SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 1995
Commission file number 1-8572
TRIBUNE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-1880355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
435 North Michigan Avenue, Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 222-9100
No Changes
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
At July 28, 1995 there were 65,101,893 shares outstanding of the
Company's Common Stock (without par value).
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
<TABLE>
<CAPTION>
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except per share data)
(Unaudited)
Second Quarter Ended First Half Ended
----------------------------- -----------------------------
June 25, 1995 June 26,1994 June 25, 1995 June 26, 1994
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $591,792 $571,287 $1,124,582 $1,052,005
Operating expenses
Cost of sales (exclusive of
items shown below)........................ 296,018 284,481 566,860 525,047
Selling, general and administrative......... 141,995 135,623 281,809 265,011
Depreciation and amortization
of intangible assets...................... 29,268 28,398 59,368 54,560
--------- --------- ---------- ----------
Total operating expenses.................... 467,281 448,502 908,037 844,618
--------- --------- ---------- ----------
Operating profit............................ 124,511 122,785 216,545 207,387
Equity in QUNO net income (loss)............ 8,315 (636) 12,396 (9,759)
Gain on sale of QUNO stock.................. - 39,381 - 39,381
Gain on sale of America Online stock........ - - 15,272 -
Interest income............................. 4,163 5,167 8,484 9,789
Interest expense............................ (4,620) (5,135) (8,883) (10,983)
--------- --------- ---------- ----------
Income before income taxes.................. 132,369 161,562 243,814 235,815
Income taxes................................ (50,242) (76,530) (93,724) (110,714)
--------- --------- ---------- ----------
Net income.................................. 82,127 85,032 150,090 125,101
Preferred dividends, net of tax............. (4,622) (4,643) (9,243) (9,287)
--------- --------- ---------- ----------
Net income attributable to common shares.... $ 77,505 $ 80,389 $ 140,847 $ 115,814
========= ========= ========== ==========
Net income per share:
Primary..................................... $ 1.19 $ 1.19 $ 2.15 $ 1.72
========= ========= ========== ==========
Fully diluted............................... $ 1.09 $ 1.09 $ 1.98 $ 1.58
========= ========= ========== ==========
Dividends per common share.................. $ .28 $ .26 $ .56 $ .52
========= ========= ========== ==========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
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<TABLE>
<CAPTION>
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
June 25, 1995 December 25, 1994
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term investments..................... $ 60,992 $ 21,824
Accounts receivable, net............................ 331,480 313,316
Inventories......................................... 47,431 33,488
Broadcast rights.................................... 151,844 155,754
Prepaid expenses and other.......................... 19,916 19,162
---------- ----------
Total current assets................................ 611,663 543,544
Investment in and advances to QUNO.................. 288,294 265,818
Property, plant and equipment....................... 1,347,442 1,316,715
Accumulated depreciation............................ (706,705) (675,684)
---------- ----------
Net properties...................................... 640,737 641,031
Broadcast rights.................................... 159,328 195,535
Intangible assets, net.............................. 834,438 834,596
Mortgage note receivable from affiliate............. 83,632 83,314
Other............................................... 258,326 221,987
---------- ----------
Total assets........................................ $2,876,418 $2,785,825
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities
Contracts payable for broadcast rights.............. $ 148,571 $ 145,026
Deferred income..................................... 58,258 35,766
Income taxes........................................ 12,731 19,291
Accounts payable, accrued expenses and
other current liabilities......................... 333,534 329,603
---------- ----------
Total current liabilities........................... 553,094 529,686
Long-term debt...................................... 497,439 411,200
Deferred income taxes............................... 162,351 149,521
Contracts payable for broadcast rights.............. 181,213 218,102
Other............................................... 140,085 144,336
---------- ----------
Total liabilities................................... 1,534,182 1,452,845
Stockholders' investment
Series B convertible preferred stock................ 322,541 329,286
Common stock........................................ 1,018 1,018
Additional paid-in capital.......................... 111,391 112,624
Retained earnings................................... 1,847,539 1,743,417
Treasury stock (at cost)............................ (742,351) (636,561)
Unearned compensation related to ESOP............... (272,486) (274,101)
Cumulative translation adjustment................... (19,236) (20,675)
Unrealized gain on investments...................... 93,820 77,972
---------- ----------
Total stockholders' investment...................... 1,342,236 1,332,980
---------- ----------
Total liabilities and stockholders' investment...... $2,876,418 $2,785,825
========== ==========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
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<TABLE>
<CAPTION>
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
First Half Ended
-----------------------------
June 25, 1995 June 26, 1994
------------- -------------
<S> <C> <C>
OPERATIONS
Net income.................................................. $ 150,090 $ 125,101
