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 30, 1996
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 August 4, 1996 there were 61,206,056 shares outstanding of the
Company's Common Stock (without par value).
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended First Half Ended
------------------------------- ------------------------------
June 30, 1996 June 25,1995 June 30, 1996 June 25, 1995
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues.................................... $641,927 $577,218 $1,179,049 $1,098,624
Operating expenses
Cost of sales (exclusive of items
shown below)....................................... 315,051 289,314 597,925 555,656
Selling, general and administrative................... 147,410 134,125 283,441 267,055
Depreciation and amortization
of intangible assets............................... 34,593 29,268 65,735 59,368
-------- -------- ---------- ---------
Total operating expenses.............................. 497,054 452,707 947,101 882,079
-------- -------- ---------- ---------
Operating profit...................................... 144,873 124,511 231,948 216,545
Gain on sale of America Online common stock........... - - - 15,272
Interest income....................................... 7,825 3,182 16,375 6,522
Interest expense...................................... (11,033) (4,620) (21,988) (8,883)
-------- -------- ---------- ---------
Income from continuing operations before
income taxes........................................ 141,665 123,073 226,335 229,456
Income taxes.......................................... (57,375) (49,845) (91,666) (92,930)
-------- -------- ---------- ---------
Income from continuing operations..................... 84,290 73,228 134,669 136,526
Discontinued operations of QUNO, net of tax........... - 8,899 89,317 13,564
-------- -------- ---------- ---------
Net income............................................ 84,290 82,127 223,986 150,090
Preferred dividends, net of tax....................... (4,697) (4,622) (9,393) (9,243)
-------- -------- ---------- ---------
Net income attributable to common shares.............. $ 79,593 $ 77,505 $ 214,593 $ 140,847
======== ======== ========== =========
Net income per share:
Primary: Continuing operations................ $ 1.30 $ 1.05 $ 2.04 $ 1.94
Discontinued operations.............. - .14 1.45 .21
------ ------ ------ ------
Net income........................... $ 1.30 $ 1.19 $ 3.49 $ 2.15
====== ====== ====== ======
Fully diluted: Continuing operations................ $ 1.19 $ .97 $ 1.88 $ 1.79
Discontinued operations.............. - .12 1.31 .19
------ ------ ------ ------
Net income........................... $ 1.19 $ 1.09 $ 3.19 $ 1.98
====== ====== ====== ======
Dividends per common share............................ $ .30 $ .28 $ .60 $ .56
====== ====== ====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term investments.................................... $ 56,339 $ 22,899
Accounts receivable, net........................................... 346,574 296,363
Inventories........................................................ 94,500 45,348
Broadcast rights................................................... 143,774 163,339
Prepaid expenses and other......................................... 20,031 17,651
---------- ----------
Total current assets............................................... 661,218 545,600
Investment in and advances to QUNO................................. - 356,925
Property, plant and equipment...................................... 1,419,048 1,366,741
Accumulated depreciation........................................... (769,255) (725,995)
---------- ----------
Net properties..................................................... 649,793 640,746
Broadcast rights................................................... 156,041 194,038
Intangible assets, net............................................. 1,251,614 795,856
Investments........................................................ 614,877 549,735
Other.............................................................. 213,571 205,355
---------- ----------
Total assets....................................................... $3,547,114 $3,288,255
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Long-term debt due within one year................................. $ 29,380 $ 28,665
Contracts payable for broadcast rights............................. 162,602 164,443
Deferred income ................................................... 59,913 43,961
Income taxes....................................................... 36,279 8,401
Accounts payable, accrued expenses and other current liabilities... 320,692 311,683
---------- ----------
Total current liabilities.......................................... 608,866 557,153
Long-term debt..................................................... 982,218 757,437
Deferred income taxes.............................................. 196,797 223,756
Contracts payable for broadcast rights............................. 198,174 225,771
Compensation and other obligations................................. 135,675 144,229
---------- ----------
Total liabilities.................................................. 2,121,730 1,908,346
Shareholders' equity
Series B convertible preferred stock............................... 312,470 322,540
Common stock and additional paid-in capital........................ 135,420 127,814
Retained earnings.................................................. 2,108,182 1,930,380
Treasury stock (at cost)........................................... (1,026,723) (923,828)
Unearned compensation related to ESOP.............................. (245,532) (247,281)
Cumulative translation adjustment.................................. - (19,188)
Unrealized gain on investments..................................... 141,567 189,472
---------- ----------
Total shareholders' equity......................................... 1,425,384 1,379,909
---------- ----------
Total liabilities and shareholders' equity......................... $3,547,114 $3,288,255
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
First Half Ended
--------------------------------------
