- --------------------------------------------------------------------------------
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 March 31, 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 May 10, 1996 there were 60,972,208 shares outstanding of the
Company's Common Stock (without par value).
- --------------------------------------------------------------------------------
<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)
First Quarter Ended
-----------------------------------
March 31, 1996 March 26,1995
-------------- -------------
<S> <C> <C>
Operating revenues...................................................... $537,122 $521,406
Operating expenses
Cost of sales (exclusive of items
shown below)......................................................... 282,874 266,342
Selling, general and administrative..................................... 136,031 132,930
Depreciation and amortization
of intangible assets................................................. 31,142 30,100
-------- --------
Total operating expenses................................................ 450,047 429,372
-------- --------
Operating profit........................................................ 87,075 92,034
Gain on sale of America Online common stock............................. - 15,272
Interest income......................................................... 8,550 3,340
Interest expense........................................................ (10,955) (4,263)
-------- --------
Income from continuing operations before income taxes................... 84,670 106,383
Income taxes............................................................ (34,291) (43,085)
-------- --------
Income from continuing operations....................................... 50,379 63,298
Discontinued operations of QUNO, net of tax............................. 89,317 4,665
-------- --------
Net income.............................................................. 139,696 67,963
Preferred dividends, net of tax......................................... (4,696) (4,621)
-------- --------
Net income attributable to common shares................................ $135,000 $ 63,342
======== ========
Net income per share:
Primary: Continuing operations................................. $ .74 $ .89
Discontinued operations............................... 1.45 .07
-------- --------
Net income............................................ $ 2.19 $ .96
======== ========
Fully diluted: Continuing operations................................. $ .69 $ .82
Discontinued operations............................... 1.31 .07
-------- --------
Net income............................................ $ 2.00 $ .89
======== ========
Dividends per common share.............................................. $ .30 $ .28
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term investments................................... $ 14,391 $ 22,899
Accounts receivable, net.......................................... 294,248 296,363
Inventories....................................................... 90,076 45,348
Broadcast rights.................................................. 176,315 163,339
Prepaid expenses and other........................................ 27,135 17,651
---------- ----------
Total current assets.............................................. 602,165 545,600
Investment in and advances to QUNO................................ - 356,925
Property, plant and equipment..................................... 1,398,601 1,366,741
Accumulated depreciation.......................................... (748,186) (725,995)
---------- ----------
Net properties.................................................... 650,415 640,746
Broadcast rights.................................................. 172,080 194,038
Intangible assets, net............................................ 1,182,240 795,856
Investments....................................................... 615,486 549,735
Other............................................................. 210,603 205,355
---------- ----------
Total assets...................................................... $3,432,989 $3,288,255
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Long-term debt due within one year................................ $ 28,359 $ 28,665
Contracts payable for broadcast rights............................ 188,637 164,443
Deferred income .................................................. 66,662 43,961
Income taxes...................................................... 126,034 8,401
Accounts payable, accrued expenses and other current liabilities.. 323,976 311,683
---------- ----------
Total current liabilities......................................... 733,668 557,153
Long-term debt.................................................... 761,527 757,437
Deferred income taxes............................................. 197,865 223,756
Contracts payable for broadcast rights............................ 219,330 225,771
Compensation and other obligations................................ 134,651 144,229
---------- ----------
Total liabilities................................................. 2,047,041 1,908,346
Shareholders' equity
Series B convertible preferred stock.............................. 312,470 322,540
Common stock and additional paid-in capital....................... 130,358 127,814
Retained earnings................................................. 2,051,588 1,930,380
Treasury stock (at cost).......................................... (1,006,848) (923,828)
Unearned compensation related to ESOP............................. (247,281) (247,281)
Cumulative translation adjustment................................. - (19,188)
Unrealized gain on investments.................................... 145,661 189,472
---------- ----------
Total shareholders' equity........................................ 1,385,948 1,379,909
---------- ----------