Adjustments to reconcile net income to net cash
provided by operations:
Equity in QUNO net (income) loss.................... (12,396) 9,759
Gain on sale of America Online stock................ (15,272) -
Gain on sale of QUNO stock.......................... - (39,381)
Depreciation and amortization of intangible
assets............................................ 59,368 54,560
Other, net.......................................... 1,506 47,779
--------- ---------
Net cash provided by operations............................. 183,296 197,818
--------- ---------
INVESTMENTS
Capital expenditures........................................ (47,739) (40,264)
Acquisitions and investments................................ (43,725) (121,920)
Proceeds from sales of QUNO and America Online stock........ 16,729 94,936
Other, net.................................................. 3,552 (12,949)
--------- ---------
Net cash used for investments............................... (71,183) (80,197)
--------- ---------
FINANCING
Proceeds from issuance of long-term debt.................... 90,000 -
Repayments of long-term debt, net........................... (3,208) (54,670)
Sale of common stock to employees, net...................... 15,387 10,372
Purchase of treasury stock.................................. (123,189) -
Dividends................................................... (45,968) (44,208)
Redemption of preferred stock............................... (5,967) -
--------- ---------
Net cash used for financing................................. (72,945) (88,506)
--------- ---------
Net increase in cash and short-term investments............. 39,168 29,115
Cash and short-term investments at the beginning of year.... 21,824 18,524
--------- ---------
Cash and short-term investments at the end of quarter....... $ 60,992 $ 47,639
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
4
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TRIBUNE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1:
------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the financial position of Tribune Company and its subsidiaries (the
"Company" or "Tribune") as of June 25, 1995 and the results of their operations
for the quarters and first halves ended June 25, 1995 and June 26, 1994 and
cash flows for the first halves ended June 25, 1995 and June 26, 1994. All
adjustments reflected in the accompanying unaudited condensed consolidated
financial statements are of a normal recurring nature. Results of operations
for interim periods are not necessarily indicative of the results to be
expected for the full year. Certain prior year amounts have been reclassified
to conform with the 1995 presentation.
Note 2:
------
Inventories consist of (in thousands):
June 25, 1995 Dec. 25, 1994
------------- -------------
Finished goods........................... $25,977 $13,893
Supplies and materials................... 11,707 11,935
Newsprint (at LIFO)...................... 9,747 7,660
------- -------
Total inventories........................ $47,431 $33,488
======= =======
U.S. newsprint inventories are valued under the LIFO method and were less than
current cost by approximately $9.5 million at June 25, 1995 and $8.0 million at
December 25, 1994.
Note 3:
------
Primary net income per share has been computed by dividing net income
attributable to common shares by the weighted average number of common shares
outstanding during the periods. Fully diluted net income per share has been
computed based on the assumption that all of the convertible preferred shares
have been converted into common shares. The numbers of common shares used for
computing primary and fully diluted net income per share were as follows (in
thousands):
Second Quarter Ended First Half Ended
1995 1994 1995 1994
------ ------ ------ ------
Primary 65,010 67,379 65,495 67,232
Fully diluted 71,762 74,411 72,245 74,309
5
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Note 4:
------
In March 1995, Tribune sold 200,000 shares of America Online common stock.
The sale resulted in an after-tax gain of $9.1 million, or $.14 per share,
which was recorded in the first quarter. This sale reduced the Company's
ownership interest in America Online from approximately 8% to 6%.
On July 28, 1995, Tribune sold Times Advocate Company, a California-based
newspaper subsidiary, for approximately $16 million in cash. The sale resulted
in an after-tax loss of $4.5 million, or $.07 per share on a primary basis,
which will be recorded in the third quarter. In May 1995, the Company reached
an agreement to exchange its two Sacramento radio stations for a Denver radio
station and cash. The exchange, which is subject to Federal Communications
Commission approval, is expected to be completed by the end of 1995.
On April 14, 1994, Tribune reduced its ownership holdings in QUNO
Corporation ("QUNO") by selling 5.5 million shares of QUNO common stock. With
this sale, Tribune reduced its ownership interest in QUNO from 59% to 34%. The
sale of the shares resulted in an after-tax gain of approximately $13 million,
or $.19 per share on a primary basis, which was recorded in the second quarter
of 1994. The Company retains 7.5 million shares of QUNO's 22 million common
shares outstanding and also holds a U.S. $138.8 million (face value)
subordinated debenture, convertible into 11.7 million voting common shares of
QUNO.
Note 5:
------
On January 1, 1995, Tribune acquired Relocation Consultants, Inc. for
approximately $8 million in cash. Relocation Consultants publishes free
apartment guides and provides apartment rental referral services to prospective
renters. On May 31, 1995, the Company acquired Jamestown Publishers, Inc., a
publisher and distributor of supplementary education materials for the
elementary and high school market, for approximately $6 million in cash. In the
first half of 1995, Tribune also invested approximately $30 million for
minority interests in several companies
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 by the end of 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.