June 30, 1996 June 25, 1995
------------- -------------
<S> <C> <C>
Operations
Net income................................................................... $ 223,986 $ 150,090
Adjustments to reconcile net income to net cash
provided by operations:
Discontinued operations of QUNO, net of tax.......................... (89,317) (13,564)
Gain on sale of America Online common stock.......................... - (15,272)
Depreciation and amortization of intangible assets................... 65,735 59,368
Other, net........................................................... (97,336) 2,674
--------- ---------
Net cash provided by operations.............................................. 103,068 183,296
--------- ---------
Investments
Capital expenditures......................................................... (42,977) (47,739)
Acquisitions................................................................. (498,460) (13,650)
Investments.................................................................. (23,796) (30,075)
Proceeds from sale of America Online common stock............................ - 16,729
Proceeds from sale of QUNO................................................... 426,828 -
Other, net................................................................... (4,942) 3,552
--------- ---------
Net cash used for investments................................................ (143,347) (71,183)
--------- ---------
Financing
Proceeds from issuance of long-term debt..................................... 236,296 90,000
Repayments of long-term debt................................................. (11,033) (3,208)
Sale of common stock to employees, net....................................... 17,993 15,387
Purchase of treasury stock................................................... (123,353) (123,189)
Dividends.................................................................... (46,184) (45,968)
Redemption of preferred stock................................................ - (5,967)
--------- ---------
Net cash provided by (used for) financing.................................... 73,719 (72,945)
--------- ---------
Net increase in cash and short-term investments.............................. 33,440 39,168
Cash and short-term investments at the beginning of year..................... 22,899 21,824
--------- ---------
Cash and short-term investments at the end of quarter........................ $ 56,339 $ 60,992
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
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 30, 1996 and the results of their operations
for the quarters and first halves ended June 30, 1996 and June 25, 1995 and cash
flows for the first halves ended June 30, 1996 and June 25, 1995. 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 1996 presentation. The condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and the related
notes included in the Company's Annual Report on Form 10-K.
Note 2:
- -------
Inventories consist of (in thousands):
June 30, 1996 Dec. 31, 1995
------------- -------------
Finished goods.................... $60,590 $21,638
Newsprint (at LIFO)............... 19,328 12,473
Supplies and other................ 14,582 11,237
------- -------
Total inventories................. $94,500 $45,348
======= =======
Newsprint inventories are valued under the LIFO method and were less than
current cost by approximately $14.1 million at June 30, 1996 and $12.8 million
at December 31, 1995. Finished goods primarily include books and supplementary
educational materials.
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 First Half
---------------------- ---------------------
1996 1995 1996 1995
------ ------ ------ ------
Primary 61,129 65,010 61,422 65,495
Fully diluted 67,830 71,762 68,161 72,245
5
<PAGE>
Note 4:
- -------
In March 1996, Tribune completed the sale of its holdings in QUNO
Corporation, a Canadian newsprint company, as part of QUNO's merger with Donohue
Inc. The sale resulted in a first quarter 1996 after-tax gain of $89.3 million,
or $1.45 per share on a primary basis. The gross proceeds from the sale were
approximately $427 million in cash, Donohue stock and short-term notes.
Immediately after the sale, the Company sold the Donohue stock and notes for
cash. After-tax proceeds were approximately $331 million. QUNO has been
accounted for as a discontinued operation in the Company's consolidated
financial statements.
In March 1995, Tribune sold shares of America Online common stock for
approximately $17 million. The sale resulted in a pretax gain of $15.3 million
and an after-tax gain of $9.1 million, or $.14 per share on a primary basis.
Note 5:
- -------
In January 1996, Tribune acquired Houston television station KHTV for
approximately $102 million in cash. In February 1996, Tribune acquired the
remaining minority interest in Philadelphia television station WPHL for
approximately $23 million in cash. In March 1996, Tribune acquired Educational
Publishing Corporation and NTC Publishing Group. Educational Publishing,
purchased for approximately $200 million in cash, publishes supplemental
education and innovative curriculum materials for early childhood through high
school learners. NTC Publishing was acquired for approximately $82 million in
cash and publishes educational products in print, audio and multimedia formats
for the foreign language learning, English as a second language, language arts,
careers, business and travel markets. In April 1996, the Company acquired San
Diego television station KTTY for approximately $71 million in cash.
In July 1996, Tribune announced an agreement to acquire Renaissance
Communications Corp., a publicly traded company owning six televisions stations,
for approximately $1.1 billion in cash. The transaction is subject to various
closing conditions, including FCC and other regulatory approval, and is expected
to close in early 1997.
The acquisitions are being accounted for by the purchase method, and
accordingly, the results of operations of the companies have been or will be
included in the consolidated financial statements since or from their respective
dates of acquisition.
