision or application.
17. GOVERNING LAW. The validity, interpretation, construction, and
performance of the Plan shall be governed by the laws of the state of Illinois.
18. HEADINGS. The headings and paragraph designations of the Plan are
included solely for convenience of reference and shall in no event be construed
to effect or modify any provisions of the Plan.
19. GENDER AND NUMBER. In the Plan where the context admits, words in any
gender shall include the other genders, words in the plural shall include the
singular, and words in the singular shall include the plural.
7
<PAGE>
Exhibit 11
TRIBUNE COMPANY
STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Fiscal Year Ended December
------------------------------------------
PRIMARY 1994 1993 1992
- ------- -------- -------- --------
<S> <C> <C> <C>
Income before cumulative effects of changes in accounting principles $242,047 $188,606 $136,625
Cumulative effects of changes in accounting principles, net of tax - - (16,800)
-------- -------- --------
Net income 242,047 188,606 119,825
Preferred dividends, net of tax (18,574) (18,439) (18,168)
-------- -------- --------
Net income attributable to common shares $223,473 $170,167 $101,657
-------- -------- --------
Weighted average common shares outstanding 67,213 66,371 65,018
-------- -------- --------
Primary net income per share:
Before cumulative effects of changes in accounting principles $3.32 $2.56 $1.82
Cumulative effects of accounting changes, net - - (0.26)
-------- -------- --------
Total $3.32 $2.56 $1.56
======== ======== ========
FULLY DILUTED
- -------------
Income before cumulative effects of changes in accounting principles $242,047 $188,606 $136,625
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (11,822) (12,442) (12,408)
Assumed elimination of tax benefit on certain ESOP preferred dividends (2,817) (2,248) (1,606)
-------- -------- --------
Adjusted net income before cumulative effects of changes in accounting principles 227,408 173,916 122,611
Cumulative effects of changes in accounting principles, net of tax - - (16,800)
-------- -------- --------
Adjusted net income $227,408 $173,916 $105,811
-------- -------- --------
Weighted average common shares outstanding 67,213 66,371 65,018
Assumed conversion of preferred shares into common shares 6,050 6,126 6,331
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 810 1,198 971
-------- -------- --------
Adjusted weighted average common shares outstanding 74,073 73,695 72,320
-------- -------- --------
Fully diluted net income per share:
Before cumulative effects of changes in accounting principles $3.07 $2.36 $1.70
Cumulative effects of accounting changes, net - - (0.24)
-------- -------- --------
Total $3.07 $2.36 $1.46
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Exhibit 12
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Fiscal Year Ended December
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income (loss) before cumulative effects of accounting changes $242,047 $188,606 $136,625 $141,981 ($63,533)
Add:
Income tax expense (benefit) 186,668 143,821 96,266 99,894 (30,695)
Losses on equity investments 16,176 20,212 1,903 1,107 2,285
-------- -------- -------- -------- --------
Sub-total 444,891 352,639 234,794 242,982 (91,943)
-------- -------- -------- -------- --------
Fixed charge adjustments
Add:
Interest expense 20,585 24,660 49,254 63,083 53,576
Amortization of capitalized interest 2,362 2,392 5,304 5,258 4,850
Interest component of rental expense (A) 8,236 8,732 9,329 9,047 14,467
-------- -------- -------- -------- --------
Earnings (loss), as adjusted $476,074 $388,423 $298,681 $320,370 ($19,050)
======== ======== ======== ======== ========
Fixed charges:
Interest expense $20,585 $ 24,660 $ 49,254 $ 63,083 $ 53,576
Interest capitalized - 1,099 3,445 1,976 8,652
Interest component of rental expense (A) 8,236 8,732 9,329 9,047 14,467
Interest related to guaranteed ESOP debt (B) 24,017 25,742 27,019 27,500 27,757
-------- -------- -------- -------- --------
Total fixed charges $ 52,838 $ 60,233 $ 89,047 $101,606 $104,452
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 9.0 6.4 3.4 3.2 (C)
======== ======== ======== ======== ========
</TABLE>
(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.
<PAGE>
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion presents the significant factors that have
affected the businesses of Tribune Company and its subsidiaries (the "Company")
over the last three years. This commentary should be read in conjunction with
the Company's consolidated financial statements and Eleven Year Financial
Summary, which are also presented in this annual report.
SIGNIFICANT EVENTS AND TRENDS
- -----------------------------
The Major League Baseball players' contract expired on December 31, 1993. The
Major League Baseball Players Association initiated a strike on August 12, 1994,
and on August 28, 1994, the owners cancelled the remainder of the Major League
Baseball season. Negotiations to settle the strike are continuing. The strike
impacted the Company's Chicago Cubs baseball operations, and, to a lesser
extent, television and radio operations. In total, the baseball strike
negatively impacted the Company's primary earnings per share by approximately
$.10. The Company cannot predict the ultimate outcome of the negotiations.
The North American newsprint industry has begun to increase newsprint
prices due to increased demand for newsprint in the U.S. and overseas. Price
increases in 1994 and announced 1995 increases for March 1 and May 1 would
result in an approximate 40% increase in average newsprint selling prices in
1995 over 1994. This will increase newsprint expense at the Company's
newspapers in 1995 by approximately $70 million. The Company expects to offset
the increase, at least in part, through cost controls and expected revenue
increases. QUNO Corporation, a Canadian newsprint manufacturer in which the
Company has a 34% equity investment, will benefit from the price increases in
1995.
RESULTS OF OPERATIONS
- ---------------------
The Company's fiscal year ends on the last Sunday of the calendar year. Fiscal
years 1994, 1993 and 1992 all included 52 weeks.
-32-
<PAGE>
CONSOLIDATED
The Company's consolidated financial results as reported for 1994, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
Change
(Dollars in millions, except per share amounts) 1994 1993 1992 94-93 93-92
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $2,154 $1,947 $2,100 + 11% - 7%
Operating profit 396 356 268 + 11% + 33%
Equity in QUNO net loss (6) (18) - + 65% *
Gain on QUNO stock sale 39 - - * -
Net income 242 189 120 + 28% + 57%
Before gain on QUNO stock sale/
accounting changes 229 189 137 + 21% + 38%
Primary net income per share 3.32 2.56 1.56 + 30% + 64%
Before gain on QUNO stock sale/
accounting changes 3.13 2.56 1.82 + 22% + 41%
* Not Meaningful
</TABLE>
On February 17, 1993, the Company's previously wholly owned newsprint
subsidiary, QUNO, completed an initial public offering of 9 million shares of
common stock. Subsequent to the offering, the Company held 49% of the voting
common shares and 59% of QUNO's total 22 million outstanding common shares. On
April 14, 1994, the Company reduced its ownership holdings in QUNO to 34% by
selling 5.5 million shares of QUNO common stock. 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. The Company also
holds a $138.8 million subordinated debenture, convertible into 11.7 million
voting common shares of QUNO. The Company has accounted for its investment in
QUNO using the equity method since the beginning of 1993. Prior year statements
were not restated.
Effective as of the beginning of 1992, the Company adopted three new
accounting standards related to income taxes, postretirement benefits and
postemployment benefits. The cumulative effect of these rules resulted in a net
after-tax charge against 1992 earnings of $16.8 million, or $.26 per share on a
primary basis.
[GRAPH APPEARS HERE]
NET INCOME PER SHARE -- The 22% increase in 1994 primary net income per share
before the gain on the QUNO stock sale was due to higher profits at the media
businesses, lower equity losses from QUNO and lower net interest expense. The
41% increase in 1993 primary net income per share before accounting changes was
due to higher profits at the media businesses, lower QUNO losses and a reduction
in the Company's share of those losses, and lower net interest expense. Average
common shares outstanding increased 1% in 1994 and 2% in 1993.
OPERATING PROFIT AND REVENUES -- The following table shows consolidated
operating revenues, EBITDA (earnings before equity in QUNO net loss, gain on
QUNO stock sale, interest, taxes, depreciation and amortization) and operating
profit by business segment, excluding QUNO from 1992:
-33-
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 1992 94-93 93-92
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Publishing $1,292 $1,199 $1,167 + 8% + 3%
Broadcasting & Entertainment 764 727 684 + 5% + 6%
New Media/Education 98 21 - + 364% *
- ----------------------------------------------------------------------------
Total operating revenues $2,154 $1,947 $1,851 + 11% + 5%
- ----------------------------------------------------------------------------
EBITDA
Publishing $ 359 $ 318 $ 288 + 13% + 11%
Broadcasting & Entertainment 168 161 153 + 4% + 5%
New Media/Education 10 4 - + 175% *
Corporate expenses (25) (24) (23) - 4% - 4%
- ----------------------------------------------------------------------------
Total EBITDA $ 512 $ 459 $ 418 + 12% + 10%
- ----------------------------------------------------------------------------
Operating profit
Publishing $ 287 $ 253 $ 225 + 14% + 13%
Broadcasting & Entertainment 132 125 121 + 5% + 4%
New Media/Education 3 2 - + 37% *
Corporate expenses (26) (24) (24) - 7% - 3%
- ----------------------------------------------------------------------------
Total operating profit $ 396 $ 356 $ 322 + 11% + 11%
- ----------------------------------------------------------------------------
* Not Meaningful
</TABLE>
As shown above, consolidated 1994 revenues were up 11%, or $207 million from
1993, with each of the segments reporting gains. New media/education, previously
included in the publishing segment, includes Contemporary Books, Compton's
NewMedia and The Wright Group, acquired July 1993, September 1993 and February
1994, respectively. A more detailed discussion of this new segment begins on
page 39. Consolidated 1993 revenues increased 5%, or $96 million, from 1992.
Consolidated operating profit increased 11%, or $40 million, in 1994.
Publishing was up $34 million and broadcasting and entertainment was up $7
million, primarily due to increased advertising revenues. Consolidated 1994
EBITDA was up $53 million, or 12%, due primarily to publishing, which was up $41
million. Consolidated operating profit increased 11% and EBITDA increased 10% in
1993, primarily due to increased revenues.
[GRAPH APPEARS HERE]
OPERATING EXPENSES -- Consolidated operating expenses, excluding QUNO from 1992,
were as follows:
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 1992 94-93 93-92
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost of sales $1,078 $1,026 $ 985 + 5% + 4%
Selling, general & administrative 565 462 448 + 22% + 3%
Depreciation & amortization
of intangible assets 115 103 96 + 12% + 7%
- -------------------------------------------------------------------------
Total operating expenses $1,758 $1,591 $1,529 + 11% + 4%
- -------------------------------------------------------------------------
</TABLE>
-34-
<PAGE>
The 5% increase in cost of sales in 1994 was due primarily to the additional
costs from five acquisitions made since mid-1993, increased newsprint and ink
expense and increased compensation expense. Excluding the acquisitions, cost of
sales increased $14 million, or 1%, in 1994. Newsprint and ink expense was up $5
million, or 3%, and compensation expense was up $6 million, or 2%. In 1993, the
4% increase in cost of sales resulted primarily from increased compensation
costs of $12 million, or 4%, higher newsprint and ink expense of $11 million, or
6%, and the acquisitions of Contemporary Books and Compton's in 1993. Cost of
sales was 50% of revenues in 1994 and 53% in 1993 and 1992.
SG&A expense increased 22% in 1994 from 1993, mainly due to acquisitions.
Excluding the acquisitions, SG&A expense increased $41 million, or 9%, due
primarily to increased compensation costs of $12 million, or 6%, and increased
sales costs of $14 million, or 20%. The 3% increase in SG&A expense in 1993 from
1992 was mainly attributable to increased compensation costs of $10 million, or
4%. The increase in depreciation and amortization of intangible assets in both
1994 and 1993 was principally due to the acquisitions and capital expenditures.
PUBLISHING
OPERATING PROFIT AND REVENUES -- The following table shows publishing operating
revenues, EBITDA and operating profit split between daily newspapers and other
publications/services/development. The latter category includes syndication of
editorial products, advertising placement services, alternative publications,
alternate delivery services, direct mail operations, online/electronic products
and, for EBITDA and operating profit, the Company's equity losses from its
investment in Picture Network International.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 1992 94-93 93-92
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues
Daily newspapers $1,214 $1,133 $1,105 + 7% + 3%
Other publications/services/development 78 66 62 + 18% + 6%
- ------------------------------------------------------------------------------------------
Total operating revenues $1,292 $1,199 $1,167 + 8% + 3%
- ------------------------------------------------------------------------------------------
EBITDA
Daily newspapers $ 366 $ 321 $ 294 + 14% + 9%
Other publications/services/development (7) (3) (6) - 121% + 45%
- ------------------------------------------------------------------------------------------
Total EBITDA $ 359 $ 318 $ 288 + 13% + 11%
- ------------------------------------------------------------------------------------------
Operating profit
Daily newspapers $ 297 $ 259 $ 233 + 15% + 11%
Other publications/services/development (10) (6) (8) - 85% + 32%
- ------------------------------------------------------------------------------------------
Total operating profit $ 287 $ 253 $ 225 + 14% + 13%
- ------------------------------------------------------------------------------------------
</TABLE>
Operating revenues increased 8%, or $93 million, in 1994 due primarily to
increased advertising revenues of 10%, or $88 million. Operating revenues
increased 3%, or $32 million, in 1993 due to increased advertising revenues of
3%, or $24 million. Publishing operating profit rose to $287 million in 1994, a
$34 million increase from 1993. This increase resulted from higher revenues,
partially offset by increased costs to support these revenues and higher
development expenditures. The 1993 operating profit increase of 13% was
principally due to higher 1993 revenues and the absence of the $15.3 million
pretax charge recorded in 1992 for the March 12, 1993 closure of the Times
Tribune in Palo Alto. Excluding the Times Tribune from 1992, 1993 revenues grew
4% while operating profits rose 5%.