6
<PAGE>
Tribune acquired The Wright Group on February 18, 1994, for approximately
$100 million in cash. The Wright Group is a publisher of supplementary
education materials for the elementary school market. On April 6, 1994,
Tribune acquired Boston independent television station WLVI for approximately
$25 million in cash. On June 30, 1994, the Company acquired Farm Journal Inc.,
publisher of The Farm Journal, for approximately $17.5 million in cash.
The acquisitions were accounted for as purchases, and accordingly, the
results of operations of the companies have been included in the consolidated
financial statements since their respective dates of acquisition.
Note 6:
------
Financial data for each of the Company's business segments is as follows
(in thousands):
<TABLE>
<CAPTION>
Second Quarter Ended First Half Ended
----------------------------- -----------------------------
June 25, 1995 June 26, 1994 June 25, 1995 June 26, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues:
Publishing.................................... $343,359 $321,153 $ 679,320 $ 636,039
Broadcasting and Entertainment................ 220,910 223,085 397,342 370,033
New Media/Education........................... 27,523 27,049 47,920 45,933
-------- -------- ---------- ----------
Total operating revenues...................... $591,792 $571,287 $1,124,582 $1,052,005
======== ======== ========== ==========
Operating profit:
Publishing.................................... $ 74,991 $ 76,325 $ 145,796 $ 145,562
Broadcasting and Entertainment................ 53,024 50,247 81,748 70,622
New Media/Education........................... 3,862 2,631 3,506 3,961
Corporate expenses............................ (7,366) (6,418) (14,505) (12,758)
-------- -------- ---------- ----------
Total operating profit........................ $124,511 $122,785 $ 216,545 $ 207,387
======== ======== ========== ==========
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
The following discussion compares the results of operations of Tribune Company
and its subsidiaries (the "Company") for the second quarter and first half of
1995 to the second quarter and first half of 1994.
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 1994
Major League Baseball season. In April 1995, the National Labor Relations Board
invalidated the owners' posted rules, and the players ended their strike. The
1995 baseball season began April 26, 1995. Eighteen games were lost from the
1995 season. Negotiations for a new players' contract are continuing and the
Company cannot predict the ultimate outcome of these negotiations. Chicago
Cubs' second quarter 1995 results were adversely affected by the baseball
strike due mainly to lower attendance and the 18 fewer games played. The strike
reduced the Company's primary net income per share by approximately $.04 in the
1995 second quarter. Lower attendance is expected to continue during the
remainder of the season due to the strike's influence. The strike had minimal
impact on the television group as profits from replacement programming,
implementation of contingency plans and continuing cost controls throughout the
broadcasting group offset lower baseball-related revenues.
The North American newsprint industry has increased newsprint prices due
to higher demand for newsprint in the U.S. and overseas. Three price increases
in 1994 and three in 1995 (March, May and announced for September) are expected
to result in an approximate 45% increase in average newsprint transaction
prices in 1995 over 1994. The price increases will increase newsprint expense
at the Company's newspapers by approximately $75 million in 1995. The Company
expects to offset the increase, at least in part, through cost controls, a
decrease in newsprint consumption and expected revenue increases. QUNO
Corporation, a Canadian newsprint manufacturer in which the Company has a 34%
equity investment, has and will continue to benefit from the price increases in
1995.
RESULTS OF OPERATIONS
---------------------
The Company's results of operations, when examined on a quarterly basis,
reflect the seasonality of advertising, which affects the results of both
publishing and broadcasting and entertainment. Second and fourth quarter
advertising revenues are typically higher than first and third quarter
revenues. Results for the 1995 and 1994 second quarters reflect this seasonal
pattern.
8
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CONSOLIDATED
The Company's consolidated operating results for the second quarter and
first half of 1995 and 1994 and the percentage change from 1994 were as
follows:
<TABLE>
<CAPTION>
(Dollars in millions, Second Quarter First Half
except per share amounts) 1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 592 $ 571 + 4% $1,124 $1,052 + 7%
Operating profit 125 123 + 1% 216 207 + 4%
Equity in QUNO net income (loss) 8 (1) * 12 (10) *
Gain on sale of AOL/QUNO stock - 39 * 15 39 *
Net income 82 85 - 3% 150 125 +20%
Before gain on AOL/QUNO
stock sales 82 72 +14% 141 112 +26%
Primary net income per share 1.19 1.19 - 2.15 1.72 +25%
Before gain on AOL/QUNO
stock sales 1.19 1.00 +19% 2.01 1.53 +31%
*Not meaningful
</TABLE>
In March 1995, the Company sold 200,000 shares of America Online ("AOL")
common stock. With this sale, Tribune reduced its position in AOL to
approximately 6%. The sale resulted in a pre-tax gain of $15.3 million and an
after-tax gain of $9.1 million, or $.14 per share on a primary basis.