Total liabilities and shareholders' equity........................ $3,432,989 $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 Quarter Ended
-----------------------------------------
March 31, 1996 March 26, 1995
-------------- --------------
<S> <C> <C>
Operations
Net income................................................................... $ 139,696 $ 67,963
Adjustments to reconcile net income to net cash
provided by operations:
Discontinued operations of QUNO, net of tax.......................... (89,317) (4,665)
Gain on sale of America Online common stock.......................... - (15,272)
Depreciation and amortization of intangible assets................... 31,142 30,100
Other, net........................................................... 46,373 91,879
--------- ---------
Net cash provided by operations.............................................. 127,894 170,005
--------- ---------
Investments
Capital expenditures......................................................... (20,070) (21,417)
Acquisitions................................................................. (422,700) (8,000)
Investments.................................................................. (14,792) (5,300)
Proceeds from the sale of America Online common stock........................ - 16,729
Proceeds from the sale of QUNO............................................... 426,828 -
Other, net................................................................... (159) 7,418
--------- ---------
Net cash used for investments................................................ (30,893) (10,570)
--------- ---------
Financing
Proceeds from issuance of long-term debt..................................... 73,000 -
Repayments of long-term debt................................................. (69,474) (5,303)
Sale of common stock to employees, net....................................... 5,717 4,243
Purchase of treasury stock................................................... (96,264) (89,140)
Dividends.................................................................... (18,488) (18,379)
Redemption of preferred stock................................................ - (5,631)
--------- ---------
Net cash used for financing.................................................. (105,509) (114,210)
--------- ---------
Net increase (decrease) in cash and short-term investments................... (8,508) 45,225
Cash and short-term investments at the beginning of year..................... 22,899 21,824
--------- ---------
Cash and short-term investments at the end of quarter........................ $ 14,391 $ 67,049
========= =========
</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 March 31, 1996 and the results of their operations
and their cash flows for the quarters ended March 31, 1996 and March 26, 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.
Note 2:
- -------
Inventories consist of (in thousands):
March 31, 1996 Dec. 31, 1995
-------------- -------------
Finished goods.......................... $56,546 $21,638
Newsprint (at LIFO)..................... 18,298 12,473
Supplies and other...................... 15,232 11,237
------- -------
Total inventories....................... $90,076 $45,348
======= =======
Newsprint inventories are valued under the LIFO method and were less than
current cost by approximately $15.0 million at March 31, 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):
First Quarter
-------------------
1996 1995
---- ----
Primary 61,716 65,981
Fully diluted 68,165 72,497
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. Income from discontinued operations in the 1995 first
quarter was $5 million, or $.07 per share.
In March 1995, Tribune sold shares of America Online (AOL) 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 and
publishes educational products in print, audio and mulitmedia 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.
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>
First Quarter Ended
------------------------------------
March 31, 1996 March 26, 1995
-------------- --------------
<S> <C> <C>
Operating revenues:
Publishing.......................................... $327,333 $323,547
Broadcasting and Entertainment...................... 187,195 176,432
Education........................................... 22,594 21,427
-------- --------
Total operating revenues.................................. $537,122 $521,406
======== ========
Operating profit:
Publishing.......................................... $ 63,243 $ 70,805
Broadcasting and Entertainment...................... 29,024 28,724
Education........................................... 2,222 (356)
Corporate expenses.................................. (7,414) (7,139)
-------- --------
Total operating profit.................................... $ 87,075 $ 92,034
======== ========
</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 first quarter of 1996 to the first
quarter 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. Income from discontinued operations in the 1995 first
quarter was $5 million, or $.07 per share.
The Company acquired five 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 and Educational Publishing Corporation and NTC
Publishing Group in March. The results of these businesses have been included in
the consolidated financial statements since their respective dates of
acquisition. In April 1996, the Company also completed its acquisition of San
Diego television station KTTY.
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.
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, and the seasonality of
educational publishing. Second and fourth quarter advertising revenues are
typically higher than first and third quarter revenues, while second and third
quarter education revenues are typically higher than first and fourth quarter
revenues. Results for the 1996 and 1995 first quarters reflect these seasonal
patterns.