-35-
<PAGE>
Daily newspaper operating margins for 1994 were 24.5% compared to
22.8% in 1993 and 21.1% in 1992. The increase each year was due primarily to
higher revenues.
Total publishing revenues by classification, excluding the Times Tribune from
1992, were as follows:
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 1992 94-93 93-92
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advertising
Retail $ 461 $ 435 $ 420 + 6% + 4%
General 135 121 127 + 12% - 5%
Classified 385 337 305 + 14% + 11%
- ------------------------------------------------------------------------------
Total advertising 981 893 852 + 10% + 5%
Circulation 243 246 236 - 1% + 4%
Other 68 60 60 + 13% - 2%
- ------------------------------------------------------------------------------
Total revenues $1,292 $1,199 $1,148 + 8% + 4%
- ------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
All of the Company's newspapers reported improvements in each of the three
advertising categories in 1994 due to both linage and advertising rate
increases. The 6% rise in retail advertising revenues was due to increases in
department store and food and drug categories at nearly all of the newspapers.
General advertising revenues climbed 12% due to higher advertising in the
transportation and media categories. Classified advertising revenues rose 14%
due to increases in help wanted, automotive and real estate advertising.
Retail advertising revenues were up 4% in 1993 due to increases in the
electronics and department store categories in Chicago and Fort Lauderdale.
General advertising revenues declined 5% in 1993 due principally to lower
advertising in the transportation and resorts categories at nearly all of the
newspapers. Classified advertising revenues rose mainly due to increases in help
wanted and automotive advertising. All newspapers reported improved classified
advertising except the Company's newspaper in Escondido, California.
The following table presents 1994, 1993 and 1992 advertising linage,
excluding the Times Tribune from 1992:
<TABLE>
<CAPTION>
Change
(Inches in thousands) 1994 1993 1992 94-93 93-92
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Full run
Retail 4,623 4,444 4,406 + 4% + 1%
General 754 641 710 + 18% - 10%
Classified 6,915 6,502 6,023 + 6% + 8%
- ------------------------------------------------------------------------------
Total full run 12,292 11,587 11,139 + 6% + 4%
Part run 10,644 10,050 10,156 + 6% - 1%
Preprint 10,646 9,822 9,101 + 8% + 8%
- ------------------------------------------------------------------------------
Total inches 33,582 31,459 30,396 + 7% + 3%
- ------------------------------------------------------------------------------
</TABLE>
-36-
<PAGE>
The 1994 increases in all categories reflect improved economic conditions in
most of the Company's major markets. Preprint linage also benefited from an
increase in the number of advertising zones offered by the Company's newspapers.
Increased zones enable advertisers to target special market areas for their
advertisements. The 1993 increases in retail and classified full run linage
reflect generally improved economic conditions. The decrease in general full run
linage in 1993 reflects a shift in advertising to preprints. The 1993 increase
in preprint advertising linage is mainly attributable to the increased number of
advertising zones offered by the Company's newspapers.
[GRAPH APPEARS HERE]
Circulation revenues decreased 1% in 1994 due to declining copies and,
excluding the Times Tribune from 1992, increased 4% in 1993 due primarily to
increased newspaper prices. Total average daily circulation decreased 1% in 1994
to 1,370,000 copies from 1,386,000 copies in 1993, while total average Sunday
circulation decreased 1% to 2,027,000 in 1994 from 2,041,000 copies in 1993.
Total average daily circulation, excluding the Times Tribune, decreased 2% in
1993 from 1,408,000 copies in 1992, while total average Sunday circulation
increased 1% from 2,029,000 copies in 1992. The decrease in average daily
circulation for both years was primarily due to pricing action in Chicago,
Orlando and Newport News in 1992 and a general circulation decline experienced
by the newspaper industry, offset partially by an increase in circulation in
Fort Lauderdale.
Other revenues are derived from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; direct mail operations; and other publishing-
related activities. The increase in 1994 resulted primarily from higher revenues
from advertising placement services. Other revenues declined 2% in 1993 due to a
decrease in commercial printing revenues.
Operating Expenses -- Publishing operating expenses increased $59 million, or
6%, in 1994 due to higher compensation, circulation and newsprint and ink
expenses. Compensation costs rose $17 million, or 5%, with full-time equivalent
employees unchanged from 1993. Circulation costs rose $8 million, or 6%, in 1994
primarily due to higher selling, postage and delivery expenses for expanded
total market coverage in Chicago. Newsprint and ink expense increased $5
million, or 3%, in 1994. Newsprint consumption increased 8%, while the average
cost of newsprint consumed declined 5% due to lower average newsprint selling
prices. Newsprint prices declined in the first half of 1994 and then increased
in the second half.
Publishing operating expenses were flat in 1993. Excluding the Times Tribune,
expenses increased $42 million, or 5%, in 1993. The increase was due to higher
newsprint and ink expense and increased circulation expenses. Newsprint and ink
expense rose 7%, or $13 million, in 1993 due to a 5% increase in newsprint
prices and a 2% increase in consumption. Circulation costs rose 9%, or $11
million, primarily due to higher selling, postage and delivery expenses for
expanding total market coverage in Chicago. Other expenses, including
compensation, increased $18 million, or 3%, in 1993. Full-time equivalent
employees, excluding the Times Tribune, decreased 1% in 1993.
BROADCASTING AND ENTERTAINMENT
OPERATING PROFIT AND REVENUES -- The following table presents operating
revenues, EBITDA and operating profit for television, radio, entertainment/
Chicago Cubs and cable programming/ development. Cable programming/development
includes CLTV News (a regional news cable channel) and, for EBITDA and operating
profit, the Company's equity losses from its investment in TV Food Network.
-37-
<PAGE>
Operating revenues, EBITDA and operating profit for the group were as
follows:
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 1992 94-93 93-92
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues
Television $599 $537 $477 + 12% +12%
Radio 69 59 50 + 17% +19%
Entertainment/Chicago Cubs 92 130 157 - 29% -17%
Cable Programming/Development 4 1 - +190% *
- -------------------------------------------------------------------------
Total operating revenues $764 $727 $684 + 5% + 6%
- -------------------------------------------------------------------------
EBITDA
Television $189 $147 $121 + 29% +21%
Radio 13 14 12 - 5% +17%
Entertainment/Chicago Cubs (24) 9 20 -375% -56%
Cable Programming/Development (10) (9) - - 23% *
- -------------------------------------------------------------------------
Total EBITDA $168 $161 $153 + 4% + 5%
- -------------------------------------------------------------------------
Operating profit
Television $162 $120 $ 95 + 35% +26%
Radio 10 11 10 - 10% +10%
Entertainment/Chicago Cubs (28) 4 16 -795% -74%
Cable Programming/Development (12) (10) - - 20% *
- ------------------------------------------------------------------------
Total operating profit $132 $125 $121 + 5% + 4%
- ------------------------------------------------------------------------
* Not meaningful
</TABLE>
[GRAPH APPEARS HERE]
Broadcasting and entertainment revenues increased 5%, or $37 million, in 1994
due to a 12%, or $62 million, increase in television revenues, partially offset
by a $38 million decrease in revenues from entertainment/Chicago Cubs.
Television revenues were up at all of the Company's stations in 1994, with the
largest increases reported by WPIX-New York, KTLA-Los Angeles and WGN-Chicago.
Television revenues in 1994 include those of WLVI-Boston, acquired in April
1994. Excluding WLVI-Boston, television revenues were up 7%, or $36 million.
Radio revenues include those of Farm Journal Inc., acquired in June 1994.
Excluding Farm Journal, radio revenues were up 1%. Entertainment/Chicago Cubs
revenues were down 29% as a result of the baseball strike and fewer shows in
syndication. Revenues of approximately $30 million were lost due to the Major
League Baseball strike, mostly from the Chicago Cubs.
Television revenues were up at all of the Company's stations in 1993. The 12%
increase in 1993 was largely due to higher revenues at WPIX-New York and KTLA-
Los Angeles, as well as the addition of WPHL-Philadelphia, which was acquired
June 5, 1992. Excluding WPHL, television revenues were up 9% in 1993. Radio
revenues increased 19% in 1993 principally due to the addition of two Denver
radio stations, KOSI-FM and KEZW-AM, acquired in January 1993. Excluding
revenues from these stations, radio revenues rose 5% in 1993 primarily due to
higher revenues at WQCD-New York. Entertainment/Chicago Cubs revenues decreased
17% in 1993, due to the cancellation in 1992 of the syndicated programs "The
Dennis Miller Show" and "Now It Can Be Told," and the inclusion in 1992 of $12.3
million of baseball expansion fees. Excluding the expansion fees from 1992,
entertainment revenues declined 9% in 1993.
Operating profit was up 5% in 1994 to a record $132 million due primarily to a
35%, or $42 million, increase in television operating profit. The segment's
operating profit was reduced by a $40 million loss resulting from the combined
impact of the baseball strike and significant development and programming
expenses for "The Road," CLTV News and TV Food Network. The baseball strike had
-38-
<PAGE>
an approximate $.10 impact on the Company's 1994 primary net income per share.
Broadcasting and entertainment operating profit was up 4%, or $4 million, in
1993 from 1992. The Chicago Cubs received $12.3 million of Major League Baseball
expansion fees in December 1992, which was recorded in operating revenues in
1992. Excluding the expansion fees from 1992, operating profit in 1993 was up
15%, or $17 million. This increase was primarily the result of improved
television and radio results due to higher revenues, partially offset by
development and programming expenses for CLTV News and TV Food Network.
OPERATING EXPENSES -- Expenses for the group increased 5%, or $30 million, in
1994 due principally to the two 1994 acquisitions and programming and
development costs for "The Road" and TV Food Network. These increases were
partially offset by the expense savings associated with the baseball strike.
Excluding WLVI-Boston, Farm Journal and the Cubs, total operating expenses for
the group were up 6%, or $33 million, as a result of the programming and
development costs mentioned above and higher compensation costs. Compensation
costs rose 8%, or $10 million, due to higher benefits and normal wage increases.
Operating expenses for the broadcasting and entertainment group increased 7%,
or $39 million, in 1993. The increase was principally due to higher compensation
costs and higher television broadcast rights expense, partially offset by a
decrease in production costs for original entertainment programming.
Compensation costs increased 15% in 1993 to $184 million, primarily due to
increased player compensation at the Chicago Cubs, the addition of the new
television and radio stations and the January 1993 startup of CLTV News.
Excluding these new operations and the Cubs, compensation costs rose 5% in 1993.
Television broadcast rights expense increased $21 million, or 10%, to $221
million in 1993 due primarily to the addition of Los Angeles Dodgers and
Philadelphia Phillies baseball in 1993. Production costs for original
programming were down 46%, or $22 million, due to the cancellation of "The
Dennis Miller Show" and "Now It Can Be Told."
NEW MEDIA/EDUCATION
OPERATING PROFIT AND REVENUES -- Until the fourth quarter of 1994, the new
media/education segment's operating results were reported within the publishing
segment. The following table presents operating revenues, EBITDA and operating
profit for the new media/education segment. This segment consists of three
recently acquired businesses - Contemporary Books, acquired in July 1993;
Compton's, acquired in September 1993; and The Wright Group, acquired in
February 1994. Contemporary Books is a publisher of nonfiction trade titles and
educational books and materials. Compton's develops and distributes interactive
multimedia software for the consumer and education markets. The Wright Group is
a leading publisher of supplemental education materials for the elementary
school market. The results of these operations are included in the consolidated
statements of income from their respective dates of acquisition.
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 94-93
- -------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 98 $ 21 + 364%
EBITDA 10 4 + 175%
Operating profit 3 2 + 37%
</TABLE>
New media/education operating revenues in 1994 were $98 million.