On April 14, 1994, the Company reduced its ownership holdings in QUNO by
selling 5.5 million shares of QUNO common stock. With this sale, the Company
reduced its ownership interest in QUNO from 59% to 34%. The sale of the shares
resulted in a pre-tax gain of $39.4 million and an after-tax gain of $13.0
million, or $.19 per share on a primary basis.
Net Income Per Share -- Primary net income per share for the 1995 second
quarter was $1.19, unchanged from 1994. For the first half of 1995, primary
net income per share rose 25% to $2.15 from $1.72 in 1994. Excluding the gains
from the AOL and QUNO stock sales, primary net income per share rose 19% for
the 1995 second quarter and 31% for the 1995 first half. The increases were
due to substantially improved earnings from Tribune's equity investment in QUNO
and to improved television operating results. These gains were partially
offset by second quarter losses at the Chicago Cubs in 1995 due to the baseball
strike.
9
<PAGE>
Operating Profit and Revenues -- The Company's consolidated operating revenues,
EBITDA (operating profit plus depreciation and amortization) and operating
profit by business segment for the second quarter and first half were as
follows:
<TABLE>
<CAPTION>
Second Quarter First Half
(Dollars in millions) 1995 1994 Change 1995 1994 Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues
Publishing $343 $321 + 7% $ 679 $ 636 + 7%
Broadcasting & Entertainment 221 223 - 1% 397 370 + 7%
New Media/Education 28 27 + 2% 48 46 + 4%
------ ------ ------ ------
Total operating revenues $592 $571 + 4% $1,124 $1,052 + 7%
EBITDA
Publishing $ 93 $ 93 - 1% $ 182 $ 179 + 2%
Broadcasting & Entertainment 62 59 + 5% 100 88 + 14%
New Media/Education 6 5 + 32% 8 7 + 10%
Corporate expenses (7) (6) - 18% (14) (12) - 17%
------ ------ ------ ------
Total EBITDA $154 $151 + 2% $ 276 $ 262 + 5%
Operating profit
Publishing $ 75 $ 76 - 2% $ 146 $ 146 -
Broadcasting & Entertainment 53 50 + 6% 82 70 + 16%
New Media/Education 4 3 + 47% 3 4 - 11%
Corporate expenses (7) (6) - 15% (15) (13) - 14%
------ ------ ------ ------
Total operating profit $125 $123 + 1% $ 216 $ 207 + 4%
</TABLE>
Consolidated operating revenues for the 1995 second quarter rose 4% to $592
million from $571 million and for the first half increased 7% from 1994 to
$1,124 million, due to continued strength in advertising and the inclusion in
1995 of recent acquisitions -- The Wright Group in February 1994, Boston
television station WLVI in April 1994 and Farm Journal Inc. in June 1994.
Excluding the acquisitions from the appropriate periods, 1995 revenues
increased 3% for the second quarter and 4% for the first half.
Consolidated operating profit increased 1% in the 1995 second quarter and
4% in the first half, while EBITDA increased 2% in the second quarter and 5% in
the first half. Publishing operating profit decreased 2% in the 1995 second
quarter and was unchanged in the first half. Revenue increases of 7% in both
the 1995 second quarter and first half were mostly offset by increases in
newsprint and ink expense of 39% in the second quarter and 35% for the first
half. Broadcasting and entertainment operating profit improved in both periods
of 1995 due primarily to improved television results, partially offset in the
second quarter by lower baseball revenues. New media/education's 1995 second
quarter operating profit was $4 million, up 47% from 1994, while its first half
operating profit was down 11% from 1994.
10
<PAGE>
Operating Expenses -- Consolidated operating expenses increased 4% for the
quarter and 8% for the first half as follows:
<TABLE>
<CAPTION>
Second Quarter First Half
(Dollars in millions) 1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Cost of sales $296 $284 + 4% $567 $525 + 8%
Selling, general & administrative 142 136 + 5% 282 265 + 6%
Depreciation & amortization
of intangible assets 29 28 + 3% 59 55 + 9%
---- ---- ---- ----
Total operating expenses $467 $448 + 4% $908 $845 + 8%
Cost of sales increased 4%, or $12 million, in the 1995 second quarter and
8%, or $42 million, in the first half due primarily to the addition of The
Wright Group, WLVI-TV Boston and Farm Journal. Excluding these acquisitions
from the appropriate periods, cost of sales increased 4%, or $10 million, in
the second quarter and 5%, or $28 million, in the first half due to higher
newsprint and ink expense, partially offset by lower television broadcast
rights amortization and lower player compensation at the Chicago Cubs.