8
<PAGE>
CONSOLIDATED
The Company's consolidated operating results for the first quarter of
1996 and 1995 and the percentage changes from 1995 were as follows:
<TABLE>
<CAPTION>
(Dollars in millions, First Quarter
except per share amounts) -----------------------------
1996 1995 Change
---- ---- ------
<S> <C> <C> <C>
Operating revenues $537 $521 + 3%
Operating profit 87 92 - 5%
Gain on sale of AOL common stock - 15 -
Income from continuing operations 50 63 - 20%
Discontinued operations of QUNO, net of tax 89 5 *
Net income 140 68 + 106%
Before dispositions 50 54 - 7%
Primary net income per share
Continuing operations .74 .89 - 17%
Discontinued operations 1.45 .07 *
Total 2.19 .96 + 128%
Continuing operations before AOL gain .74 .75 - 1%
*Not meaningful
</TABLE>
Net Income Per Share -- Primary net income per share from continuing operations
for the 1996 first quarter was $.74, down 1% from $.75 last year, excluding a
gain in 1995 on the sale of AOL common stock. The decrease resulted from lower
publishing operating profit, offset partially by improvement in education and
fewer shares outstanding. Average common shares outstanding decreased 6% in the
1996 first quarter.
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 first quarter were as follows:
9
<PAGE>
First Quarter
-------------------------------
(Dollars in millions) 1996 1995 Change
---- ---- ------
Operating revenues
Publishing $327 $324 + 1%
Broadcasting & Entertainment 187 176 + 6%
Education 23 21 + 5%
---- ----
Total operating revenues $537 $521 + 3%
EBITDA
Publishing $ 81 $ 89 - 9%
Broadcasting & Entertainment 40 38 + 6%
Education 4 2 + 113%
Corporate expenses (7) (7) - 2%
---- ----
Total EBITDA $118 $122 - 3%
Operating profit
Publishing $ 63 $ 71 - 11%
Broadcasting & Entertainment 29 28 + 1%
Education 2 - *
Corporate expenses (7) (7) - 4%
---- ----
Total operating profit $ 87 $ 92 - 5%
* Not meaningful
Consolidated operating revenues increased 3% in the 1996 first quarter
to $537 million from $521 million in 1995. This resulted from increased
advertising revenues and the inclusion of the recent acquisitions. Excluding
business recently acquired or sold, revenues were up 3 percent for the first
quarter.
Consolidated operating profit decreased 5% and EBITDA decreased 3% in
the first quarter of 1996 due mainly to lower publishing operating profit.
Publishing operating profit decreased 11% in the first quarter primarily due to
higher newsprint costs. Average newsprint prices were more than 30% higher in
the 1996 first quarter, resulting in a $12 million increase in newsprint and ink
expense. Broadcasting and entertainment operating profit improved 1% in the
first quarter due to reduced losses in entertainment/Chicago Cubs and a 3%
increase in television operating profit. Education 1996 first quarter operating
profit was $2 million, compared to a loss of $.3 million in 1995. Excluding
businesses recently acquired or sold, consolidated operating profit was down 8%
to $87 million and EBITDA was down 5% to $117 million.
Operating Expenses -- Consolidated operating expenses increased 5% for the
quarter as follows:
10
<PAGE>
First Quarter
----------------------------
(Dollars in millions) 1996 1995 Change
---- ---- ------
Cost of sales $283 $266 + 6%
Selling, general & administrative 136 133 + 2%
Depreciation & amortization
of intangible assets 31 30 + 3%
---- ----
Total operating expenses $450 $429 + 5%
Cost of sales increased 6%, or $17 million, in the 1996 first quarter
due to higher newsprint and ink expense and the acquisitions, partially offset
by the dispositions. Excluding the acquisitions and dispositions, cost of sales
increased 6%, or $16 million. Newsprint and ink expense increased $12 million,
or 22%, in the 1996 first quarter. Selling, general and administrative expenses
were up $3 million, or 2%, in the 1996 first quarter. Excluding the acquisitions
and dispositions, SG&A expense increased $5 million, or 4%, primarily due to
increased losses from equity investments and expenses for development
activities. The increase in depreciation and amortization of intangible assets
reflects the acquisitions and capital expenditures made in 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.
First Quarter
-----------------------------
(Dollars in millions) 1996 1995 Change
---- ---- ------
Operating revenues
Daily newspapers $310 $305 + 2%
Other publications/
services/development 17 15 + 14%
---- ----
Total operating revenues $327 $320 + 2%
EBITDA
Daily newspapers $ 85 $ 91 - 6%
Other publications/
services/development (4) (1) - 278%
---- ----
Total EBITDA $ 81 $ 90 - 10%
Operating profit
Daily newspapers $ 68 $ 74 - 7%
Other publications/
services/development (5) (2) - 184%
---- ----
Total operating profit $ 63 $ 72 - 12%
11
<PAGE>
Publishing operating revenues for the 1996 first quarter, excluding
Times Advocate, were up 2% to $327 million mainly due to higher advertising and
circulation revenues. Operating profit for the 1996 first quarter was $63
million, down 12% as the increased revenues were more than offset by a 22%
increase in newsprint and ink expense. Daily newspaper operating margins
decreased to 22.0% from 24.2% in 1995. Including Times Advocate, operating
revenues were up 1% and operating profit was down 11% for the quarter.