Revenues are derived from publishing supplemental education and adult education
materials, trade books, and multimedia products. The multimedia products are
sold primarily by Compton's and include the "Compton's Interactive Encyclopedia"
and other CD-ROM titles. Operating profit for the group was $3 million in 1994,
while EBITDA was $10 million. Results for 1994 were impacted by an operating
loss of $11 million at Compton's. This resulted primarily from unusually high
product returns and inventory write-offs of obsolete third-party products.
-39-
<PAGE>
OPERATING EXPENSES -- Expenses for the group were $95 million in 1994. The
major components were product costs of $29 million, selling and promotion
expenses of $26 million, compensation costs of $20 million, other cash expenses
of $13 million, and depreciation and amortization of $7 million.
EQUITY IN QUNO NET LOSS
The Company's share of QUNO's 1994 net loss was $6 million, which reduced the
Company's primary net income per share by $.10. This amount represents 59% of
QUNO's net loss prior to April 14, 1994, and 34% of QUNO's net loss thereafter.
This compares to a 1993 equity in QUNO net loss of $18 million, which reduced
1993 primary net income per share by $.28. This loss represented 100% of QUNO's
net loss prior to February 17, 1993, the date of QUNO's stock offering, and 59%
of QUNO's net loss thereafter. The improvement in 1994 was the result of
increased newsprint shipments and the absence of a one-time $13 million pretax
charge recorded by QUNO in the 1993 fourth quarter for the closure of a pulping
operation. QUNO's newsprint shipments were up 6% while average newsprint
selling prices were down 1%.
The Company's 1993 equity in QUNO's net loss, after interest expense and
taxes, was $18 million. QUNO reported an operating loss of $31 million in 1993,
$23 million less than the $54 million operating loss incurred in 1992. This was
the result of higher average newsprint selling prices and lower operating
expenses, partially offset by a 4% decrease in newsprint shipments and the $13
million charge recorded in 1993 for the pulping operation closure. Revenues were
up 6% to $387 million in 1993 from $366 million in 1992 due to the increased
newsprint selling prices and improved sawmill revenues. Operating expenses
declined 1% from 1992.
INTEREST INCOME AND EXPENSE
The components of net interest expense were as follows:
<TABLE>
<CAPTION>
Change
(Dollars in millions) 1994 1993 1992 94-93 93-92
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 20 $ 19 $ 14 + 14% + 38%
Interest expense (21) (25) (49) - 17% - 50%
- ---------------------------------------------------------------
Net interest expense $ (1) $ (6) $ (35) - 85% - 84%
- ---------------------------------------------------------------
</TABLE>
Interest income consists primarily of interest on mortgage notes receivable
from real estate affiliates, the QUNO convertible debenture and short-term
marketable securities. Interest expense decreased 17% in 1994 to $21 million due
to lower average debt levels. Average debt levels declined approximately $97
million in 1994 to $488 million. Outstanding debt dropped to $439 million at
year-end 1994 from $537 million at the end of 1993. Interest income increased
38% to $19 million in 1993 due to the convertible debenture. Interest expense
decreased 50% in 1993 to $25 million due to lower average debt levels, primarily
as a result of the QUNO initial public offering. Average debt levels declined
approximately $280 million in 1993 to $585 million. Outstanding debt dropped to
$537 million at year-end 1993 from $841 million at the end of 1992.
FINANCIAL CONDITION
- -------------------
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $368 million in 1994 compared to $302
million in 1993. The 1994 increase was primarily due to higher net income and
changes in working capital.
Net cash used for investments was $171 million for 1994 compared to $54
million in 1993. The 1994 amount includes the $95 million of proceeds received
by the Company from the sale of 5.5 million shares of QUNO common stock, the
acquisition of The Wright Group in February for approximately $100 million in
cash, the acquisition of WLVI-Boston in April for approximately $25 million in
cash, and the acquisition of Farm Journal Inc. in June for approximately $17.5
million in cash. These acquisitions were financed with available cash. In
November 1994, the Company entered into an agreement to make a less than 50%
equity investment in Qwest Broadcasting L.L.C., a new company formed to acquire
and operate television and radio stations. Qwest has entered into an agreement
to
-40-
<PAGE>
acquire, pending FCC and other regulatory agencies approval, two television
stations for a total of $167 million. The Company has guaranteed the payment of
$150 million for one of the stations if FCC approval is not received by December
14, 1995. In March 1994, the Company contributed to a partnership in which it
had a 50% interest the $35 million mortgage note it held on an office building
owned and operated by the partnership. This increased the Company's ownership
interest in the partnership to 99%, and the partnership is consolidated in the
Company's financial statements since the date of the mortgage note contribution.
Capital expenditures of $92 million in 1994 related to a variety of
modernization and normal replacement projects. Capital spending for 1995 is
expected to total approximately $125 million. The 1995 spending will include a
variety of normal replacement projects, as well as a press expansion project at
Fort Lauderdale and the relocation and expansion of WPIX-New York's news and
production studios.
[GRAPH APPEARS HERE]
Net cash used for financing activities in 1994 was $194 million compared to
$246 million in 1993. Net cash used for financing activities in 1994 included
debt repayments of $77 million and dividends of $88 million. Dividends on common
stock increased 8% in 1994 to $1.04 per share. In 1994, the Company acquired
946,500 shares of its common stock for approximately $49 million. This exhausted
the previous authorization for share repurchases. In December 1994, the
Company's board of directors authorized the Company to acquire an additional 5
million shares. At December 25, 1994, the Company had authorization to
repurchase 4.96 million shares of its common stock. Net cash used for financing
activities in 1993 reflects dividends of $82 million, $284 million of debt
repayments primarily funded with the proceeds received from the QUNO stock
offering and debt financing, and $78 million of Medium-Term Notes, Series B,
issued in September 1993. The Company has revolving credit agreements with banks
in the aggregate amount of $460 million that extend to December 31, 1999, and of
$50 million that extend to December 31, 1995. These agreements are fully
available to support the issuance of commercial paper. At December 25, 1994, the
Company had commercial paper outstanding of $5 million with a weighted average
interest rate of 5.6%.
In 1993, the Company filed a Prospectus Supplement with the Securities and
Exchange Commission relating to the offer and sale from time to time of up to
$300 million principal amount of the Company's Medium-Term Notes, Series C,
originally registered with the SEC under a shelf registration effective July 13,
1992. Funds borrowed under this issue will be used for general corporate
purposes.
[GRAPH APPEARS HERE]
The Company expects to fund 1995 dividends, capital expenditures and other
operating requirements primarily with net cash provided by operations.
The State of Florida Department of Environmental Protection ("DEP") has issued
a preliminary draft report identifying the Company's subsidiary, Sentinel
Communications Company (the "Sentinel"), as a source of certain trichloroethene
(TCE) groundwater contamination in downtown Orlando, Florida. Based upon
separate environmental reviews performed by the Company's environmental
consultants, management believes that many of the findings contained in the
DEP's preliminary draft report are inaccurate and that the Sentinel is not the
source of the extensive contamination. Although the Company cannot predict the
ultimate resolution of this matter, based on information currently available,
the Company does not believe that the resolution of this matter will have a
material adverse effect on its consolidated financial position or results of
operations.
IMPACT OF INFLATION
The Company's financial statements have been prepared in accordance with
generally accepted accounting principles and are expressed in historical
dollars, which measure amounts of dollars used at the dates the related
transactions occurred. Management does not believe that the effects of
inflation are significantly any more or less adverse on the Company's
businesses than they are on other companies.
-41-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
To the Board of Directors and Stockholders of Tribune Company
In our opinion, the accompanying consolidated statements of financial position
and the related consolidated statements of income, of cash flows and of
stockholders' investment present fairly, in all material respects, the financial
position of Tribune Company and its subsidiaries at December 25, 1994 and
December 26, 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 25, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, in
1992 the Company changed its method of accounting for postretirement benefits
other than pensions, for income taxes and for postemployment benefits.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 27, 1995
-42-
<PAGE>
Tribune Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands of dollars, except per share data) Year Ended Dec. 25, 1994 Dec. 26, 1993 Dec. 27, 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Publishing
REVENUES Advertising $ 981,513 $ 892,524 $ 868,051
Circulation 242,767 246,093 238,302
Other 68,105 60,486 60,227
-------------------------------------------------------------------------------------------------------
Total 1,292,385 1,199,103 1,166,580
Broadcasting and Entertainment 764,197 727,213 684,051
New Media/Education 98,335 21,209 -
Newsprint Operations - - 366,269
Intercompany - - (117,195)
-------------------------------------------------------------------------------------------------------
Total operating revenues 2,154,917 1,947,525 2,099,705
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING Cost of sales (exclusive of items shown below) 1,077,508 1,025,986 1,181,401
EXPENSES Selling, general and administrative 565,409 462,374 510,362
Depreciation and amortization of intangible assets 115,375 102,762 139,579
-------------------------------------------------------------------------------------------------------
Total operating expenses 1,758,292 1,591,122 1,831,342
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT 396,625 356,403 268,363
Equity in QUNO net loss (6,437) (18,355) -
Gain on sale of QUNO stock 39,381 - -
Interest income 19,731 19,039 13,782
Interest expense (20,585) (24,660) (49,254)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 428,715 332,427 232,891
Income taxes (186,668) (143,821) (96,266)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES 242,047 188,606 136,625
Cumulative effects of changes in accounting principles, net of tax - - (16,800)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME 242,047 188,606 119,825
Preferred dividends, net of tax (18,574) (18,439) (18,168)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 223,473 $ 170,167 $ 101,657
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE
Primary: Before cumulative effects of changes in accounting
principles $ 3.32 $ 2.56 $ 1.82
Cumulative effects of accounting changes, net - - (.26)
-------------------------------------------------------------------------------------------------------
Net income $ 3.32 $ 2.56 $ 1.56
-------------------------------------------------------------------------------------------------------
Fully diluted: Before cumulative effects of changes in accounting
principles $ 3.07 $ 2.36 $ 1.70
Cumulative effects of accounting changes, net - - (.24)
-------------------------------------------------------------------------------------------------------
Net income $ 3.07 $ 2.36 $ 1.46
-------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
-43-
<PAGE>
Tribune Company and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
ASSETS (In thousands of dollars, except share data) Dec. 25, 1994 Dec. 26, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS Cash and short-term investments $ 21,824 $ 18,524
Accounts receivable (less allowances of $33,998
and $25,432) 313,316 284,110
Inventories 33,488 26,290
Broadcast rights 155,754 144,233
Prepaid expenses and other 19,162 18,102
----------------------------------------------------------------------------------------------
Total current assets 543,544 491,259
- --------------------------------------------------------------------------------------------------------------
INVESTMENT IN AND ADVANCES TO QUNO 265,818 250,923
- --------------------------------------------------------------------------------------------------------------
PROPERTIES Machinery, equipment and furniture 849,188 792,642
Buildings and land and leasehold improvements 361,280 314,953
----------------------------------------------------------------------------------------------
1,210,468 1,107,595
Accumulated depreciation (675,684) (599,552)
----------------------------------------------------------------------------------------------
534,784 508,043
Land 60,984 54,471
Construction in progress 45,263 39,101
----------------------------------------------------------------------------------------------
Net properties 641,031 601,615
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS Broadcast rights 195,535 217,229
Intangible assets (less accumulated amortization
of $182,982 and $156,372) 834,596 719,965
Mortgage notes receivable from affiliates 83,314 119,437
Other 221,987 135,982
----------------------------------------------------------------------------------------------
Total other assets 1,335,432 1,192,613
----------------------------------------------------------------------------------------------
Total assets $2,785,825 $2,536,410
----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
-44-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT Dec. 25, 1994 Dec. 26, 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES Long-term debt due within one year $ 27,598 $ 25,817
Employee compensation 86,821 77,335
Accounts payable 118,642 85,334
Contracts payable for broadcast rights 145,026 142,686
Accrued liabilities 96,542 106,488
Deferred income 35,766 29,009
Income taxes 19,291 38,358
--------------------------------------------------------------------------------------------------------------
Total current liabilities 529,686 505,027
- -----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (less portions due within one year) 411,200 510,838
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER Deferred income taxes 149,521 87,605
NON-CURRENT Contracts payable for broadcast rights 218,102 194,846
LIABILITIES Compensation and other obligations 144,336 142,467
--------------------------------------------------------------------------------------------------------------
Total other non-current liabilities 511,959 424,918
- -----------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS (see Note 8) - -
- -----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' Series B convertible preferred stock (without par value)
INVESTMENT Authorized: 1,600,000 shares