Newsprint and ink expense increased $18 million, or 39% for the 1995 second
quarter, and $31 million, or 35% for the first half, while television broadcast
rights amortization decreased $9 million, or 16%, in the second quarter and $8
million, or 7%, in the first half. The increases in selling, general and
administrative expenses in the 1995 second quarter and first half were
primarily attributable to the new businesses acquired. Excluding the new
businesses from the appropriate periods, SG&A expenses increased $3 million, or
2% in the second quarter of 1995 and $5 million, or 2% in the first half. The
increase in depreciation and amortization of intangible assets reflects the
addition of the three acquisitions and capital expenditures made in 1994.
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 income and losses
from its investments.
11
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</TABLE>
<TABLE>
<CAPTION>
Second Quarter First Half
(Dollars in millions) 1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues
Daily newspapers $321 $303 + 6% $635 $598 + 6%
Other publications/
services/development 22 18 +21% 44 38 +16%
---- ---- ---- ----
Total operating revenues $343 $321 + 7% $679 $636 + 7%
EBITDA
Daily newspapers $ 94 $ 95 - 2% $184 $183 + 1%
Other publications/
services/development (1) (2) +67% (2) (4) +53%
---- ---- ---- ----
Total EBITDA $ 93 $ 93 - 1% $182 $179 + 2%
Operating profit
Daily newspapers $ 76 $ 79 - 3% $149 $151 - 1%
Other publications/
services/development (1) (3) +49% (3) (5) +37%
---- ---- ---- ----
Total operating profit $ 75 $ 76 - 2% $146 $146 -
</TABLE>
On July 28, 1995, Tribune sold Times Advocate Company, a California-based
newspaper subsidiary, for approximately $16 million in cash. The sale resulted
in an after-tax loss of $4.5 million, or $.07 per share on a primary basis,
which will be recorded in the third quarter. Operating results for Times
Advocate Company were not material.
Publishing operating revenues for the 1995 second quarter increased 7% to
$343 million from $321 million in 1994, and for the first half were up 7% to
$679 million from $636 million, due principally to a 7% increase in advertising
revenues in both the quarter and the first half. Operating profit for the 1995
second quarter was down 2% to $75 million and for the first half was unchanged
at $146 million, as increases in operating revenues were offset by higher
operating expenses resulting from significantly higher newsprint expenses.
Newsprint and ink expense rose 39% in the second quarter of 1995 and 35% in the
first half.
12
<PAGE>
Publishing group revenues by classification for 1995 were as follows:
<TABLE>
<CAPTION>
Second Quarter First Half
(Dollars in millions) 1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Advertising
Retail $119 $113 + 6% $229 $217 + 6%
General 33 33 - 67 69 - 2%
Classified 109 99 +10% 218 194 +12%
---- ---- ---- ----
Total advertising 261 245 + 7% 514 480 + 7%
Circulation 61 61 - 1% 123 124 - 1%
Other 21 15 +39% 42 32 +29%
---- ---- ---- ----
Total revenues $343 $321 + 7% $679 $636 + 7%
</TABLE>
Advertising revenues for the 1995 second quarter and first half increased
mainly due to rate increases and preprint linage increases. Retail advertising
revenues increased in both periods primarily due to improvements reported in
the general merchandise category in Chicago. Classified advertising revenues
for the second quarter and first half rose, boosted by increased help wanted
advertising in Chicago, Orlando and Fort Lauderdale and real estate advertising
increases in Fort Lauderdale.
Total advertising linage was unchanged for the 1995 second quarter and
first half. Most categories declined due to a slight slowdown in the economy
in the second quarter. Preprint advertising linage was up 7% in the 1995 second
quarter and 3% for the first half due to higher full run preprint advertising,
primarily in Orlando. The following summary presents advertising linage for
the second quarter and first half.
<TABLE>
<CAPTION>
Second Quarter First Half
(Inches in thousands) 1995 1994 Change 1995 1994 Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Full run
Retail 1,071 1,146 - 7% 2,144 2,224 - 4%
General 182 183 - 1% 368 362 + 2%
Classified 1,768 1,773 - 3,521 3,504 -
------ ------ ------ ------
Total full run 3,021 3,102 - 3% 6,033 6,090 - 1%
Part run 2,692 2,768 - 3% 5,283 5,316 - 1%
Preprint 2,778 2,597 + 7% 5,029 4,896 + 3%
------ ------ ------ ------
Total inches 8,491 8,467 - 16,345 16,302 -
</TABLE>
13
<PAGE>
Circulation revenues were down 1% in both the 1995 second quarter and
first half due mainly to discount programs in Chicago and Orlando. Total
average daily circulation was up slightly to 1,371,000 copies in the 1995
second quarter, and total average Sunday circulation was up 1% to 2,016,000
copies. For the first half of 1995, total average daily circulation increased
1% to 1,399,000 copies, while total average Sunday circulation was up slightly
to 2,055,000 copies.