Publishing group revenues by classification, excluding Times Advocate,
were as follows:
First Quarter
-----------------------------
(Dollars in millions) 1996 1995 Change
---- ---- ------
Advertising
Retail $100 $103 - 2%
General 34 34 -
Classified 115 109 + 6%
---- ----
Total advertising 249 246 + 1%
Circulation 65 62 + 5%
Other 13 12 + 11%
---- ----
Total revenues $327 $320 + 2%
Retail advertising revenues for the 1996 first quarter decreased mainly
due to declines in the electronics and food and drug categories in Chicago.
Classified advertising increased in the quarter due principally to increased
help wanted advertising in Chicago, Fort Lauderdale and Orlando.
Total advertising linage, excluding Times Advocate, decreased 3% in the
1996 first quarter. Full run retail advertising linage decreased 13% due to
decreases at all of the newspapers. Part run advertising linage was down 4% due
primarily to decreases in Chicago in classified and decreases in Orlando and
Newport News in both retail and classified. The following summary presents
advertising linage for the first quarter, excluding Times Advocate:
First Quarter
-------------------------------
(Inches in thousands) 1996 1995 Change
---- ---- ------
Full run
Retail 853 975 - 13%
General 178 176 + 1%
Classified 1,594 1,645 - 3%
----- -----
Total full run 2,625 2,796 - 6%
Part run 2,322 2,418 - 4%
Preprint 1,802 1,763 + 2%
----- -----
Total inches 6,749 6,977 - 3%
Circulation revenues, excluding Times Advocate, increased 5% in the
1996 first quarter due to selected price increases at all of the Company's
newspapers. Total average daily circulation, excluding Times Advocate, was down
3% to 1,331,000 copies in the 1996 first quarter, and total average Sunday
circulation was down 2% to 2,000,000 copies.
12
<PAGE>
Other revenues are derived from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; direct mail operations; and other
publishing-related activities. The increase in other revenues in the 1996 first
quarter, excluding Times Advocate, resulted primarily from higher advertising
placement services and revenues from Internet/electronic projects.
Operating Expenses -- Publishing operating expenses, excluding Times Advocate,
increased 7%, or $16 million, in the first quarter of 1996. Newsprint and ink
expense rose $12 million, or 22%, as average newsprint selling prices increased
over 30%. Newsprint consumption declined 9% in the 1996 first quarter mainly due
to linage and copy decreases and web width reductions. Other expenses rose 2% in
the quarter, mainly due to increased development costs of new businesses.
Including Times Advocate, operating expenses increased 4% for the quarter.
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.
First Quarter
------------------------------
(Dollars in millions) 1996 1995 Change
---- ---- ------
Operating revenues
Television $148 $134 + 11%
Radio 25 25 - 1%
Entertainment/Chicago Cubs 12 16 - 22%
Cable Programming/Development 2 1 + 17%
---- ----
Total operating revenues $187 $176 + 6%
EBITDA
Television $ 42 $ 39 + 7%
Radio 5 5 -
Entertainment/Chicago Cubs (3) (4) + 28%
Cable Programming/Development (4) (2) - 65%
---- ----
Total EBITDA $ 40 $ 38 + 6%
Operating profit
Television $ 33 $ 32 + 3%
Radio 4 4 - 9%
Entertainment/Chicago Cubs (4) (5) + 27%
Cable Programming/Development (4) (3) - 56%
---- ----
Total operating profit $ 29 $ 28 + 1%
13
<PAGE>
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 had no impact in the first
quarter of 1995 as no games were scheduled to be played. The strike shortened
the 1995 season by 18 games and impacted attendance throughout the season.
Negotiations for a new players' contract are continuing.