Issued and outstanding: 1,502,573 in 1994
and 1,531,084 shares in 1993 (liquidation value
$220 per share) 329,286 335,532
Common stock (without par value)
Authorized: 400,000,000 shares; 81,771,658 shares issued 1,018 1,018
Additional paid-in capital 112,624 105,819
Retained earnings 1,743,417 1,589,695
Treasury stock (at cost)
15,070,216 shares in 1994 and 14,791,114 shares in 1993 (636,561) (607,332)
Unearned compensation related to ESOP (274,101) (298,969)
Cumulative translation adjustment (20,675) (30,136)
Unrealized gain on investments 77,972 -
--------------------------------------------------------------------------------------------------------------
Total stockholders' investment 1,332,980 1,095,627
--------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' investment $2,785,825 $2,536,410
--------------------------------------------------------------------------------------------------------------
</TABLE>
-45-
<PAGE>
Tribune Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands of dollars) Dec. 25, 1994 Dec. 26, 1993 Dec. 27, 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net income $ 242,047 $ 188,606 $ 119,825
Adjustments to reconcile net income
to net cash provided by operations:
Equity in QUNO net loss 6,437 18,355 -
Gain on sale of QUNO stock (39,381) - -
Cumulative effects of accounting changes, net - - 16,800
Depreciation and amortization of
intangible assets 115,375 102,762 139,579
Deferred income taxes 11,537 3,531 (35,527)
(Increase) decrease in working capital items
excluding effects from acquisitions:
Accounts receivable (18,999) (27,311) (658)
Inventories, prepaid expenses and other
current assets (593) (4,288) 19,144
Accounts payable, employee compensation,
deferred income and accrued liabilities 37,655 (11,166) (477)
Income taxes (20,827) (2,166) (15,760)
Decrease in broadcast rights net of current and
long-term contracts payable 20,319 28,959 21,470
Other, net 15,217 4,676 13,948
---------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 368,787 301,958 278,344
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS Capital expenditures (91,626) (75,620) (130,232)
Acquisitions (excluding $18.5 million of
stock issued in 1993) (138,477) (98,918) (3,293)
Investments (24,186) (10,408) (5,153)
Proceeds from sale of QUNO stock 94,936 - -
Repayment of note receivable from QUNO - 179,846 -
Purchase of mortgage note - (35,500) -
Other, net (12,039) (13,852) (19,372)
---------------------------------------------------------------------------------------------------------------------
Net cash used for investments (171,392) (54,452) (158,050)
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCING Proceeds from issuance of long-term debt - 78,050 -
Repayments of long-term debt (77,100) (283,968) (67,876)
Sale of common stock to employees, net 20,410 46,138 31,918
Purchase of treasury stock (49,080) - -
Dividends (88,325) (81,927) (80,407)
Redemption of preferred stock - (4,043) (4,118)
---------------------------------------------------------------------------------------------------------------------
Net cash used for financing (194,095) (245,750) (120,483)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 3,300 1,756 (189)
Cash and short-term investments at the beginning of year 18,524 16,768 16,957
---------------------------------------------------------------------------------------------------------------------
Cash and short-term investments at the end of year $ 21,824 $ 18,524 $ 16,768
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Cash paid for:
CASH FLOW Interest (net of amounts capitalized) $ 20,957 $ 28,015 $ 53,768
INFORMATION Income taxes $ 175,965 $ 121,727 $ 128,921
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
-46-
<PAGE>
Tribune Company and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Common Treasury Stock
Series B Stock and --------------
(In thousands, Convertible Additional Unearned Cumulative Unrealized
except per share data) Preferred Paid-In Retained Amount Compensation Translation Gain on
Stock Capital (1) Earnings Shares - at cost (ESOP) Adjustment Investments Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1991 $345,862 $102,294 $1,443,598 (17,240) $(701,527) $(342,032) $ 3,504 - $ 851,699
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 119,825 119,825
Translation adjustment (27,370) (27,370)
Redemptions of convertible
preferred stock (5,228) 107 25 1,003 (4,118)
Dividends declared
Common-$.96/share (62,450) (62,450)
Preferred-$17.05/share (26,502) (26,502)
Tax benefit on dividends
paid to the ESOP (2) 8,545 8,545
Repayment of ESOP debt 20,342 20,342
Shares issued under option
and stock plans (938) 1,417 57,685 56,747
Stock tendered as payment
for options exercised (494) (24,829) (24,829)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 27, 1992 340,634 101,463 1,483,016 (16,292) (667,668) (321,690) (23,866) - 911,889
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 188,606 188,606
Translation adjustment (6,270) (6,270)
Redemptions of convertible
preferred stock (5,102) 228 20 831 (4,043)
Dividends declared
Common-$.96/share (63,799) (63,799)
Preferred-$17.05/share (26,104) (26,104)
Tax benefit on dividends
paid to the ESOP (2) 7,976 7,976
Repayment of ESOP debt 22,721 22,721
Shares issued under option
and stock plans 908 1,225 50,171 51,079
Stock tendered as payment
for options exercised (92) (4,941) (4,941)
Shares issued for
Contemporary
Books acquisition 4,238 348 14,275 18,513
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 26, 1993 335,532 106,837 1,589,695 (14,791) (607,332) (298,969) (30,136) - 1,095,627
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 242,047 242,047
Translation adjustment,
net of stock sale (3) 9,461 9,461
Unrealized gain on
investments 77,972 77,972
Redemptions of convertible
preferred stock (6,246) 1,589 114 4,657 -
Dividends declared
Common-$1.04/share (69,907) (69,907)
Preferred-$17.05/share (25,619) (25,619)
Tax benefit on dividends
paid to the ESOP (2) 7,201 7,201
Repayment of ESOP debt 24,868 24,868
Purchase of treasury stock (947) (49,080) (49,080)
Shares issued under option
and stock plans 5,216 903 36,467 41,683
Stock tendered as payment
for options exercised (349) (21,273) (21,273)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 25, 1994 $329,286 $113,642 $1,743,417 (15,070) $(636,561) $(274,101) $(20,675) $77,972 $1,332,980
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Issued shares of common stock totaled 81,771,658 for all dates presented.
(2) Excludes the tax benefit on allocated preferred shares held by the ESOP,
which is credited to income tax expense.
(3) Includes a $14.3 million write-off of the cumulative translation adjustment
related to the sale of QUNO common stock in April 1994.
See Notes to Consolidated Financial Statements.
-47-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant accounting policies of Tribune Company and subsidiaries
(the "Company"), as summarized below, conform with generally accepted accounting
principles and reflect practices appropriate to the businesses in which they
operate. Certain prior year amounts have been reclassified to conform with the
1994 presentation.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
FISCAL YEAR - The Company's fiscal year ends on the last Sunday in December. The
fiscal years included herein comprised 52 weeks.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of Tribune Company and all majority-owned subsidiaries. Investments
comprising 20 to 50 percent of the voting stock of companies and joint ventures
are accounted for using the equity method. All significant intercompany
transactions are eliminated.
SHORT-TERM INVESTMENTS - Short-term investments are stated at cost, which
approximates market value. For purposes of the consolidated statements of cash
flows, investments with maturities of three months or less at the time of
purchase are considered to be cash equivalents.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined on the last-in, first-out ("LIFO") basis for newsprint and on the
first-in, first-out ("FIFO") or average basis for all other inventories.
BROADCAST RIGHTS - Broadcast rights consist principally of rights to broadcast
syndicated programs, sports and feature films and are stated at the lower of
cost or estimated net realizable value. The total cost of these rights is
recorded as an asset and a liability when the program becomes available for
broadcast. Broadcast rights that have limited showings are generally amortized
using an accelerated method as programs are aired. Those with unlimited showings
are amortized on a straight-line basis over the contract period. The current
portion of broadcast rights represents those rights available for broadcast that
are expected to be amortized in the succeeding year.
PROPERTIES - Property, plant and equipment are stated at cost. Depreciation is
computed using the straight-line method over the properties' estimated useful
lives. Depreciation expense was $88.7 million in 1994, $81.1 million in 1993 and
$120.5 million in 1992.
INTANGIBLE ASSETS - Intangible assets primarily represent the excess of cost
over the fair market value of tangible net assets acquired. The excess cost
related to net assets acquired since 1971 is being amortized on a straight-line
basis over various periods ranging from 3 to 40 years, with the majority over 40
years. Intangible assets of $23.5 million related to pre-1971 acquisitions are
not being amortized
-48-
<PAGE>
as the Company believes there has been no diminution of value. The Company
evaluates the carrying value of intangibles periodically in relation to the
future undiscounted cash flows of the related businesses.
PENSION PLANS - The Company contributes to pension plans that provide retirement
benefits for substantially all employees. These plans are sponsored either by
the Company or by unions. Under the Company-sponsored plans, pension benefits
are primarily a function of both the years of service and the level of
compensation for a specified number of years, depending on the plan. It is the
Company's policy to fund at least the minimum for Company-sponsored pension
plans as required by ERISA. Contributions made to union-sponsored plans are
based upon collective bargaining agreements.
NEW ACCOUNTING PRINCIPLES - In 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The statement generally requires the Company to
record investments in debt and equity securities at their market value, except
for debt securities that the Company intends to hold to maturity and equity
securities that are accounted for using the equity method. At December 25, 1994,
the Company has recorded an unrealized gain on investments of approximately $78
million, which is net of a tax effect of $50 million, in a separate component of
stockholders' investment. The market value of the Company's long-term
investments in equity securities with readily determinable fair values was
approximately $87 million and the cost basis was $24 million. The QUNO
convertible debenture (see note 2) has a cost basis of $138.8 million and a fair
value of $204 million based on the Canadian quoted market price per share of the
underlying QUNO common stock at December 25, 1994. There was no effect on net
income as a result of this adoption. The Company estimates that the effect of
adopting this statement in 1993 would have been to increase assets by
approximately $100 million and stockholders' investment by $60 million at
December 26, 1993, with no impact on net income.
In 1992, the Company adopted three new accounting rules and recorded the
cumulative effects of these changes in accounting principles in the 1992
consolidated statement of income. SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," resulted in an after-tax charge
against earnings of $37.6 million, or $.58 per share on a primary basis. SFAS
No. 109, "Accounting for Income Taxes," resulted in a credit to earnings of
$26.3 million, or $.40 per share on a primary basis. SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," resulted in an after-tax charge against
earnings of $5.5 million, or $.08 per share on a primary basis.
NET INCOME PER SHARE - Primary net income per share is computed by dividing net
income attributable to common shares by the weighted average number of common
shares outstanding during the period. Fully diluted net income per share is
computed based on the assumption that all of the convertible preferred shares
are converted into common shares. For purposes of calculating fully diluted net
income per share, net income is reduced by the additional Employee Stock
Ownership Plan ("ESOP") contribution that would be required for ESOP debt
service, and the weighted average number of shares outstanding is increased by
(i) the additional common shares that would be issued upon conversion of the
preferred shares based on the stated conversion rate plus any additional common
shares that would have to be issued to meet the redemption price guarantee for
all preferred shares that have been allocated to participants, and (ii) the
effect of stock options. The numbers of common shares used in the computations
of primary and fully diluted net income per share were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Primary 67,213 66,371 65,018
Fully diluted 74,073 73,695 72,320
</TABLE>
-49-
<PAGE>
NOTE 2: INVESTMENT IN QUNO CORPORATION
- ---------------------------------------
On February 17, 1993, the Company's previously wholly owned newsprint
subsidiary, QUNO Corporation ("QUNO"), completed an initial public offering
("IPO") of 9 million shares of common stock. After the IPO, the Company held 8.8
million, or 49%, of the voting common shares and 4.2 million non-voting common
shares for a combined total of 59% of QUNO's total 22 million outstanding common
shares. At closing, QUNO used the net proceeds of approximately $100 million
from the stock offering plus proceeds from a bank financing of approximately $80
million to repay a portion of its intercompany borrowings owed the Company. The
Company has accounted for its investment in QUNO using the equity method
beginning in 1993. On April 14, 1994, the Company reduced its ownership holdings
in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The sale of
the shares resulted in an after-tax gain of approximately $13 million, or $.19
per share on a primary basis. The Company also holds a $138.8 million
subordinated debenture, convertible at the option of the Company into 11.7
million voting common shares of QUNO. The debenture is callable by QUNO after
December 27, 1997, matures in 2002 and bears interest at an effective rate of
2.77%.
The financial statements and transactions of QUNO are maintained in its
functional currency (Canadian dollars) and translated into U.S. dollars.
Translation adjustments are accumulated in a separate component of stockholders'
investment.
QUNO manufactures newsprint for sale to the Company's newspapers and other
North American and overseas customers. The Company is party to a contract with
QUNO expiring in 2007 to supply newsprint based on market prices. Under the
contract, the Company has agreed to purchase specified minimum amounts of
newsprint each year subject to certain limitations. The specified minimum annual
volume is 250,000 metric tons in years 1995 to 1999, 225,000, 200,000 and
175,000 metric tons in years 2000 to 2002, respectively, and 150,000 metric tons
in each of years 2003 to 2007. In 1994 and 1993, respectively, 27% and 33% of
QUNO's sales, or $112.8 million and $127.2 million, were to the Company's
newspapers, which represented 67% and 74% of their consumption.