Other revenues are derived from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; direct mail services; and other
publishing-related activities. The increase in other revenues in the 1995
second quarter and first half resulted primarily from higher advertising
placement services and from the addition of Relocation Consultants, Inc.,
acquired in January 1995, which publishes free apartment guides and provides
apartment rental referral services to prospective renters.
Operating Expenses -- Publishing operating expenses increased 10%, or $23
million, in the second quarter of 1995 and 9%, or $43 million, in the first
half. These increases were primarily due to increases in newsprint and ink
expense of 39%, or $18 million, in the 1995 second quarter and 35%, or $31
million, in the first half. Average newsprint selling prices rose 47% in the
quarter and 39% in the first half. Newsprint consumption declined 5% in the
1995 second quarter and 2% in the first half due to a number of actions taken
at the newspaper companies to control newsprint usage. Other expenses grew 3%
in both the 1995 second quarter and first half.
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.
<TABLE>
<CAPTION>
Second Quarter First Half
(Dollars in millions) 1995 1994 Change 1995 1994 Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues
Television $171 $168 + 2% $305 $286 + 7%
Radio 21 16 + 27% 45 27 + 71%
Entertainment/Chicago Cubs 27 38 - 27% 43 55 - 21%
Cable Programming/Development 2 1 + 38% 4 2 + 58%
------ ------ ------ ------
Total operating revenues $221 $223 - 1% $397 $370 + 7%
14
<PAGE>
EBITDA
Television $ 70 $ 58 + 20% $109 $ 91 + 20%
Radio 3 4 - 20% 8 6 + 41%
Entertainment/Chicago Cubs (9) (1) -916% (13) (4) -257%
Cable Programming/Development (2) (2) + 19% (4) (5) + 19%
------ ------ ------ ------
Total EBITDA $ 62 $ 59 + 5% $100 $ 88 + 14%
Operating profit
Television $ 63 $ 51 + 23% $ 95 $ 77 + 22%
Radio 3 4 - 17% 8 5 + 52%
Entertainment/Chicago Cubs (11) (2) -414% (16) (6) -167%
Cable Programming/Development (2) (3) + 16% (5) (6) + 17%
------ ------ ------ ------
Total operating profit $ 53 $ 50 + 6% $ 82 $ 70 + 16%
</TABLE>
Broadcasting and entertainment operating revenues decreased 1% in the 1995
second quarter to $221 million from $223 million in 1994, and increased 7% in
the first half to $397 million from $370 million in 1994. Television revenues
improved in the 1995 second quarter and first half despite lower baseball-
related revenues as a result of the acquisition of WLVI-Boston in April of 1994
and stronger advertising revenues, primarily at WPIX-New York and WGNX-Atlanta.
Excluding WLVI, television revenues were up 1% and 4% for the 1995 second
quarter and first half, respectively. Radio revenues include those of Farm
Journal Inc., acquired in June 1994. Excluding Farm Journal, radio revenues
increased 4% in the 1995 second quarter and 11% in the first half due to higher
revenues at all of the stations except WGN-Chicago, which was impacted by the
baseball strike. Farm Journal revenues are seasonal, with the first quarter
being the strongest. Entertainment/Chicago Cubs revenues were negatively
impacted by the baseball strike, which shortened the season by 18 games and
resulted in lower attendance.
Broadcasting and entertainment operating profit for the second quarter was
up 6% to $53 million and for the first half was up 16% to $82 million. While
baseball-related revenues were lower due to the strike, profits from
replacement programming, implementation of contingency plans and continuing
cost controls throughout the broadcasting group offset the lower revenues. The
second quarter improvement was due to a 23% gain in television, partially
offset by the lower Chicago Cubs' results. The 1995 first half operating
profit improvement was due to a 22% gain in television and strong results in
radio, which includes Farm Journal. Entertainment/Chicago Cubs results
worsened in both the 1995 second quarter and the first half due mainly to the
baseball strike's effect on the Cubs.
Operating Expenses -- Operating expenses for the group decreased 3%, or $5
million, in the second quarter and increased 5%, or $16 million, in the first
half. Excluding WLVI-Boston and Farm Journal, operating expenses were down 6%,
or $10 million, in the second quarter and 2%, or $5 million, in the first half.
The second quarter decline was attributable to lower player compensation costs
at the Chicago Cubs caused by the delayed baseball season and a $9 million, or
16%, decrease in television broadcast rights amortization.
15
<PAGE>
NEW MEDIA/EDUCATION
Operating Profit and Revenues -- The following table presents operating
revenues, EBITDA and operating profit for the new media/education segment.