6
<PAGE>
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 30, 1996 June 25, 1995 June 30, 1996 June 25, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues:
Publishing.................................... $330,495 $327,787 $ 657,828 $ 651,334
Broadcasting and Entertainment................ 253,280 220,910 440,475 397,342
Education..................................... 58,152 28,521 80,746 49,948
-------- -------- ---------- ----------
Total operating revenues............................ $641,927 $577,218 $1,179,049 $1,098,624
======== ======== ========== ==========
Operating profit:
Publishing.................................... $ 72,861 $ 74,991 $ 136,104 $ 145,796
Broadcasting and Entertainment................ 65,904 53,024 94,928 81,748
Education..................................... 13,749 3,862 15,971 3,506
Corporate expenses............................ (7,641) (7,366) (15,055) (14,505)
-------- -------- ---------- ----------
Total operating profit.............................. $144,873 $124,511 $ 231,948 $ 216,545
======== ======== ========== ==========
</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
1996 to the second quarter and first half of 1995.
SIGNIFICANT EVENTS
- ------------------
In March 1996, Tribune completed the sale of its holdings in QUNO
Corporation, a Canadian newsprint company, as part of QUNO's merger with Donohue
Inc. The sale resulted in a first quarter 1996 after-tax gain of $89.3 million,
or $1.45 per share on a primary basis. The gross proceeds from the sale were
approximately $427 million in cash, Donohue stock and short-term notes.
Immediately after the sale, the Company sold the Donohue stock and notes for
cash. After-tax proceeds were approximately $331 million. QUNO has been
accounted for as a discontinued operation in the Company's consolidated
financial statements.
The Company acquired the following businesses since the 1995 first
quarter. In 1995, the Company purchased Jamestown Publishers, Inc. in May and
Everyday Learning Corporation in August. In 1996, the Company acquired Houston
television station KHTV in January, Educational Publishing Corporation and NTC
Publishing Group in March and San Diego television station KTTY in April. The
results of these businesses have been included in the consolidated financial
statements since their respective dates of acquisition.
In March 1995, the Company sold shares of America Online ("AOL") common
stock for approximately $17 million. The sale resulted in an after-tax gain of
$9.1 million, or $.14 per share on a primary basis, in the first quarter of
1995. In July 1995, the Company sold its California newspaper subsidiary, Times
Advocate Company in Escondido, for approximately $16 million in cash. The sale
resulted in an after-tax loss of $4.5 million, or $.07 per share. In December
1995, the Company sold Compton's NewMedia to SoftKey International Inc. for
$120.5 million of SoftKey common shares and a $3 million note and also invested
$150 million in SoftKey convertible notes. These transactions resulted in an
after-tax gain of $4.1 million, or $.06 per share.
In July 1996, Tribune announced an agreement to acquire Renaissance
Communications Corp., a publicly traded company owning six televisions stations,
for approximately $1.1 billion in cash. The transaction is subject to various
closing conditions, including FCC and other regulatory approval, and is expected
to close in early 1997.
8
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
The results of operations, when examined on a quarterly basis, reflect the
seasonality of the Company's revenues. In both publishing and broadcasting and
entertainment, second and fourth quarter advertising revenues are typically
higher than first and third quarter revenues. In education, second and third
quarter revenues are typically higher than first and fourth quarter revenues.
Results for the 1996 and 1995 second quarters reflect these seasonal patterns.
CONSOLIDATED
The Company's consolidated operating results for the second quarter and
first half of 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
(Dollars in millions, Second Quarter First Half
except per share amounts) ------------------------- ---------------------------
1996 1995 Change 1996 1995 Change
----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 642 $ 577 + 11% $1,179 $1,098 + 7%
Operating profit 145 125 + 16% 232 216 + 7%
Gain on sale of AOL common stock - - - - 15 -
Income from continuing operations 84 73 + 15% 135 137 - 1%
Discontinued operations of QUNO, net of tax - 9 - 89 14 *
Net income 84 82 + 3% 224 150 + 49%
Before AOL gain and QUNO 84 73 + 15% 135 127 + 6%
Primary net income per share
Continuing operations 1.30 1.05 + 24% 2.04 1.94 + 5%
Discontinued operations - .14 - 1.45 .21 *
Total 1.30 1.19 + 9% 3.49 2.15 + 62%
Continuing operations before AOL gain 1.30 1.05 + 24% 2.04 1.80 + 13%
*Not meaningful
</TABLE>
Net Income Per Share -- Primary net income per share from continuing operations
for the 1996 second quarter was $1.30, up 24% from $1.05 last year. For the
first half of 1996, primary net income per share from continuing operations rose
13% to $2.04 from $1.80 in 1995, excluding a gain in 1995 on the sale of AOL
common stock. The increases were due to higher operating profit from
broadcasting and entertainment as well as from education, partially offset by
lower publishing profit and higher net interest expense. Fewer shares
outstanding also contributed to the higher per share earnings. Average common
shares outstanding decreased 6% in both the 1996 second quarter and first half
due to the Company's stock repurchases.