During the period that QUNO was a wholly owned subsidiary, provision was made
for U.S. income taxes on undistributed earnings of QUNO that were expected to be
remitted to the Company. No provision for U.S. income taxes, however, was made
on undistributed earnings that were intended to be reinvested in facilities and
other assets in Canada for an indefinite period of time. At December 25, 1994,
the cumulative amount of unremitted earnings and other book/tax bases
differences for which no deferred taxes have been provided was approximately $35
million. Approximately $24 million of deferred taxes on the unremitted earnings
have not been recorded and would be recognized if and when additional QUNO
shares are sold. Since the IPO, no U.S. tax benefit has been provided on the
Company's share of QUNO's net losses. The unrecognized tax benefit on these
losses is approximately $10 million at December 25, 1994.
NOTE 3: CHANGES IN OPERATIONS AND UNUSUAL ITEMS
- ------------------------------------------------
ACQUISITIONS -- The Company recorded acquisitions totaling $138.5 million in
1994, $117.4 million in 1993 and $3.3 million in 1992. These acquisitions were
all accounted for as purchases. The intangibles recorded on these acquisitions
are being amortized on a straight-line basis over periods from 3 to 40 years.
The results of these operations are included in the consolidated statements of
income from the respective dates of their acquisitions.
On February 18, 1994, the Company acquired The Wright Group, a leading
publisher of supplemental education materials for the elementary school market,
for approximately $100 million in cash. On April 6, 1994, the Company acquired
independent television station WLVI-Boston for approximately $25 million in
cash. On June 30, 1994, the Company acquired Farm Journal Inc., publisher of The
Farm Journal, the nation's leading farm magazine, for approximately $17.5
million in cash.
-50-
<PAGE>
The Company has entered into an agreement to make a less than 50% equity
investment in Qwest Broadcasting, L.L.C., a new company formed to acquire and
operate television and radio stations. In November 1994, Qwest agreed to acquire
television stations in Atlanta (WATL) and New Orleans (WNOL) for approximately
$167 million. These acquisitions are pending approvals of the Federal
Communications Commission and other regulatory agencies and are expected to
close in 1995. The Company will provide certain services to each of the stations
under a cost-sharing agreement with Qwest. As part of this transaction, Qwest
has agreed to pay $150 million to WATL's current owner even if regulatory
approvals have not been received by December 14, 1995. The Company has
guaranteed this payment.
The Company acquired two Denver radio stations, KOSI-FM and KEZW-AM, on
January 6, 1993 for $19.9 million in cash. On July 28, 1993, the Company
acquired Contemporary Books, Inc., a publisher of nonfiction trade titles and
educational books and materials, for approximately $22 million in cash and $18.5
million in common stock. On September 13, 1993, the Company acquired Compton's
Multimedia Publishing Group for approximately $57 million in cash. Compton's
develops and distributes interactive multimedia software for the consumer and
education markets.
DISPOSITION -- The Company recorded a $15.3 million pretax charge in the fourth
quarter of 1992 as a result of its decision to close The Peninsula Times
Tribune, a Palo Alto-based newspaper, which ceased operations on March 12, 1993.
Total operating revenues and losses for the Times Tribune in 1992 were not
material.
BASEBALL EXPANSION FEES -- In December 1992, the Company's Chicago Cubs
subsidiary received Major League Baseball expansion fees totaling $12.3 million.
The fees have been included in operating revenue and profit of the broadcasting
and entertainment business segment.
NOTE 4: MORTGAGE NOTES RECEIVABLE FROM AFFILIATES
- --------------------------------------------------
The Company holds a mortgage note resulting from the sale in 1982 of the New
York Daily News building to a limited partnership in which the Company holds a
23% interest. The note is due December 31, 1997, can be prepaid beginning
December 31, 1996, and bears interest at 13% plus contingent interest based upon
the building's cash flow and appreciation.
In 1993, the Company purchased a mortgage note for $35.5 million on a
building owned by a partnership in which the Company held a 50% interest. In
1994, the Company contributed the mortgage note to the partnership and, for $1.6
million in cash, acquired an additional 49% of the partnership. Subsequent to
this transaction, the partnership has been consolidated in the Company's
financial statements.
NOTE 5: INVENTORIES
- --------------------
Inventories consist of:
<TABLE>
<CAPTION>
(In thousands) Dec. 25, 1994 Dec. 26, 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Finished goods $13,893 $ 3,202
Supplies and materials 11,935 13,100
Newsprint (at LIFO) 7,660 9,988
- ----------------------------------------------------------------------------
Total inventories $33,488 $26,290
- ----------------------------------------------------------------------------
</TABLE>
If newsprint inventories were valued at FIFO cost, such inventories would
have been greater by $8.0 million at December 25, 1994, $9.3 million at December
26, 1993 and $8.5 million at December 27, 1992.
NOTE 6: CONTRACTS PAYABLE FOR BROADCAST RIGHTS
- -----------------------------------------------
Contracts payable for broadcast rights are classified as current or long-term
liabilities in accordance with the payment terms of the contracts. Required
payments under contractual agreements for broadcast rights recorded at December
25, 1994 are: $145.0 million in 1995, $102.5 million in 1996, $59.7 million in
1997, $27.0 million in 1998, $15.0 million in 1999 and $13.9 million thereafter.
-51-
<PAGE>
NOTE 7: LONG-TERM DEBT
- -----------------------
Long-term debt consists of:
<TABLE>
<CAPTION>
(In thousands) Dec. 25, 1994 Dec. 26, 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Promissory notes, weighted average
interest rate of 5.6% in 1994 and 3.3% in 1993 $ 4,992 $ 41,829
Medium-term notes, weighted average
interest rates of 7.0% and 7.3% , due 1994-2003 135,800 163,200
8.4% guaranteed ESOP notes, due 1994-2003 259,172 280,999
8.19% guaranteed ESOP note, due 1994-1998 14,929 17,970
Other notes and obligations 23,905 32,657
- --------------------------------------------------------------------------------
Total debt 438,798 536,655
Less portions due within one year (27,598) (25,817)
- --------------------------------------------------------------------------------
Long-term debt $411,200 $510,838
- --------------------------------------------------------------------------------
</TABLE>
In 1990, the Company began offering up to $200.0 million of its Series B
medium-term notes, which have maturities from 2 to 10 years and may not be
redeemed by the Company prior to maturity. The proceeds from the sale of the
notes have been used for general corporate purposes. The final $78 million of
these notes were issued during 1993.
The notes issued by the Company's ESOP are unconditionally guaranteed by the
Company as to payment of principal and interest. Therefore, the unpaid balance
of these borrowings is reflected in the accompanying consolidated statements of
financial position as long-term debt. An amount equivalent to the unpaid balance
of these borrowings, representing unearned employee compensation, is recorded as
a reduction of stockholders' investment.
Certain debt agreements limit the amount of secured debt the Company can
incur without equally and ratably securing additional borrowings under those
agreements.
In 1995, the Company intends to refinance $5.0 million of promissory notes
and $8.5 million of Series B medium-term notes scheduled to mature in 1995, and
has the ability to do so on a long-term basis through existing revolving credit
agreements. Accordingly, these notes were classified as long-term and treated as
maturing in fiscal year 1999. The Company has revolving credit agreements with a
number of banks in the aggregate amount of $510.0 million that are fully
available to support the issuance of promissory notes. These agreements contain
various interest rate options and provide for annual fees based on a percentage
of the commitment. Such fees totaled approximately $.7 million in 1994 and $.5
million in 1993 and 1992. A total of $460 million of the credit agreements
extend to December 31, 1999 and $50 million terminate at December 31, 1995.
Long-term debt at December 25, 1994 matures as follows: $27.6 million in
1995, $40.3 million in 1996, $60.3 million in 1997, $34.5 million in 1998, $40.9
million in 1999 and $235.2 million thereafter.
NOTE 8: COMMITMENTS
- --------------------
The Company has entered into commitments for broadcast rights that are not
currently available for broadcast and are therefore not included in the
financial statements. These commitments totaled approximately $237 million at
December 25, 1994. Payments for broadcast rights generally commence when the
programs become available for broadcast.
The Company had commitments totaling approximately $77 million at December
25, 1994 related to the purchase of property, plant and equipment and to talent
contracts.
The Company leases certain equipment and office and production space under
various operating leases. Rental expense totaled $24.6 million in 1994, $26.2
million in 1993 and $28.0 million in 1992. Future minimum rental commitments
under non-cancelable operating leases are $15.4 million in 1995, $14.4 million
in 1996, $12.0 million in 1997, $10.8 million in 1998, $9.7 million in 1999 and
$55.1 million thereafter.
-52-
<PAGE>
NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------
Estimated fair values and carrying amounts of the Company's financial
instruments at December 25, 1994 and December 26, 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
Fair Carrying Fair Carrying
(In thousands) Value Amount Value Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments in less than 20% owned companies:
Practicable to estimate fair value $ 87,211 $ 87,211 $ 47,536 $ 10,624
Not practicable - 5,887 - 6,939
QUNO debenture 204,342 204,342 202,323 138,757
Mortgage notes receivable 91,135 83,937 138,235 119,986
Debt 459,453 438,798 574,142 536,655
Contracts payable for broadcast rights 316,809 363,128 299,433 337,532
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments.
INVESTMENTS IN LESS THAN 20% OWNED COMPANIES AND QUNO DEBENTURE - In 1994, upon
adoption of SFAS No. 115 (see note 1), certain of these investments and the QUNO
debenture have been recorded at fair value in the consolidated financial
statements. For other investments for which there are no readily determinable
market prices, it was not practicable to estimate fair value.
MORTGAGE NOTES RECEIVABLE - Fair value was estimated using the discounted cash
flow method.
DEBT - Fair value of the Company's debt was determined based on quoted market
prices for similar issues or on current rates available to the Company for debt
of the same remaining maturities and similar terms.
CONTRACTS PAYABLE FOR BROADCAST RIGHTS - Fair value of contracts payable for
broadcast rights, which are not discounted in the consolidated statements of
financial position, was estimated using the discounted cash flow method.
NOTE 10: CAPITAL STOCK
- ------------------------
Under the Company's Restated Certificate of Incorporation, 5.0 million shares of
preferred stock are authorized. In 1989, the Company established a series of 1.6
million shares of Series B Convertible Preferred Stock of which 1.59 million
shares were issued to the Company's ESOP. Each share of such preferred stock
pays a cumulative dividend of 7.75% annually, has a liquidation value of $220
per share, is convertible into four shares of the Company's common stock and is
voted with the common stock with an entitlement to 4.58 votes per preferred
share.
In December 1987, the Company adopted a Share Purchase Rights Plan and
declared a distribution of one right on each outstanding share of the Company's
common stock. Each right will entitle stockholders to buy one one-hundredth of a
share of Series A Junior Participating Preferred Stock at an exercise price of
$150. The rights have no voting rights and are not exercisable until 10 days
after the occurrence of certain triggering events, upon which the holders of the
rights are entitled to purchase either the common stock of an acquiror or
additional common stock of the Company at a discounted price. The rights are
redeemable at the option of the Company for $.01 per right. The Company has
established a series of 800,000 shares of Series A Junior Participating
Preferred Stock in connection with the plan, none of which have been issued.
The Board from time to time has authorized the repurchase of shares of
the Company's common stock in the open market or through private transactions to
be used for employee benefit programs. In 1994, the Company acquired 946,500
shares of its common stock for approximately $49 million. At December 25, 1994,
the Company had authorization to repurchase an additional 4.96 million shares of
its common stock.
There were approximately 4,500 holders of record of the Company's common
stock at January 27, 1995.
-53-
<PAGE>
NOTE 11: INCENTIVE COMPENSATION AND STOCK PLANS
- -------------------------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) - In 1988, the Company established an ESOP
as a long-term employee benefit plan to supplement the Company's U.S. employee
pension plan. In connection therewith, the ESOP purchased, in 1988 and 1989,
approximately 800,000 common shares and 1.59 million Series B convertible
preferred shares for an aggregate of $375.0 million. The ESOP provides for the
awarding of shares of the Company's preferred and common stock on a
noncontributory basis to eligible non-union employees of the Company. At
December 25, 1994, 6.0 million shares of common stock were reserved for issuance
in connection with this plan.
Shares of stock held by the ESOP have been placed with the ESOP
Trustee and are allocated to eligible employees annually. These common and
preferred shares are allocated in the same proportion that the current year's
principal and interest payments bear to the total principal and interest paid
over the lives of the related borrowings. Each preferred share is convertible
into four shares of the Company's common stock. The ESOP Trustee must convert
the preferred shares when making distributions to participants upon their
withdrawal from the ESOP. If at the time of such conversion, the price of the
Company's common stock is below $55 per share, the Company must, at its option,
either pay the difference in cash or issue additional common stock. As of
December 25, 1994, approximately 87,897 shares of Series B Convertible Preferred
Stock have been redeemed and 429,078 shares have been allocated.