<TABLE>
<CAPTION>
Second Quarter First Half
(Dollars in millions) 1995 1994 Change 1995 1994 Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 28 $ 27 + 2% $ 48 $ 46 + 4%
EBITDA 6 5 + 32% 8 7 +10%
Operating profit 4 3 + 47% 3 4 -11%
</TABLE>
New media/education operating revenues were up 2% to $28 million in the
1995 second quarter as gains at The Wright Group and Contemporary Books were
partially offset by lower revenues at Compton's. Operating revenues were up 4%
to $48 million in the first half due to the acquisition of The Wright Group in
February 1994. Excluding The Wright Group, new media/education revenues were
down 16% in the first half due to lower Compton's revenues.
Second quarter operating profit for the new media/education group was $3.9
million in 1995, up 47% from $2.6 million in 1994. This increase was due to
gains at Contemporary Books and The Wright Group, while Compton's remained
virtually unchanged from 1994. Operating profit declined 11% in the first half
of 1995 to $3.5 million from $4.0 million in 1994 as operating gains at
Contemporary Books and The Wright Group were offset by losses at Compton's.
Operating Expenses -- New media/education's operating expenses were down 3%, or
$1 million, in the 1995 second quarter, and up 6%, or $2 million, in the first
half. Excluding The Wright Group, operating expenses were down 9%, or $3
million, in the first half.
EQUITY IN QUNO NET INCOME (LOSS)
The Company's share of QUNO's 1995 second quarter net income was $8
million, or $.13 per share on a primary basis. In the 1994 second quarter, the
Company's share of QUNO's net loss was $1 million, or $.01 per share. For the
first half, the Company's share of QUNO's 1995 net income was $12 million, or
$.19 per share, while Tribune's share of QUNO's 1994 net loss was $10 million,
or $.15 per share. The improvement for both periods of 1995 was attributable
to increased newsprint prices, higher sales volume and a more favorable foreign
currency position.
OTHER
Interest expense decreased 10% to $5 million in the 1995 second quarter
and decreased 19% to $9 million in the first half due to lower average debt
levels. Interest income decreased 19% to $4 million in the 1995 second quarter
and 13% to $8 million in the first half. The Company's effective income tax
16
<PAGE>
rate, excluding QUNO's equity income or loss and the 1994 gain on sale of QUNO
common stock, was 40.5% in the 1995 second quarter and first half compared to
40.8% and 40.9% in the 1994 second quarter and first half, respectively.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations for the first half of 1995 was $183
million compared to $198 million in the first half of 1994. The decrease was
due primarily to increased working capital requirements. Net cash used for
investments was $71 million for the first half of 1995 compared to $80 million
for the corresponding 1994 period. The 1995 first half included the $17
million of proceeds from the sale of 200,000 shares of America Online common
stock, acquisitions and investments of $44 million and capital expenditures of
$48 million. Capital expenditures for fiscal year 1995 are expected to total
approximately $120 million, related to a variety of modernization and 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. The 1994 first half included $95 million of proceeds from the sale of
5.5 million shares of QUNO common stock, the acquisition of The Wright Group
in February 1994 for approximately $100 million in cash, the acquisition of
WLVI-Boston in April 1994 for approximately $25 million in cash, and capital
expenditures of $40 million.
Net cash used for financing activities in the 1995 first half was $73
million compared to $89 million in 1994. Net cash used for financing
activities in 1995 included $123 million of treasury stock repurchases, $90
million of proceeds from the issuance of Medium Term Notes, debt repayments of
$3 million, and dividends of $46 million. In the first half of 1995, the
Company acquired approximately 2.2 million shares of its common stock, financed
primarily with available cash. At June 25, 1995, the Company had authorization
to repurchase 2.7 million additional shares and expects to continue to
repurchase shares in 1995, financed with available cash or commercial paper.
First half dividends per common share increased 8% to $.56 in 1995 from $.52 in
1994. Net cash used for financing activities in 1994's first half included $55
million of debt repayments and dividends of $44 million.
The Company expects to fund capital expenditures, dividends and other
operating requirements for the remainder of 1995 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, 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 the 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.
17
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
------------------
The computation of the ratios of earnings to fixed charges, filed herewith
as Exhibit 12, is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
11 - Statements of computation of primary and fully diluted net
income per share.