Operating Profit and Revenues -- The Company's consolidated operating revenues,
EBITDA (operating profit before depreciation and amortization) and operating
profit by business segment for the second quarter and first half were as
follows:
9
<PAGE>
<TABLE>
<CAPTION>
Second Quarter First Half
-------------------------- -----------------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
---- ---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues
Publishing $331 $328 + 1% $ 658 $ 651 + 1%
Broadcasting and Entertainment 253 221 + 15% 440 397 + 11%
Education 58 28 +104% 81 50 + 62%
---- ---- ------ ------
Total operating revenues $642 $577 + 11% $1,179 $1,098 + 7%
EBITDA
Publishing $ 92 $ 93 - 1% $ 173 $ 182 - 5%
Broadcasting and Entertainment 77 62 + 25% 117 100 + 17%
Education 17 6 +193% 22 8 + 173%
Corporate expenses (7) (7) + 2% (14) (14) -
---- ---- ------ ------
Total EBITDA $179 $154 + 17% $ 298 $ 276 + 8%
Operating profit
Publishing $ 73 $ 75 - 3% $ 136 $ 146 - 7%
Broadcasting and Entertainment 66 53 + 24% 95 81 + 16%
Education 14 4 +256% 16 4 + 356%
Corporate expenses (8) (7) - 4% (15) (15) - 4%
---- ---- ------ ------
Total operating profit $145 $125 + 16% $ 232 $ 216 + 7%
</TABLE>
Consolidated operating revenues for the 1996 second quarter rose 11% to
$642 million from $577 million in 1995 and for the first half increased 7% to
$1,179 million from $1,098 million in 1995. This was due to recent acquisitions
and higher advertising revenues. Excluding businesses recently acquired or sold,
operating revenues were up 6% for the second quarter and up 4% for the first
half.
Consolidated operating profit increased 16% in the 1996 second quarter and
7% in the first half, while EBITDA increased 17% in the second quarter and 8% in
the first half. Publishing operating profit decreased 3% in the 1996 second
quarter and 7% in the first half primarily due to increased investments and
development of new businesses and, especially for the first half, higher
newsprint costs. Broadcasting and entertainment operating profit increased in
both periods of 1996 due to improvements at the Chicago Cubs, impacted by last
year's strike-shortened season, and to gains in the television group.
Education's 1996 second quarter operating profit was $14 million, up 256% from
1995, and its first half operating profit was $16 million, up from $4 million in
1995, due mainly to the recent acquisitions. Excluding businesses recently
acquired or sold, consolidated operating profit was up 6% to $134 million in the
second quarter and was relatively unchanged at $221 for the half, while EBITDA
was up 7% to $165 million in the second quarter and up 1% to $282 in the first
half.
10
<PAGE>
Operating Expenses -- Consolidated operating expenses increased 10% for the
quarter and 7% for the first half as follows:
<TABLE>
<CAPTION>
Second Quarter First Half
----------------------------- ---------------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Cost of sales $315 $289 + 9% $598 $556 + 8%
Selling, general & administrative 147 134 + 10% 283 267 + 6%
Depreciation & amortization
of intangible assets 35 29 + 18% 66 59 + 11%
---- ---- ---- ----
Total operating expenses $497 $452 + 10% $947 $882 + 7%
</TABLE>
Cost of sales increased 9%, or $26 million, in the 1996 second quarter and
8%, or $42 million, in the first half due to the acquisitions, increased
television broadcast rights amortization and, in the first half, higher
newsprint and ink expense. This was partially offset by the effect of the
dispositions. Excluding the acquisitions and dispositions, cost of sales
increased 5%, or $13 million, in the second quarter and 5%, or $30 million in
the first half. Newsprint and ink expense was up 2%, or $1 million, in the
second quarter of 1996 and rose 12%, or $14 million, in the first half.
Excluding the two new television stations, television broadcast rights
amortization increased 17%, or $8 million, in the 1996 second quarter and
increased 14%, or $14 million, in the first half due to higher syndicated
programming and baseball rights amortization. Selling, general and
administrative expenses were up $13 million, or 10%, in the 1996 second quarter
and increased $16 million, or 6%, in the first half, primarily due to the
acquisitions and increased losses from equity investments and expenses for
development activities. Excluding the acquisitions and dispositions, SG&A
expense increased $6 million, or 5%, in the second quarter and increased $12
million, or 5% in the first half. Expenses for development activities and losses
from equity investments increased $4 million in the 1996 second quarter and rose
$10 million in the first half. The increase in depreciation and amortization of
intangible assets reflects the acquisitions and capital expenditures made in
1996 and 1995.
PUBLISHING
Operating Profit and Revenues -- The following table, which excludes Times
Advocate Company, presents publishing operating revenues, EBITDA and operating
profit for daily newspapers and other publications/services/development. The
latter category includes syndication of editorial products, advertising
placement services, niche publications, alternate delivery services, direct mail
operations, online/electronic products and, for EBITDA and operating profit,
equity losses from investments.