The Company recognizes expense for this plan based upon cash contributions it
makes to the ESOP. The ESOP services its debt requirements with amounts received
from preferred dividends, common dividends earned on unallocated common shares
and Company contributions. The following table summarizes ESOP debt service
activity for the three years ended December 25, 1994:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- -------------------------------------------------------
<S> <C> <C> <C>
Debt Requirements:
Principal $24,868 $22,721 $20,342
Interest 25,015 26,932 28,885
- -------------------------------------------------------
Total $49,883 $49,653 $49,227
- -------------------------------------------------------
Debt Service:
Dividends $26,019 $26,548 $27,019
Company cash contributions 23,864 23,105 22,208
- -------------------------------------------------------
Total $49,883 $49,653 $49,227
- -------------------------------------------------------
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN - This plan permits eligible employees to purchase
shares of the Company's common stock at 85% of market price. A total of 4.0
million shares of stock may be sold under the plan. The Company's only expense
relating to this plan is for its administration. During 1994, 1993 and 1992,
110,925, 99,809 and 121,747 shares, respectively, were sold to employees under
this plan. As of December 25, 1994, a total of 2.3 million shares were available
for sale.
SAVINGS INCENTIVE PLAN - The Company maintains various qualified Savings
Incentive Plans, whereby eligible employees may make voluntary contributions to
these plans on a pre-tax salary reduction basis. The plans provide for uniform
employer contributions to eligible employees of $.25 for each $1.00 contributed
by participants up to 4% of the participants' compensation. These plans allow
participants to invest their savings in various investments including the
Company's common stock. Company contributions to these plans for each of the
last three years were not material. The Company had 400,000 shares of common
stock reserved for possible issuance under these plans at December 25, 1994.
-54-
<PAGE>
RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS - This plan provides for the
granting of restricted shares of the Company's common stock to outside
directors. The Company has reserved 50,000 shares of common stock in connection
with this plan. Upon each election or re-election, each outside director
receives an award of 300 shares of the Company's common stock for each year in
the term for which he or she is elected. The Company granted 2,700, 2,700 and
2,100 shares of its common stock under this plan in 1994, 1993 and 1992,
respectively. At December 25, 1994, 29,000 shares were available for future
grant in connection with this plan.
1992 LONG-TERM INCENTIVE PLAN - In 1992, the 1984 Long-Term Performance Plan was
terminated and replaced with the 1992 Long-Term Incentive Plan. Remaining
options outstanding under the 1984 plan at December 25, 1994 totaled 2.1 million
shares. No further awards will be made under the 1984 plan. The 1992 plan
provides for the granting of stock options or various other types of awards to
eligible employees. General awards available under this plan, on an annual
basis, are equal to nine-tenths of one percent (.009) of the adjusted average
number of common shares outstanding used by the Company to calculate fully
diluted net income per share for the preceding year, plus shares of stock
available for awards in previous years that have not been awarded, and any
previously forfeited or expired options. At December 25, 1994 and December 26,
1993, approximately .7 million shares were available for general awards.
An additional number of shares is available for replacement options. The
number of shares available for replacement options is generally equal to four-
tenths of one percent (.004) of the adjusted average number of common shares
outstanding used by the Company to calculate fully diluted net income per share
for the preceding year, plus shares available under the 1984 Long-Term
Performance Plan for which no awards had been granted prior to its termination,
plus shares of stock available for awards in previous years that have not been
awarded, and any previously forfeited or expired replacement options. At
December 25, 1994 and December 26, 1993, 2.3 million and 2.0 million shares,
respectively, were available for replacement options. Shares not awarded in any
year carry over and are available for award in subsequent years.
Under the 1992 plan, only 3.0 million of the shares available for general
awards may be used for certain outright stock awards and other stock-based
awards, and only 3.0 million of the shares may be used for incentive stock
options. No such awards have been granted. The option price is the market value
of the Company's common stock at the time the option is granted. Options are
exercisable not less than six months or more than 11 years after the date the
option is granted. At December 25, 1994, 3.2 million options were exercisable. A
combined summary of stock option activity and prices is as follows:
<TABLE>
<CAPTION>
(Shares in thousands) 1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Options Outstanding
Beginning of year 4,893 5,261 5,596
Granted 1,050 889 1,187
Exercised (832) (1,131) (1,293)
Cancelled (66) (126) (229)
- ----------------------------------------------------------------------------------
End of year 5,045 4,893 5,261
Prices of Options
Granted $ 49 5/8 - 63 1/8 $51 1/8 - 57 7/8 $41 1/4 - 50 3/8
Exercised 16 7/8 - 57 3/4 16 7/8 - 47 3/8 16 7/8 - 41
Outstanding at year end 20 1/16 - 63 1/8 16 7/8 - 57 7/8 16 7/8 - 57 3/4
</TABLE>
-55-
<PAGE>
NOTE 12: EMPLOYEE PENSION PLANS
- --------------------------------
The Company amended its Company-sponsored U.S. pension plans, effective January
1989, for employees not covered by a collective bargaining agreement. The
amendments were made in connection with the establishment of the Company's ESOP
and to comply with the provisions of the Tax Reform Act of 1986. These pension
plans will continue to provide substantially the same pension benefits as under
the pre-amended plans until December 1998. After that date, the plans provide
that the pension benefit credits will be frozen in terms of pay and service.
Net pension expense (credit) for Company-sponsored plans in 1994, 1993 and
1992 included the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 U.S. QUNO
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefits earned during the
period (service costs) $ 9,038 $ 8,000 $ 7,699 $ 3,288
Interest cost on projected
benefit obligation 17,912 17,900 17,364 15,180
Recognized return on plan
assets (27,424) (27,151) (27,036) (17,549)
Amortization, net (380) (511) (443) (337)
- ------------------------------------------------------------------------------
Net pension expense (credit) $ (854) $ (1,762) $ (2,416) $ 582
- ------------------------------------------------------------------------------
</TABLE>
Actual returns on U.S. plan assets were: loss of $2.0 million in 1994 and
gains of $37.1 million in 1993 and $21.1 million in 1992. Actual returns on plan
assets for Canadian plans were gains of $7.6 million in 1992.
The following table sets forth the funded status of the Company-sponsored
pension plans as of year-end 1994 and 1993:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Plans' assets at fair value $281,515 $297,125
Less: Actuarial present value of
benefit obligations
Vested benefits 229,019 224,800
Non-vested benefits 9,024 12,900
- ---------------------------------------------------------------------
Accumulated benefit obligation 238,043 237,700
Projected future salary increases 12,917 16,188
- ---------------------------------------------------------------------
Projected benefit obligation 250,960 253,888
- ---------------------------------------------------------------------
Plans' assets in excess of projected
benefit obligation 30,555 43,237
Unrecognized net asset at
transition being amortized
through 2001 (13,686) (15,251)
Unrecognized net loss due
to actual experience varying
from actuarial assumptions 15,717 2,509
Unrecognized prior service costs 906 1,932
- ---------------------------------------------------------------------
Pension asset recognized in the
consolidated statements
of financial position $ 33,492 $ 32,427
- ---------------------------------------------------------------------
</TABLE>
The plans' assets consist primarily of listed common stocks and bonds,
including 350,725 shares of the Company's common stock having an aggregate
market value of $18.9 million at December 25, 1994. In determining the projected
benefit obligation for the U.S. plans, the weighted average assumed discount
rate used was 8.5% in 1994 and 7.25% in 1993, while the average rate of increase
in future salary levels was 5.0% for 1994 and 4.5% for 1993. The weighted
average expected long-term rate of return on assets used in determining net
pension credit was 9.75% in 1994, 10% in 1993 and 10.5% in 1992. For the
Canadian plans in 1992, the expected long-term rate of return on assets was
8.5%. Total pension expense for union-sponsored pension plans was $5.8 million
in 1994, $4.9 million in 1993 and $5.1 million in 1992. The Company's portion of
assets and liabilities for multi-employer union pension plans is not
determinable.
-56-
<PAGE>
NOTE 13: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- -----------------------------------------------------
The Company provides postretirement health care and life insurance benefits to
eligible employees under a variety of plans. Employees become eligible for these
benefits if they meet age and service requirements. For U.S. plans and effective
January 1991, the Company provides a fixed medical contribution to participants
who retire between the age of 55 to 65 and have 10 or more years of service.
Medical coverage for these participants ends when they reach age 65. Retirees
are also eligible for life insurance benefits, which are primarily a function of
both the years of service and the level of compensation at retirement. The cost
of postretirement medical and life benefits is accrued over the active service
periods of employees to the date they attain full eligibility for such benefits.
It is the Company's policy to fund postretirement benefits as claims are
incurred.
Postretirement benefit cost for 1994, 1993 and 1992 included the following
components:
<TABLE>
<CAPTION>
1992
(In thousands) 1994 1993 U.S. QUNO
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost of benefits earned
during the year $ 350 $ 288 $ 278 $ 492
Interest cost on accumulated
postretirement benefit
obligation ("APBO") 3,069 3,159 3,175 2,249
- ---------------------------------------------------------------------------
Postretirement benefit cost $ 3,419 $ 3,447 $3,453 $2,741
- ---------------------------------------------------------------------------
</TABLE>
The plans' APBO and postretirement liability were composed of the following:
<TABLE>
<CAPTION>
(In thousands) Dec. 25, 1994 Dec. 26, 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees $35,079 $37,193
Active participants, fully eligible 2,158 2,271
Other participants 3,489 3,673
- ----------------------------------------------------------------------------
APBO 40,726 43,137
Unrecognized net gain (loss) due to
actual experience varying from
actuarial assumptions 2,774 (1,488)
- ----------------------------------------------------------------------------
Postretirement benefit liability $43,500 $41,649
- ----------------------------------------------------------------------------
</TABLE>
In determining the APBO for U.S. participants, the weighted average assumed
discount rate used was 8.5% in 1994 and 7.25% in 1993, while the average rate of
increase in future salary levels was 5.0% in 1994 and 4.5% in 1993. Increases of
12.6% and 10.5% in the cost of covered health care benefits were assumed for
fiscal 1995 for pre-age 65 employees and post-age 65 employees, respectively.
These rates were assumed to decrease ratably to 7.0% after nine years and remain
at that level thereafter. The effect of a one percentage point increase in the
assumed health care cost trend rate for each future year for U.S. employees
would increase the total APBO at year-end 1994 by $2.6 million and the 1994 net
benefit cost by $.2 million.
NOTE 14: CONTINGENCIES AND LEGAL PROCEEDINGS
- ---------------------------------------------
The Company and its subsidiaries are defendants from time to time in actions for
libel and other matters arising out of their business operations. In addition,
the Company and its subsidiaries are involved from time to time as parties in
various regulatory, environmental and other proceedings with governmental
authorities and administrative agencies.
The State of Florida Department of Environmental Protection ("DEP") has
issued a preliminary draft report identifying the Company's subsidiary, Sentinel
Communications Company (the "Sentinel"), as a source of certain trichloroethene
(TCE) groundwater contamination in downtown Orlando, Florida. Based upon
separate environmental reviews performed by the Company's environmental
consultants, management believes that many of the findings contained in the
DEP's preliminary draft report are inaccurate and that the Sentinel is not the
source of the extensive contamination.
The Company does not believe that any of the matters or proceedings presently
pending will have a material adverse effect on its consolidated financial
position or results of operations.
-57-
<PAGE>
NOTE 15: SEGMENT INFORMATION
- -----------------------------
Tribune Company is an information and entertainment company comprising three
business segments. The Company's publishing segment consists of six daily
newspapers and other related publications and services. The principal newspapers
are the Chicago Tribune, the Fort Lauderdale-based Sun-Sentinel and The Orlando
Sentinel. The Company's new media/education segment is composed of educational
and reference publishing operations and includes Contemporary Books, Compton's
and The Wright Group. The Company's broadcasting operations consist of
independent television stations in New York, Los Angeles, Chicago, Philadelphia,
Boston, Denver and New Orleans, a CBS television affiliate in Atlanta and six
radio stations. In entertainment, the Company owns the Chicago Cubs baseball
team, produces and syndicates television programming and has interests in cable
programming. The Company currently holds a 34% ownership interest in QUNO
Corporation, which manufactures newsprint for sale to the Company's newspapers
and other North American and overseas customers. Prior to February 1993, when
QUNO completed an initial public offering, QUNO was a wholly owned subsidiary
and was reported as the newsprint operations business segment. Beginning in
1993, QUNO is no longer consolidated in the company's financial statements.
Financial data for each of the Company's business segments is presented on page
60.
In calculating operating profit for each segment, none of the following items
have been added or deducted: interest income and expense, non-operating gains
and losses, equity in QUNO net loss or income taxes. Assets represent those
identifiable tangible and intangible assets used in the operations of each
segment.