Broadcasting and entertainment first quarter 1996 operating revenues
increased 6% to $187 million due mainly to an 11% increase in television. This
increase was due to improvements at WPIX-New York, WGN-Chicago and KWGN-Denver
and the acquisition of Houston television station KHTV. Excluding KHTV-Houston,
television revenues increased 7%. Entertainment/ Chicago Cubs revenues decreased
22% mainly due to lower cable royalties at Tribune Entertainment.
First quarter 1996 operating profit for broadcasting and
entertainment was up 1% to $29 million from $28 million in 1995 and EBITDA was
up 6% to $40 million. The increases were due to reduced losses in
entertainment/Chicago Cubs and a 3% increase in television operating profit,
offset partially by startup losses from the Company's recent equity investment
in The WB Television Network. Tribune Entertainment had lower losses due to the
cancellation in late 1995 of the "Charles Perez" television talk show.
Operating Expenses -- Operating expenses for the group increased 7%, or $10
million, in the 1996 first quarter primarily due to higher television broadcast
rights amortization, the acquisition of KHTV and equity losses from The WB
Network. These increases were partially offset by lower expenses at Tribune
Entertainment due to the cancellation of two shows in 1995, "Charles Perez" and
"The Road." Excluding KHTV and equity losses from The WB Network, broadcasting
and entertainment operating expenses were up 2%, or $3 million, for the first
quarter.
EDUCATION
Operating Profit and Revenues -- The following table, which excludes Compton's
NewMedia, presents operating revenues, EBITDA and operating profit for the
education segment:
First Quarter
-----------------------------
(Dollars in millions) 1996 1995 Change
---- ---- ------
Operating revenues $ 23 $ 13 + 75%
EBITDA 4 2 + 67%
Operating profit 2 1 + 58%
Education first quarter 1996 operating revenues, excluding Compton's,
were up 75% to $23 million primarily due to revenue growth at both The Wright
Group and Contemporary Books and to the recent acquisitions of Everyday
Learning, Educational Publishing and NTC Publishing. Excluding the acquisitions,
operating revenues were up 23% for the quarter. Including Compton's, operating
revenues were up 5%.
14
<PAGE>
First quarter education operating profit, excluding Compton's, was up
$.8 million, or 58%, from $1.4 million in 1995. The improvement was due to gains
at both The Wright Group and Contemporary Books and contributions from
Educational Publishing and NTC Publishing. These gains were partially offset by
seasonal losses at Everyday Learning. Including Compton's, first quarter
operating profit was up $2.6 million from a loss of $.4 million.
Operating Expenses -- Education operating expenses, excluding Compton's, were up
77%, or $9 million, primarily due to the recent acquisitions. Excluding the
acquisitions, operating expenses were up 18%, or $2 million, due to the higher
sales volume. Including Compton's, first quarter operating expenses were down
6%.
OTHER
Interest expense for the 1996 first quarter increased 157% to $11
million from $4 million last year due to higher debt levels. Interest income
increased 156% to $9 million in the 1996 first quarter from $3 million in 1995
due mainly to the SoftKey and Qwest convertible debentures held by Tribune. The
Company's effective income tax rate was 40.5% in both the 1996 and 1995 first
quarters.
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 quarter was $128 million
in 1996 and $170 million in 1995 mainly due to lower net income 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 $31 million in the 1996 first
quarter as the Company spent $437 million for acquisitions and investments,
including KHTV, Educational Publishing, NTC Publishing and the remaining
minority interest in WPHL. The Company received $427 million of gross proceeds
in the first quarter of 1996 from the sale of QUNO Corporation.
Net cash used for financing activities in the 1996 first quarter was
$106 million as proceeds from the issuance of long-term debt and the sale of
stock to employees were more than offset by purchases of treasury stock,
dividends and repayments of debt. In the first quarter of 1996, the Company
issued $73 million of medium-term notes and repurchased 1.5 million shares of
its common stock for $96 million. At March 31, 1996, the Company had
authorization to repurchase an additional 3.2 million shares and expects to
continue to repurchase shares in 1996. The first quarter 1996 dividend increased
7% to $.30 per share from $.28 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.
15
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
(a) The Company held its annual meeting of stockholders on
May 7, 1996.
(b) No answer required.