11
<PAGE>
<TABLE>
<CAPTION>
Second Quarter First Half
------------------------------ ----------------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues
Daily newspapers $314 $307 + 2% $623 $612 + 2%
Other publications/
services/development 17 16 + 8% 35 31 + 11%
---- ---- ---- ----
Total operating revenues $331 $323 + 2% $658 $643 + 2%
EBITDA
Daily newspapers $ 97 $ 94 - 3% $182 $185 - 1%
Other publications/
services/development (5) (1) * (9) (2) *
---- ---- ---- ----
Total EBITDA $ 92 $ 93 - 1% $173 $183 - 5%
Operating profit
Daily newspapers $ 79 $ 76 + 3% $147 $150 - 2%
Other publications/
services/development (6) (1) - 330% (11) (3) -250%
---- ---- ---- ----
Total operating profit $ 73 $ 75 - 3% $136 $147 - 8%
*Not meaningful
</TABLE>
Publishing operating revenues for the 1996 second quarter, excluding Times
Advocate, were up 2% to $331 million, and for the first half were up 2% to $658
million, due principally to higher advertising and circulation revenues.
Operating profit for the 1996 second quarter was $73 million, down 3%, and for
the first half was $136 million, down 8%, as the increased revenues were more
than offset by increased investments and development of new businesses and,
especially for the first half, higher newsprint costs. In the second quarter of
1996, daily newspaper operating profit margins increased to 25.2% from 25.0% in
1995 and in the first half decreased to 23.6% from 24.6% in 1995. Including
Times Advocate, operating revenues were up 1% for both the second quarter and
first half, and operating profit was down 3% for the second quarter and down 7%
for the first half.
Publishing group revenues by classification, excluding Times Advocate,
were as follows:
<TABLE>
<CAPTION>
Second Quarter First Half
----------------------------- ----------------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Advertising
Retail $104 $108 - 4% $205 $211 - 3%
General 35 33 + 4% 68 67 + 2%
Classified 116 109 + 7% 231 218 + 6%
---- ---- ---- ----
Total advertising 255 250 + 2% 504 496 + 2%
Circulation 63 60 + 5% 128 122 + 5%
Other 13 13 - 2% 26 25 + 4%
---- ---- ---- ----
Total revenues $331 $323 + 2% $658 $643 + 2%
</TABLE>
12
<PAGE>
Retail advertising revenues for the 1996 second quarter and first half
decreased mainly due to declines in the electronics, food and drug and hardware
store categories in Chicago, partially offset by an increase in the general
merchandise category in the first half. Several major Chicago retailers went out
of business in the fourth quarter of 1995. Classified advertising revenues
increased due principally to increased help wanted advertising in Chicago and
Orlando for both the second quarter and first half and improved real estate
advertising in Fort Lauderdale in the first half, partially offset by a decline
in automotive advertising in Chicago in the first half.
Total advertising linage, excluding Times Advocate, decreased 5% in the
1996 second quarter and was down 4% for the first half. Full run retail
advertising linage decreased 7% in the second quarter and was down 10% in the
first half due to decreases at all of the newspapers. Part run advertising
linage was down 5% for both the second quarter and first half due primarily to
decreases in Chicago and Orlando in both retail and classified. Preprint
advertising linage decreased 10% in the 1996 second quarter and was down 4% in
the first half due primarily to lower preprint part run linage in Orlando and
Newport News and decreased full run linage in Fort Lauderdale and Chicago. The
following summary presents advertising linage for the second quarter and first
half, excluding Times Advocate:
<TABLE>
<CAPTION>
Second Quarter First Half
------------------------------ ------------------------------
(Inches in thousands) 1996 1995 Change 1996 1995 Change
----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Full run
Retail 888 953 - 7% 1,741 1,928 - 10%
General 184 174 + 6% 362 350 + 3%
Classified 1,673 1,643 + 2% 3,267 3,288 - 1%
----- ----- ----- -----
Total full run 2,745 2,770 - 1% 5,370 5,566 - 4%
Part run 2,386 2,516 - 5% 4,708 4,934 - 5%
Preprint 1,965 2,175 - 10% 3,767 3,938 - 4%
----- ----- ------ ------
Total inches 7,096 7,461 - 5% 13,845 14,438 - 4%
</TABLE>
Circulation revenues, excluding Times Advocate, increased 5% in both the
1996 second quarter and first half due to selected price increases at all of the
Company's newspapers. Total average daily circulation, excluding Times Advocate,
was down 2% to 1,301,000 copies in the 1996 second quarter, and total average
Sunday circulation was down 2% to 1,921,000 copies. For the first half of 1996,
total average daily circulation decreased 2% to 1,316,000 copies, while total
average Sunday circulation was down 2% to 1,958,000 copies.