The Company's cost of sales by business segment is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Publishing $ 630,276 $ 607,181 $ 599,677
Broadcasting and Entertainment 412,704 410,007 384,860
New Media/Education 34,528 8,798 -
- --------------------------------------------------------------------------
Total 1,077,508 1,025,986 984,537
Newsprint Operations - - 314,059
Intercompany (newsprint) - - (117,195)
- --------------------------------------------------------------------------
Total cost of sales $1,077,508 $1,025,986 $1,181,401
- --------------------------------------------------------------------------
</TABLE>
NOTE 16: INCOME TAXES
- ----------------------
The amounts of income (loss) before income taxes and cumulative effects of
accounting changes attributable to U.S. and foreign operations, and a
reconciliation of income taxes computed at the U.S. federal statutory rate to
income taxes reported in the consolidated statements of income follow:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income taxes and
accounting changes
U.S. $435,152 $350,782 $321,989
Foreign (6,437) (18,355) (89,098)
- --------------------------------------------------------------------------
$428,715 $332,427 $232,891
Federal income taxes at 35% in 1994
and 1993 and 34% in 1992 $150,050 $116,349 $ 79,183
Increase (decrease) resulting from:
State and local income taxes, net
of federal tax 22,500 18,502 15,781
Gain on sale of QUNO stock 12,598 - -
Equity in QUNO net loss 2,253 6,424 -
Amortization of intangible assets 4,912 4,814 5,141
Other (5,645) (2,268) (3,839)
- --------------------------------------------------------------------------
Income taxes reported $186,668 $143,821 $ 96,266
Effective tax rate 43.5% 43.3% 41.3%
- --------------------------------------------------------------------------
</TABLE>
-58-
<PAGE>
Components of income tax expense charged to income before cumulative effects
of accounting changes were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable U.S. Federal $149,240 $106,678 $101,856
Foreign - - 1,812
State 39,960 28,654 24,027
- --------------------------------------------------------------------------
189,200 135,332 127,695
- --------------------------------------------------------------------------
Deferred U.S. Federal (979) 8,679 534
Foreign - - (31,847)
State (1,553) (190) (116)
- --------------------------------------------------------------------------
(2,532) 8,489 (31,429)
- --------------------------------------------------------------------------
Total $186,668 $143,821 $ 96,266
- --------------------------------------------------------------------------
</TABLE>
Significant components of the Company's net deferred tax liabilities were as
follows:
<TABLE>
<CAPTION>
(In thousands) Dec. 25, 1994 Dec. 26, 1993
- --------------------------------------------------------------------------
<S> <C> <C>
Net properties $ 93,229 $ 98,680
Net intangible assets 61,113 64,006
Pensions 12,483 12,452
Unrealized gain on investments 50,324 -
Investment in QUNO common stock 12,340 -
Other future taxable items 17,710 7,522
- --------------------------------------------------------------------------
Total deferred tax liabilities 247,199 182,660
- --------------------------------------------------------------------------
Broadcast rights (27,250) (27,991)
Postretirement and postemployment
benefits other than pensions (19,461) (17,457)
Deferred compensation (26,241) (27,091)
Disposition of New York Daily News (7,645) (9,218)
Other accrued liabilities (19,817) (12,144)
Accrued employee compensation (14,122) (10,988)
Federal benefit on deferred state taxes (14,748) (13,125)
Accounts receivable (10,275) (10,556)
Other future deductible items (12,495) (3,197)
- --------------------------------------------------------------------------
Total deferred tax assets (152,054) (131,767)
- --------------------------------------------------------------------------
Net deferred tax liability $ 95,145 $ 50,893
- --------------------------------------------------------------------------
</TABLE>
-59-
<PAGE>
Tribune Company and Subsidiaries
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
(In thousands of dollars) 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Publishing $1,292,385 $1,199,103 $1,166,580
Broadcasting and Entertainment (1) 764,197 727,213 684,051
New Media/Education 98,335 21,209 -
- ------------------------------------------------------------------------------------------------
Total 2,154,917 1,947,525 1,850,631
Newsprint Operations - - 366,269
Intercompany - - (117,195)
- ------------------------------------------------------------------------------------------------
Total operating revenues $2,154,917 $1,947,525 $2,099,705
- ------------------------------------------------------------------------------------------------
OPERATING PROFIT
Publishing (2) $ 287,590 $ 253,050 $ 224,509
Broadcasting and Entertainment (1) 132,413 125,684 121,267
New Media/Education 2,829 2,071 -
Corporate expenses (26,207) (24,402) (23,643)
- ------------------------------------------------------------------------------------------------
Total 396,625 356,403 322,133
Newsprint Operations - - (53,770)
- ------------------------------------------------------------------------------------------------
Total operating profit $ 396,625 $ 356,403 $ 268,363
- ------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Publishing $ 51,205 $ 50,647 $ 66,971
Broadcasting and Entertainment 21,041 18,782 20,958
New Media/Education 4,905 721 -
Corporate 14,475 5,470 420
- ------------------------------------------------------------------------------------------------
Total 91,626 75,620 88,349
Newsprint Operations - - 41,883
- ------------------------------------------------------------------------------------------------
Total capital expenditures $ 91,626 $ 75,620 $ 130,232
- ------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION OF INTANGIBLE ASSETS
Publishing $ 71,629 $ 65,387 $ 63,465
Broadcasting and Entertainment 35,107 35,203 31,753
New Media/Education 7,064 1,529 -
Corporate 1,575 643 880
- ------------------------------------------------------------------------------------------------
Total 115,375 102,762 96,098
Newsprint Operations - - 43,481
- ------------------------------------------------------------------------------------------------
Total depreciation and amortization of intangible assets $ 115,375 $ 102,762 $ 139,579
- ------------------------------------------------------------------------------------------------
ASSETS
Publishing $ 757,889 $ 880,384 $ 856,383
Broadcasting and Entertainment 1,321,768 1,155,331 1,149,482
New Media/Education 210,445 107,964 -
Corporate 495,723 392,731 133,181
Intercompany receivables - - (10,747)
- ------------------------------------------------------------------------------------------------
Total 2,785,825 2,536,410 2,128,299
Newsprint Operations - - 623,271
- ------------------------------------------------------------------------------------------------
Total assets $2,785,825 $2,536,410 $2,751,570
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) 1992 includes $12.3 million of Major League Baseball expansion fees.
(2) 1992 includes a $15.3 million pretax charge for the closure of The
Peninsula Times Tribune.
-60-
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
QUARTERLY RESULTS (Unaudited)
Quarters
1994 (In thousands of dollars,
except per share data) First Second Third Fourth Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING Publishing $ 314,886 $ 321,153 $ 308,288 $ 348,058 $1,292,385
REVENUES (1) Broadcasting and Entertainment 146,948 223,085 179,986 214,178 764,197
New Media/Education 18,884 27,049 23,542 28,860 98,335
----------------------------------------------------------------------------------------------------------------
Total operating revenues $ 480,718 $ 571,287 $ 511,816 $ 591,096 $2,154,917
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING Publishing $ 69,237 $ 76,325 $ 60,354 $ 81,674 $ 287,590
PROFIT Broadcasting and Entertainment 20,375 50,247 23,699 38,092 132,413
New Media/Education 1,330 2,631 (5,311) 4,179 2,829
Corporate expenses (6,340) (6,418) (6,813) (6,636) (26,207)
----------------------------------------------------------------------------------------------------------------
Total operating profit 84,602 122,785 71,929 117,309 396,625
- ------------------------------------------------------------------------------------------------------------------------------
Equity in QUNO net income (loss) (9,123) (636) 3,923 (601) (6,437)
Gain on sale of QUNO stock (2) - 39,381 - - 39,381
Net interest expense (1,226) 32 473 (133) (854)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 74,253 161,562 76,325 116,575 428,715
Income taxes (34,184) (76,530) (28,498) (47,456) (186,668)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME 40,069 85,032 47,827 69,119 242,047
Preferred dividends, net of tax (4,644) (4,643) (4,644) (4,643) (18,574)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO
COMMON SHARES $ 35,425 $ 80,389 $ 43,183 $ 64,476 $ 223,473
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE (3)
Primary $ .53 $ 1.19 $ .64 $ .96 $ 3.32
----------------------------------------------------------------------------------------------------------------
Fully diluted $ .49 $ 1.09 $ .60 $ .89 $ 3.07
- ------------------------------------------------------------------------------------------------------------------------------
COMMON DIVIDENDS PER SHARE $ .26 $ .26 $ .26 $ .26 $ 1.04
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK PRICE (HIGH - LOW) $61 7/8-55 $64 1/2-54 $56 5/8-50 1/4 $56 1/8-48 7/8
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to Quarterly Results:
(1) Revenues have been restated to reflect the formation of a new segment, New
Media/Education, and to conform to revised financial statement
presentation. The restatement had no effect on net income.
(2) On April 14, 1994, the Company sold 5.5 million shares of QUNO common
stock. The sale resulted in an after-tax gain of $13 million, or $.19 per
share on a primary basis.
(3) Quarterly and full year net income per share amounts are calculated
independently based on the weighted average number of common shares
applicable for each period.
-62-
<PAGE>
<TABLE>
<CAPTION>
Quarters
1993 (In thousands of dollars,
except per share data) First Second Third Fourth Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING Publishing $ 292,639 $ 300,115 $ 285,321 $ 321,028 $1,199,103
REVENUES (1) Broadcasting and
Entertainment 140,981 216,903 195,352 173,977 727,213
New Media/Education - - 4,924 16,285 21,209
--------------------------------------------------------------------------------------------------------
Total operating revenues $ 433,620 $ 517,018 $ 485,597 $ 511,290 $1,947,525
- ---------------------------------------------------------------------------------------------------------------------
OPERATING Publishing $ 55,729 $ 63,697 $ 52,054 $ 81,570 $ 253,050
PROFIT Broadcasting and
Entertainment 9,170 49,254 32,053 35,207 125,684
New Media/Education - - 492 1,579 2,071
Corporate expenses (5,798) (5,860) (6,345) (6,399) (24,402)
--------------------------------------------------------------------------------------------------------
Total operating profit 59,101 107,091 78,254 111,957 356,403
- ---------------------------------------------------------------------------------------------------------------------
Equity in QUNO net income (loss) (2,711) (2,757) (5,849) (7,038) (18,355)
Net Interest expense (3,779) (73) (173) (1,596) (5,621)
- ---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 52,611 104,261 72,232 103,323 332,427
Income taxes (22,960) (41,976) (33,637) (45,248) (143,821)
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME 29,651 62,285 38,595 58,075 188,606
Preferred dividends, net of tax (4,628) (4,628) (4,672) (4,511) (18,439)
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO
COMMON SHARES $ 25,023 $ 57,657 $ 33,923 $ 53,564 $ 170,167
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE (3)
Primary $ .38 $ .87 $ .51 $ .80 $ 2.56
--------------------------------------------------------------------------------------------------------
Fully diluted $ .36 $ .80 $ .48 $ .73 $ 2.36
- ---------------------------------------------------------------------------------------------------------------------
COMMON DIVIDENDS PER SHARE $ .24 $ .24 $ .24 $ .24 $ .96
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCK PRICE (HIGH - LOW) $56 7/8-47 5/8 $56 1/4-50 $55-48 3/8 $61 1/4-50 7/8
- -----------------------------------------------------------------------------------------------------
</TABLE>
-63-
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
ELEVEN YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share data) 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING RESULTS
OPERATING REVENUES
Publishing excluding Daily News $1,292,385 1,199,103 1,166,580 1,142,116
New York Daily News $ - - - -
Broadcasting and Entertainment $ 764,197 727,213 684,051 617,514
New Media/Education $ 98,335 21,209 - -
- ----------------------------------------------------------------------------------------------------------------------------
Total $2,154,917 1,947,525 1,850,631 1,759,630
Newsprint Operations (net of intercompany) $ - - 249,074 279,543
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUES $2,154,917 1,947,525 2,099,705 2,039,173
OPERATING PROFIT
Publishing excluding Daily News $ 287,590 253,050 224,509 217,031
New York Daily News $ - - - -
Broadcasting and Entertainment $ 132,413 125,684 121,267 100,175
New Media/Education $ 2,829 2,071 - -
Corporate expenses $ (26,207) (24,402) (23,643) (22,256)
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 396,625 356,403 322,133 294,950
Newsprint Operations $ - - (53,770) (6,975)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING PROFIT $ 396,625 356,403 268,363 287,975
Equity in QUNO net loss $ (6,437) (18,355) - -
Net interest expense $ (854) (5,621) (35,472) (46,100)
Other $ 39,381 - - -
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES $ 428,715 332,427 232,891 241,875
Income taxes $ (186,668) (143,821) (96,266) (99,894)
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE ACCOUNTING CHANGES $ 242,047 188,606 136,625 141,981
Cumulative effects of changes in accounting principles $ - - (16,800) -
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (1) $ 242,047 188,606 119,825 141,981
SHARE INFORMATION
Primary net income (loss) per share (1) $ 3.32 2.56 1.56 1.94
Common dividends per share $ 1.04 .96 .96 .96
Stockholders' investment per share $ 18.93 15.54 13.32 12.78
Weighted average common shares outstanding (000's) 67,213 66,371 65,018 64,364
FINANCIAL RATIOS
Operating profit margin 18.4% 18.3% 12.8% 14.1%
Net income margin 11.2% 9.7% 5.7% 7.0%
Net income as a percentage of average stockholders' investment 19.9% 18.8% 13.6% 17.6%
Long-term debt to total capital 22% 30% 43% 47%
FINANCIAL POSITION AND OTHER DATA
Total assets $2,785,825 2,536,410 2,751,570 2,795,298
Long-term debt $ 411,200 510,838 740,979 897,835
Stockholders' investment $1,332,980 1,095,627 911,889 851,699
Capital expenditures $ 91,626 75,620 130,232 93,931
Repurchase (issuance) of treasury stock, net $ 28,670 (46,138) (31,918) (10,007)
Dividends $ 88,325 81,927 80,407 78,415
Amortization of broadcast rights $ 244,361 236,468 233,859 207,392
Employees (full-time equivalents) 10,500 9,900 12,400 12,900
</TABLE>
(1) Includes the gain on sale of QUNO stock of $13 million or $.19 per share in
1994, the cumulative effects of accounting changes of $16.8 million or $.26
per share in 1992, charges relating to New York Daily News totaling $255.0
million or $3.86 per share in 1990, and a non-recurring net loss of $21.1
million or $.27 per share in 1987 and a non-recurring net gain of $151.6
million or $1.88 per share in 1986.