(c) Proposal 1 involved the election of three directors to serve until
the 1999 Annual Meeting. Those directors and the voting results
are as follows:
<TABLE>
<CAPTION>
Votes Votes Votes
"For" "Not For" "Abstained"
---------- --------- -----------
<S> <C> <C> <C>
Kristie Miller 62,448,462 929,745 --
Donald H. Rumsfeld 62,520,488 857,719 --
Dudley S. Taft 62,438,209 939,998 --
Proposal 2 involved the adoption of the Tribune Company 1996
Nonemployee Director Stock Compensation Plan.
Votes Votes Votes
"For" "Not For" "Abstained"
---------- --------- -----------
60,223,398 2,777,135 377,674
Proposal 3 involved the ratification of the selection of Price
Waterhouse LLP to serve as the Company's independent accountants
for 1996.
Votes Votes Votes
"For" "Not For" "Abstained"
---------- --------- -----------
62,877,406 312,439 188,362
(d) Not applicable.
</TABLE>
Item 5. Other Information.
------------------
The computation of the ratios of earnings to fixed charges, filed
herewith as Exhibit 12, is incorporated herein by reference.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
10.21 - 1996 Nonemployee Director Stock Compensation Plan.
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.
The Company has filed four reports on Form 8-K during the quarter
for which this report is filed.
o The Company filed a Form 8-K Current Report dated January 8,
1996, which reported under Item 5 an agreement to sell all of
the Company's holdings in QUNO Corporation as part of QUNO's
merger with Donohue Inc. No financial statements were filed as
part of the report.
o The Company filed a Form 8-K Current Report dated February 13,
1996 which reported under Item 5 that the Company had reached
agreement to acquire Educational Publishing Corporation for
$200 million in cash and NTC Publishing Group for $82 million
in cash. No financial statements were filed as part of the
report.
o The Company filed a Form 8-K Current Report dated March 12,
1996, which filed under Item 7 certain financial information of
the Company as of December 31, 1995 and December 25, 1994 and
for the three years ended December 31, 1995. The filing
included the Report of Independent Accountants, the
Consolidated Financial Statements of the Company for the
periods aforementioned, the Report of Independent Accountants
on Financial Statement Schedule and the Financial Statement
Schedule II -- Valuation and Qualifying Accounts and Reserves.
o The Company filed a Form 8-K Current Report dated March 15,
1996, which included Items 2, 5 and 7. Item 2 reported on the
sale of QUNO Corporation as part of QUNO's merger with Donohue
Inc. Item 5 disclosed the Company's completion of the
acquisition of Educational Publishing Corporation and NTC
Publishing Group. Item 7 included unaudited pro forma financial
statements reflecting these transactions as well as other
completed or pending acquisitions and dispositions.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIBUNE COMPANY
(Registrant)
Date: May 15, 1996 /s/ R. Mark Mallory
---------------
R. Mark Mallory
Vice President and Controller
(on behalf of the Registrant
and as Chief Accounting
Officer)
18
TRIBUNE COMPANY
1996 NONEMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
ARTICLE I
GENERAL
1.1 Purpose. Tribune Company, a Delaware corporation (the "Company"), hereby
adopts this 1996 Nonemployee Director Stock Compensation Plan (the "Plan"). The
purpose of the Plan is to increase the stock ownership of nonemployee directors,
to further align their interests with those of the Company's other stockholders
and to foster and promote the long-term financial success of the Company by
attracting and retaining outstanding nonemployee directors by enabling them to
participate in the Company's growth through stock ownership.
1.2 Participation. Only directors of the Company who at the time an award is
made meet the following criteria ("Directors") shall receive awards under the
Plan: (a) the director is not an employee of the Company or any subsidiary of
the Company and (b) the director is a "disinterested person" as such term is
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act") or any similar rule which may subsequently be in effect ("Rule
16b-3").
1.3 Shares Subject to the Plan. Shares of stock covered by awards under the Plan
may be in whole or in part authorized and unissued or treasury shares of the
Company's common stock or such other shares as may be substituted pursuant to
Section 4.2 ("Common Stock"). The maximum number of shares of Common Stock which
may be issued for all purposes under the Plan shall be 75,000 (subject to
adjustment pursuant to Section 4.2).