Other revenues are derived from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; direct mail operations; and other
publishing-related activities.
Operating Expenses -- Publishing operating expenses, excluding Times Advocate,
increased 4%, or $10 million, in the second quarter of 1996 and 5%, or $26
million, in the first half. In the second quarter of 1996, newsprint and ink
expense increased 2%, or $1 million, as average newsprint prices were up 8%
while consumption declined 6% due to linage and copy decreases. For the first
half, newsprint and ink expense was up 12%, or $14 million, as average newsprint
prices rose 20% while consumption declined 8%. Investments in and costs
associated with the development of new businesses increased $4 million, or
13
<PAGE>
242%, in the second quarter and was up $8 million, or 226%, in the first half,
primarily due to Internet related spending. Including Times Advocate, operating
expenses increased 2%, or $5 million, in the second quarter and increased 3%, or
$16 million, in the 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 income or loss from The WB
Network, TV Food Network and Qwest Broadcasting.
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------------- ---------------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues
Television $196 $171 + 15% $344 $305 + 13%
Radio 20 21 - 45 45 - 1%
Entertainment/Chicago Cubs 35 27 + 26% 47 43 + 9%
Cable Programming/Development 2 2 + 16% 4 4 + 16%
---- ---- ---- ----
Total operating revenues $253 $221 + 15% $440 $397 + 11%
EBITDA
Television $ 75 $ 70 + 8% $117 $109 + 7%
Radio 3 3 + 4% 8 8 + 1%
Entertainment/Chicago Cubs 1 (9) * (2) (13) + 86%
Cable Programming/Development (2) (2) - 9% (6) (4) - 39%
---- ---- ---- ----
Total EBITDA $ 77 $ 62 + 25% $117 $100 + 17%
Operating profit
Television $ 66 $ 63 + 4% $ 99 $ 95 + 4%
Radio 3 3 - 7% 7 7 - 8%
Entertainment/Chicago Cubs - (11) + 97% (4) (16) + 75%
Cable Programming/Development (3) (2) - 7% (7) (5) - 33%
---- ---- ---- ----
Total operating profit $ 66 $ 53 + 24% $ 95 $ 81 + 16%
*Not meaningful
</TABLE>
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. The strike shortened the 1995 season
by 18 games, all in the second quarter, and impacted attendance throughout the
season. Negotiations for a new players' contract are continuing.
14
<PAGE>
Broadcasting and entertainment operating revenues increased 15% to $253
million in the 1996 second quarter and increased 11% in the first half to $440
million due mainly to increases in television and entertainment/Chicago Cubs.
Television revenues increased in both periods primarily due to improvements in
Chicago and New York and the acquisition of stations KHTV in Houston and KTTY in
San Diego. Excluding the two new stations, television revenues increased 9% in
the second quarter and 8% in the first half. Entertainment/Chicago Cubs revenues
increased 26% to $35 million in the second quarter and were up 9% to $47 million
in the first half as a result of higher Chicago Cubs revenues. Chicago Cubs
results were negatively impacted in 1995 by the baseball strike. The improvement
at the Chicago Cubs was partially offset in both periods by lower entertainment
revenues due to the cancellation of two shows - "Charles Perez" and "The Road."
Second quarter 1996 operating profit for broadcasting and entertainment
was up 24% to $66 million from $53 million in 1995 and for the first half was up
16% to $95 million from $81 million in 1995. The increases were due to reduced
losses in entertainment/Chicago Cubs and higher television operating profit.
Tribune Entertainment also improved in both periods due to the cancellation of
"Charles Perez" and "The Road."
Operating Expenses -- Broadcasting and entertainment operating expenses
increased 12%, or $19 million, in the 1996 second quarter and 9%, or $30
million, in the first half. The increase in both periods was primarily due to
the acquisition of KHTV and KTTY, higher television broadcast rights
amortization, and equity losses from The WB Network. These increases were
partially offset by lower expenses at Tribune Entertainment due to the
cancellation of "Charles Perez" and "The Road." Excluding the acquisitions,
broadcasting and entertainment operating expenses were up 7%, or $12 million, in
the second quarter and were up 5%, or $17 million, in the first half. Television
broadcast rights amortization, excluding the two new television stations,
increased 17%, or $8 million, in the 1996 second quarter and increased 14%, or
$14 million, in the first half primarily due to higher syndicated programming
amortization and increased baseball rights amortization as a result of the 1995
strike-impacted season.
EDUCATION
Operating Profit and Revenues -- The following table, which excludes Compton's
NewMedia, presents operating revenues, EBITDA and operating profit for the
education segment:
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------------- ----------------------------
(Dollars in millions) 1996 1995 Change 1996 1995 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $58 $20 + 192% $81 $33 + 146%
EBITDA 17 7 + 149% 22 9 + 127%
Operating profit 14 6 + 136% 16 7 + 121%
</TABLE>
15
<PAGE>
Education operating revenues, excluding Compton's, were up 192% to $58
million in the second quarter and rose 146% to $81 million in the first half
primarily due to the recent acquisitions of Everyday Learning, Educational
Publishing and NTC Publishing. Excluding the acquisitions and Compton's,
revenues were up 5% in the second quarter and 12% in the first half. Including
Compton's, operating revenues increased 104% in the 1996 second quarter and were
up 62% for the first half.