12 - Computation of ratios of earnings to fixed charges.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed in the second quarter of 1995.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIBUNE COMPANY
(Registrant)
Date: August 8, 1995 R. Mark Mallory
Vice President and Controller
(on behalf of the Registrant
and as Chief Accounting Officer)
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Second
Quarter 1995 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-26-1994
<PERIOD-END> JUN-25-1995
<CASH> 18,102
<SECURITIES> 42,890
<RECEIVABLES> 365,583
<ALLOWANCES> 34,103
<INVENTORY> 47,431
<CURRENT-ASSETS> 611,663
<PP&E> 1,347,442
<DEPRECIATION> 706,705
<TOTAL-ASSETS> 2,876,418
<CURRENT-LIABILITIES> 553,094
<BONDS> 0
<COMMON> 1,018
0
322,541
<OTHER-SE> 1,018,677
<TOTAL-LIABILITY-AND-EQUITY> 2,876,418
<SALES> 0
<TOTAL-REVENUES> 1,124,582
<CGS> 0
<TOTAL-COSTS> 566,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,883
<INCOME-PRETAX> 243,814
<INCOME-TAX> 93,724
<INCOME-CONTINUING> 150,090
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,090
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 1.98
</TABLE>
EXHIBIT 11
<TABLE>
<CAPTION>
TRIBUNE COMPANY
STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE (UNAUDITED)
(In thousands, except per share amounts)
Second Quarter Ended First Half Ended
---------------------------- ----------------------------
PRIMARY June 25, 1995 June 26, 1994 June 25, 1995 June 26, 1994
--------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 82,127 $ 85,032 $ 150,090 $ 125,101
Preferred dividends, net of tax (4,622) (4,643) (9,243) (9,287)
--------- --------- --------- ---------
Net income attributable to common shares $ 77,505 $ 80,389 $ 140,847 $ 115,814
--------- --------- --------- ---------
Weighted average common shares outstanding 65,010 67,379 65,495 67,232
--------- --------- --------- ---------
Primary net income per share $ 1.19 $ 1.19 $ 2.15 $ 1.72
========= ========= ========= =========
FULLY DILUTED
--------------
Net income $ 82,127 $ 85,032 $ 150,090 $ 125,101
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (2,775) (2,970) (5,549) (5,940)
Assumed elimination of tax benefit on certain ESOP
preferred dividends (831) (704) (1,662) (1,409)
--------- --------- ---------- ----------
Adjusted net income $ 78,521 $ 81,358 $ 142,879 $ 117,752
Weighted average common shares outstanding 65,010 67,379 65,495 67,232
Assumed conversion of preferred shares into common shares 5,890 6,027 5,890 6,027
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 862 1,005 860 1,050
--------- --------- ---------- ----------
Adjusted weighted average common shares outstanding 71,762 74,411 72,245 74,309
--------- --------- ---------- ----------
Fully diluted net income per share $ 1.09 $ 1.09 $ 1.98 $ 1.58
========= ========= ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
EXHIBIT 12
<TABLE>
<CAPTION>
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
First
Half Fiscal Year Ended December
Ended -----------------------------------------------------
6/25/95 1994 1993 1992 1991 1990
--------- -------- -------- -------- -------- --------
<S>
Net income (loss) before cumulative effects <C> <C> <C> <C> <C> <C>
of accounting changes $ 150,090 $ 242,047 $ 188,606 $ 136,625 $ 141,981 $ (63,533)
Add:
Income tax expense (benefit) 93,724 186,668 143,821 96,266 99,894 (30,695)
(Income) losses on equity investments (8,541) 16,176 20,212 1,903 1,107 2,285
--------- -------- -------- -------- -------- --------
Sub-total 235,273 444,891 352,639 234,794 242,982 (91,943)
--------- -------- -------- -------- -------- --------
Fixed charge adjustments
Add:
Interest expense 8,883 20,585 24,660 49,254 63,083 53,576
Amortization of capitalized interest 1,106 2,362 2,392 5,304 5,258 4,850
Interest component of rental expense (A) 4,965 8,236 8,732 9,329 9,047 14,467
--------- -------- -------- -------- -------- --------
Earnings (loss), as adjusted $ 250,227 $ 476,074 $ 388,423 $ 298,681 $ 320,370 $ (19,050)
========= ======== ======== ======== ======== ========
Fixed charges:
Interest expense $ 8,883 $ 20,585 $ 24,660 $ 49,254 $ 63,083 $ 53,576
Interest capitalized 213 - 1,099 3,445 1,976 8,652
Interest component of rental expense (A) 4,965 8,236 8,732 9,329 9,047 14,467
Interest related to guaranteed ESOP debt (B) 10,995 24,017 25,742 27,019 27,500 27,757
--------- -------- -------- -------- -------- --------
Total fixed charges $ 25,056 $ 52,838 $ 60,233 $ 89,047 $ 101,606 $ 104,452
========= ======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 10.0 9.0 6.4 3.4 3.2 (C)
========= ======== ======== ======== ======== ========
(A) Represents a portion of rental expense incurred by the Company, which is a reasonable approximation of
the interest cost component of such expense.
(B) Tribune Company guarantees the debt of its Employee Stock Ownership Plan (ESOP).
(C) The net loss for 1990 reflects an after-tax non-recurring loss of $185 million ($295 million before
income taxes) relating to the sale of the New York Daily News. Excluding this non-recurring item,
the ratio for 1990 was 2.6. As a result of the loss incurred for the full-year 1990, the Company was
unable to cover the indicated fixed charges. The Company's loss, as adjusted, plus the indicated fixed
charges for 1990 totaled $124 million.
</TABLE>