-64-
<PAGE>
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986 1985 1984
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1,199,394 1,210,084 1,125,260 1,049,872 948,390 948,173 871,089
321,823 422,024 436,843 419,853 411,840 405,862 402,509
623,981 584,326 505,729 485,276 466,231 384,723 322,082
- - - - - - -
------------------------------------------------------------------------------------
2,145,198 2,216,434 2,067,832 1,955,001 1,826,461 1,738,758 1,595,680
213,752 243,208 270,741 202,144 202,370 198,319 199,817
------------------------------------------------------------------------------------
2,358,950 2,459,642 2,338,573 2,157,145 2,028,831 1,937,077 1,795,497
278,594 299,282 248,567 239,358 209,525 171,932 149,623
(114,468) (2,179) 15,167 (47,357) (9,228) 3,040 (4,817)
107,528 96,803 77,754 62,858 65,537 45,693 41,182
- - - - - - -
(22,654) (22,100) (22,699) (25,815) (17,650) (19,459) (15,441)
------------------------------------------------------------------------------------
249,000 371,806 318,789 229,044 248,184 201,206 170,547
(11,058) 61,285 99,154 73,009 33,126 40,206 17,929
------------------------------------------------------------------------------------
237,942 433,091 417,943 302,053 281,310 241,412 188,476
- - - - - - -
(37,170) (25,340) (39,515) (32,459) (35,026) (16,416) (16,283)
(295,000) 3,133 - - 276,587 6,466 14,421
------------------------------------------------------------------------------------
(94,228) 410,884 378,428 269,594 522,871 231,462 186,614
30,695 (168,463) (168,022) (128,057) (230,001) (107,618) (83,571)
------------------------------------------------------------------------------------
(63,533) 242,421 210,406 141,537 292,870 123,844 103,043
- - - - - - -
------------------------------------------------------------------------------------
(63,533) 242,421 210,406 141,537 292,870 123,844 103,043
(1.22) 3.17 2.78 1.80 3.63 1.53 1.28
.96 .88 .76 .64 .52 .44 .38
11.68 15.60 15.88 14.35 13.91 11.19 10.23
66,032 72,390 75,636 78,536 80,677 81,045 80,801
10.1% 17.6% 17.9% 14.0% 13.9% 12.5% 10.5%
(2.7)% 9.9% 9.0% 6.6% 14.4% 6.4% 5.7%
(6.9)% 21.4% 18.4% 12.9% 29.1% 14.3% 12.9%
51% 40% 32% 31% 29% 41% 20%
2,826,099 3,013,537 2,905,382 2,738,484 2,571,432 2,445,924 1,737,142
998,962 880,686 650,118 551,651 522,750 732,521 244,982
764,512 1,077,996 1,188,480 1,094,943 1,101,274 908,486 827,676
148,897 238,307 213,596 191,895 147,726 171,687 122,352
178,517 296,738 56,185 108,647 65,893 (5,692) (2,336)
80,110 75,298 57,416 50,025 42,201 35,490 30,383
228,605 221,897 192,045 169,921 155,183 83,463 66,888
16,100 17,100 16,800 16,800 17,300 18,700 18,400
</TABLE>
-65-
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
APPENDIX TO EXHIBIT 13
DESCRIPTION OF GRAPHS
---------------------
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
- -------------------------------------------------------------------------------------
Annual Report
Page Number Description
- ------------- -----------
<S> <C>
33 Bar graph of Net Income Excluding Accounting Changes
and Daily News (In millions). 1990 - $191, 1991 - $142,
1992 - $137, 1993 - $189, 1994 - $242.
34 Bar graph of Operating Profit Excluding QUNO and Daily
News (In millions). 1990 - $363, 1991 - $295, 1992 -
$322, 1993 - $356, 1994 - $396.
34 Pie chart of 1994 Consolidated Expenses as a Percent of
Revenues. Compensation - 27%, Amortization of
Broadcast Rights - 11%, Newsprint & Ink - 9%, Other -
35%, Operating Margin - 18%.
35 Bar graph of Publishing Operating Profit Per FTE (In
thousands). 1990 - $33, 1991 - $27, 1992 - $28, 1993 -
$33, 1994 - $38.
36 Stacked bar graph of Publishing Advertising Revenues
Excluding Daily News (In millions). Retail - 1990 - $443,
1991 - $429, 1992 - $428, 1993 - $435, 1994 - $461;
General - 1990 -$130, 1991 - $124, 1992 - $129, 1993 -
$121, 1994 - $135; Classified - 1990 - $356, 1991 - $301,
1992 - $312, 1993 - $337, 1994 - $385.
37 Pie chart of 1994 Publishing Revenues by Market. Chicago
- 54%, Fort Lauderdale - 21%, Orlando - 16%, Virginia/CA
- 5%, National - 4%.
38 Bar graph of Broadcasting and Entertainment Operating
Profit (In millions). 1990 - $108, 1991 - $100, 1992 -
$121, 1993 - $125, 1994 - $132.
38 Bar graph of Television EBITDA (In millions). 1990 -
$108, 1991 - $104, 1992 - $121, 1993 - $147, 1994 - $189.
41 Bar graph of Long-Term Debt to Total Capital.
1990 - 51%, 1991 - 47%, 1992 - 43%, 1993 - 30%,
1994 - 22%.
41 Bar graph of Return on Equity (Excluding
Accounting Changes and Daily News). 1990 -
18.3%, 1991 - 17.6%, 1992 - 15.3%, 1993 - 18.8%,
1994 - 19.9%.
</TABLE>
<PAGE>
EXHIBIT 21
TRIBUNE COMPANY SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
PUBLISHING
- ----------
Tribune Publishing Company Delaware
Illinois Chicago Tribune; Exito!
Chicago Tribune Company
Chicago Tribune Newspapers, Inc. Illinois Tribune Newspaper Network
Chicago Tribune Press Service, Inc. Illinois
Newspaper Readers Agency, Inc. Illinois
Tribune Direct Marketing, Inc. Delaware AmeriComm/Illinois
Precision Home Delivery, Inc. Delaware
Relcon, Inc. Delaware
Tribune Media Services, Inc. Delaware TV Log; TV Week
Sun-Sentinel Company Delaware Sun-Sentinel; Gold Coast Labeling
Gold Coast Publications, Inc. Delaware Gold Coast Shopper; Porch Plus; XS; Exito!;
iCE; Vital Signs; South Florida Parenting
New River Center Maintenance Association, Inc. Florida
Sentinel Communications Company Delaware The Orlando Sentinel; US Express; Magic
Magazine; Tribune Interactive Network
Services
Neocomm, Inc. Delaware Porch Plus
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Peninsula Newspapers, Inc. Delaware
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
Times-Advocate Company Delaware Times-Advocate; GO Magazine; The
Californian; The Californian Extra
Twin County Community Newspapers, Inc. Delaware The Enterprise; The Extraprize
The Daily Press, Inc. Delaware Daily Press
Hampton Roads Newspapers, Inc. Virginia
Tribune National Marketing Company Delaware Real Estate Information Connection/REIC
Picture Network International Delaware
NEW MEDIA
- ---------
Tribune New Media Company Delaware
Contemporary Books, Inc. Illinois Best Publications Company; Best Books
Company
Congdon & Weed, Inc. New York
Wright Group Publishing, Inc. Delaware
Compton's Learning Company Delaware
Compton's NewMedia, Inc. California
Compton's Multimedia Publishing Group, Inc. Delaware
NewMedia Source, Inc. California
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
BROADCASTING AND ENTERTAINMENT
- ------------------------------
Tribune Broadcasting Company Delaware Tribune Plus; Tribune Plus Corporate Sales;
Tribune Creative Services Group
Tribune Broadcasting News Network, Inc. Delaware Trib Net
ChicagoLand Television News, Inc. Delaware ChicagoLand Television/CLTV
Oak Brook Productions, Inc. Delaware
ChicagoLand Microwave Licensee, Inc. Delaware
Tribune Regional Programming, Inc. Delaware
Tribune New York Radio, Inc. Delaware WQCD-FM
Tribune Denver Radio, Inc. Delaware KOSI; KEZW
Tribune Denver Direct Mail, Inc. Delaware KOSI Coupons
WGN Continental Broadcasting Company Delaware WGN-TV; WGN Radio; Tribune Radio
Networks
Interstate Radio Network, Inc. Illinois
Tribune Sacramento Radio, Inc. Delaware KYMX; KCTC
Tribune Entertainment Company Delaware
Magic T Music Publishing Company Delaware
Tribune Entertainment Production Company Delaware
Chicago River Production Company Delaware The Road
435 Production Company Delaware
Gossip Production Company Delaware
North Michigan Production Company Delaware
Fairfax Media, Incorporated Virginia
Tribune (FN) Cable Ventures, Inc. Delaware
KWGN Inc. Delaware KWGN-TV
WGNO Inc. Delaware WGNO-TV
WGNX Inc. Delaware WGNX-TV
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
KTLA Inc. California KTLA-TV
GWB Productions Delaware
WPHL-TV, Inc. Pennsylvania WPHL
WPIX Inc. New York WPIX-TV; Tribune New York Holdings
WLVI Inc. Delaware
Tribune California Properties, Inc. Delaware
Farm Journal, Inc. Pennsylvania Rockwood Research Corporation
Farm Journal Tours, Inc. Pennsylvania
Chicago National League Ball Club, Inc. Delaware Chicago Cubs
Diana-Quentin, Inc. Illinois
Rockford Professional Baseball Club, Inc. Florida Rockford Cubbies
Rock River Concessions, Inc. Florida
Orlando Baseball Club, Inc. Delaware Orlando Cubs
Orlando Baseball Concessions, Inc. Delaware
MISCELLANEOUS
- -------------
Tribune Properties, Inc. Delaware New River Center Management Co.
Tribune New York Properties, Inc. Delaware
Riverwalk Center I Joint Venture
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (File No. 33-45793)
and in the Registration Statements on Form S-8 (File Nos. 2-90727, 33-21853,
33-26239 and 33-47547) of Tribune Company of our report dated January 27, 1995
appearing in the 1994 Annual Report to Stockholders which is incorporated in
this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears in
this Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 22, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1994 CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1994
<PERIOD-START> DEC-27-1993
<PERIOD-END> DEC-25-1994
<CASH> 18,476
<SECURITIES> 3,348
<RECEIVABLES> 347,314
<ALLOWANCES> 33,998
<INVENTORY> 33,488
<CURRENT-ASSETS> 543,544
<PP&E> 1,316,715
<DEPRECIATION> 675,684
<TOTAL-ASSETS> 2,785,825
<CURRENT-LIABILITIES> 529,686
<BONDS> 0
<COMMON> 1,018
0
329,286
<OTHER-SE> 1,002,676
<TOTAL-LIABILITY-AND-EQUITY> 2,785,825
<SALES> 0
<TOTAL-REVENUES> 2,154,917
<CGS> 0
<TOTAL-COSTS> 1,077,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,585
<INCOME-PRETAX> 428,715
<INCOME-TAX> 186,668
<INCOME-CONTINUING> 242,047
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,047
<EPS-PRIMARY> 3.32
<EPS-DILUTED> 3.07
</TABLE>