Education second quarter operating profit, excluding Compton's, was up $8
million, or 136%, from $6 million in 1995. In the first half of 1996, operating
profit was up $9 million, or 121%, from $7 million. The improvements were due to
the acquisitions. Including Compton's, second quarter operating profit increased
$10 million, or 256% and was up $12 million, or 356% for the first half.
Operating Expenses -- Education operating expenses, excluding Compton's, were up
215%, or $30 million, in the second quarter of 1996 and increased 153%, or $39
million, in the first half, primarily due to the recent acquisitions. Excluding
the acquisitions and Compton's, operating expenses were up 17%, or $2 million,
in the second quarter and 17%, or $4 million, in the first half due to higher
sales volume. Including Compton's, operating expenses increased 80% for the
second quarter and 39% for the first half.
OTHER
Interest expense for the 1996 second quarter increased 139% to $11 million
and for the first half increased 148% to $22 million due to higher debt levels
resulting from the acquisitions and stock repurchases. Interest income increased
146% to $8 million in the 1996 second quarter and increased 151% to $16 million
in the first half due mainly to the SoftKey International and Qwest Broadcasting
convertible debentures held by Tribune. The effective tax rate was 40.5% in both
second quarter and first half of 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow generated from operations is the Company's primary source of
liquidity. Net cash provided by operations in the first half was $103 million in
1996 and $183 million in 1995. The reduction was mainly due to the payment of
taxes on the sale of QUNO and changes in working capital. The Company normally
expects to fund dividends, capital expenditures and other operating requirements
with net cash provided by operations. Funding required for share repurchases and
acquisitions is financed by available cash flow from operations and, if
necessary, by the issuance of debt or stock.
Net cash used for investments totaled $143 million in the 1996 first half
as the Company spent $522 million for acquisitions and investments, including
KHTV, Educational Publishing, NTC Publishing, KTTY and the remaining minority
interest in WPHL. The Company received $427 million of gross proceeds in 1996
from the sale of QUNO Corporation.
Net cash provided by financing activities in the 1996 first half was $74
million, as proceeds from the issuance of long-term debt and commercial paper
and the sale of stock to employees were only partially offset by purchases of
treasury stock, dividends and repayments of debt. In the first half of 1996, the
Company issued $73 million of medium-term notes, increased commercial paper
borrowings by $163 million and repurchased 1.9 million shares of its common
stock for $123 million. At June 30, 1996, the
16
<PAGE>
Company had authorization to repurchase an additional 2.8 million shares and may
continue to repurchase shares in 1996. The 1996 common dividend increased 7% to
$.60 per share for the first half from $.56 per share in 1995. In the second
quarter of 1996, the Company filed a shelf registration and prospectus
supplement with the Securities and Exchange Commission relating to the offer and
sale from time to time of up to $500 million principal amount of the Company's
Series D medium-term notes. Proceeds from the issuance of such notes are
expected to be used for general corporate purposes, including the funding of
acquisitions.
In July 1996, Tribune announced an agreement to acquire Renaissance
Communications Corp., a publicly traded company owning six televisions stations,
for approximately $1.1 billion in cash. The transaction is subject to various
closing conditions, including FCC and other regulatory approval, and is expected
to close in early 1997. Tribune expects to finance the acquisition with medium
to long-term borrowings and commercial paper. Rating agencies have placed
Tribune's debt ratings under review. The impact of any potential changes is not
likely to significantly restrict the Company's ability to borrow funds or
materially affect the cost of those borrowings.
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 1996.
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 13, 1996 /s/ R. Mark Mallory
---------------
R. Mark Mallory
Vice President and Controller
(on behalf of the Registrant
and as Chief Accounting Officer)
19
EXHIBIT 11
TRIBUNE COMPANY
STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Second Quarter Ended First Half Ended
-------------------------------- -------------------------------
PRIMARY June 30, 1996 June 25, 1995 June 30, 1996 June 25, 1995
- ------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income from continuing operations $ 84,290 $ 73,228 $ 134,669 $ 136,526
Discontinued operations of QUNO, net of tax - 8,899 89,317 13,564
------------- ------------ ------------- -------------
Net income 84,290 82,127 223,986 150,090
Preferred dividends, net of tax (4,697) (4,622) (9,393) (9,243)
------------- ------------ ------------- --------------
Net income attributable to common shares $ 79,593 $ 77,505 $ 214,593 $ 140,847
------------- ------------ ------------- -------------
Weighted average common shares outstanding 61,129 65,010 61,422 65,495
------------- ------------ ------------- -------------
Primary net income per share:
Continuing operations (A) $ 1.30 $ 1.05 $ 2.04 $ 1.94
Discontinued operations - .14 1.45 .21
------------ ----------- ------------- -------------
Total $ 1.30 $ 1.19 $ 3.49 $ 2.15
============ =========== ============= =============
FULLY DILUTED
- -------------
Income from continuing operations $ 84,290 $ 73,228 $ 134,669 $ 136,526
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (3,375) (3,606) (6,749) (7,211)
----------- ---------- ------------ -------------
Adjusted income from continuing operations 80,915 69,622 127,920 129,315
Discontinued operations of QUNO, net of tax - 8,899 89,317 13,564
----------- ---------- ------------ -------------
Adjusted net income $ 80,915 $ 78,521 $ 217,237 $ 142,879
----------- ---------- ------------ -------------
Weighted average common shares outstanding 61,129 65,010 61,422 65,495
Assumed conversion of preferred shares into common shares 5,703 5,890 5,703 5,890
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 998 862 1,036 860
----------- ---------- ------------ -------------
Adjusted weighted average common shares outstanding 67,830 71,762 68,161 72,245
----------- ---------- ------------ -------------
Fully diluted net income per share:
Continuing operations $ 1.19 $ .97 $ 1.88 $ 1.79
Discontinued operations - .12 1.31 .19
----------- ---------- ------------ -------------
Total $ 1.19 $ 1.09 $ 3.19 $ 1.98
=========== ========== ============ =============
</TABLE>
(A) Primary net income per share from continuing operations is computed by
deducting preferred dividends, net of tax, from income from continuing
operations and then dividing by weighted average common shares
outstanding.
See Notes to Consolidated Financial Statements.
EXHIBIT 12
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Fiscal Year Ended December
First Half --------------------------------------------------------------------
Ended 6/30/96 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations before
cumulative effects of accounting changes $ 134,669 $ 245,458 $ 233,149 $ 204,646 $ 179,534 $ 158,049
Add:
Income tax expense 91,666 167,076 158,698 142,212 120,089 106,514
Losses on equity investments 8,141 13,209 9,739 1,857 1,903 1,107
---------- ---------- ---------- ---------- ---------- ----------
Subtotal 234,476 425,743 401,586 348,715 301,526 265,670
---------- ---------- ---------- ---------- ---------- ----------
Fixed charge adjustments
Add:
Interest expense 21,988 21,814 20,585 24,660 35,301 45,588
Amortization of capitalized interest 1,054 2,253 2,362 2,392 2,434 2,435
Interest component of rental expense (A) 4,597 8,200 8,236 8,732 8,182 7,647
---------- ---------- --------- ---------- ---------- ----------
Earnings, as adjusted $ 262,115 $ 458,010 $ 432,769 $ 384,499 $ 347,443 $ 321,340
========== ========== ========= ========== ========== ==========
Fixed charges:
Interest expense $ 21,988 $ 21,814 $ 20,585 $ 24,660 $ 35,301 $ 45,588
Interest capitalized 168 610 - 1,099 1,092 146
Interest component of rental expense (A) 4,597 8,200 8,236 8,732 8,182 7,647
Interest related to guaranteed ESOP debt (B) 10,101 22,057 24,017 25,742 27,019 27,500
---------- ---------- --------- ---------- ---------- ----------
Total fixed charges $ 36,854 $ 52,681 $ 52,838 $ 60,233 $ 71,594 $ 80,881
========== ========== ========= ========== ========== ==========
Ratio of Earnings to Fixed Charges 7.1 8.7 8.2 6.4 4.9 4.0
========== ========== ========= ========== ========== ==========
</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).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
June 30, 1996 condensed consolidated statement of income and condensed
consolidated balance sheet 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-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,145
<SECURITIES> 40,194
<RECEIVABLES> 378,274
<ALLOWANCES> 31,700
<INVENTORY> 94,500
<CURRENT-ASSETS> 661,218
<PP&E> 1,419,048
<DEPRECIATION> 769,255
<TOTAL-ASSETS> 3,547,114
<CURRENT-LIABILITIES> 608,866
<BONDS> 0
0
312,470
<COMMON> 1,018
<OTHER-SE> 1,111,896
<TOTAL-LIABILITY-AND-EQUITY> 3,547,114
<SALES> 0
<TOTAL-REVENUES> 1,179,049
<CGS> 0
<TOTAL-COSTS> 597,925
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,988
<INCOME-PRETAX> 226,335
<INCOME-TAX> 91,666
<INCOME-CONTINUING> 134,669
<DISCONTINUED> 89,317
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,986
<EPS-PRIMARY> 3.49
<EPS-DILUTED> 3.19
</TABLE>