ARTICLE II
STOCK AWARDS
2.1 Basic Stock Awards. Effective on the day after the date of each annual
meeting of the stockholders of the Company at which Directors are elected
("Annual Meeting") commencing with the Annual Meeting in 1996, each Director in
office on adjournment of said meeting will automatically be awarded under the
Plan 700 shares of Common Stock (subject to adjustment pursuant to Section 4.2)
subject to the adjustments described in Sections 2.2 and 2.3 hereof. A Director
who is not initially elected at an Annual Meeting shall receive an award for a
pro rata portion of 700 shares of Common Stock on the day following his or her
becoming a Director based on the number of months remaining from such date until
the anniversary date of the most recent Annual Meeting of the Company divided by
twelve.
2.2 Supplemental Stock Awards. Effective on the date of the Basic Stock Award,
each Director who is serving as a chairman of a standing committee or
subcommittee of the Board shall automatically be awarded an additional 100
shares of Common Stock.
<PAGE>
2.3 Adjustment to 1996 and 1997 Basic Stock Awards. The Basic Stock Awards
provided for under Section 2.1 hereof on the day following the 1996 and 1997
Annual Meetings shall be reduced by 300 shares in the case of each Director who
on such date holds shares awarded under the Tribune Company 1988 Restricted
Stock Plan for Outside Directors which are subject to forfeiture under the terms
of said plan.
ARTICLE III
DEFERRAL OF STOCK AWARDS
3.1 Deferral. Each Director may elect to defer receipt of part or all of any
stock awards hereunder. Any such election must be made not less than 30 days
prior to the date on which an award is made. The deferred award will be credited
to an account established in the Director's name and held subject to the
following terms and conditions:
(a) If the Company pays a cash dividend with respect to its
Common Stock at any time while there is a balance in the Director's
account, the Company will determine the cash dividend which the
Director would have received had the Director been the actual owner of
the number of shares shown in the account at the time of the dividend
payment. The Company will then determine the additional shares of
Common Stock that could have been purchased with the dividend at the
fair market value of the stock on the date of dividend payment and add
this number to the Director's account.
(b) The number of whole shares in a Director's account at the
time the Director terminates service on the Board shall be delivered in
a lump sum upon termination of service or in no more than ten equal
annual installments commencing upon termination in accordance with the
Director's original deferral election. The value of any fractional
shares shall be paid in cash upon termination. A Director may amend an
election with respect to the manner of the delivery of shares at any
time up to six months prior to the date of termination of service.
(c) If a Director dies or becomes legally incapacitated, the
Company will deliver the shares to the persons designated by the
Director by a writing filed with the Company.
(d) The Company's obligations with respect to the deferred
stock awards shall not be funded or secured in any manner nor shall the
Director's right to receive shares be assignable or transferable
voluntarily or involuntarily except as expressly provided herein.
However, nothing shall prevent the Company from establishing a rabbi
trust to provide a Director additional assurance that the shares
subject to a deferred award will be delivered in a timely fashion in
accordance with the Director's election.
2
<PAGE>
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 Nontransferability. No shares awarded under the Plan shall be sold for a
period of six months and one day after the date of the award.
4.2 Adjustments Upon Certain Changes. If any of the events described in Sections
4.4(a) or (b) of the Company's 1992 Long-Term Incentive Plan shall occur, the
number of shares authorized by the Plan, shall be automatically adjusted on the
same basis to give the proper effect to such change so as to prevent the
dilution or enlargement of the shares available under Section 1.3 hereof.
4.3 Amendment or Discontinuation of Plan. The Board of Directors may amend the
Plan at any time or suspend or discontinue the Plan at any time, but no such
action shall adversely affect any prior award; provided that this Plan may not
be amended more frequently than once every six months and no amendment shall be
adopted which would result in any Director losing his or her status as a
"disinterested" administrator under Rule 16b-3 with respect to any employee
benefit plan of the Company or result in the Plan losing its status as a
protected plan under Rule 16b-3.
4.4 Plan Not Exclusive. The adoption of the Plan does not supersede the 1995
Nonemployee Director Stock Option Plan and shall not preclude the adoption by
appropriate means of any other stock or other compensation plan for Directors.
4.5 Other Provisions; Securities Registration. The grant of any award under the
Plan may also be subject to other provisions as counsel to the Company deems
appropriate, including, without limitation, such provisions as may be
appropriate to comply with federal or state securities laws and stock listing
requirements.
4.6 Rights of Directors. Nothing in the Plan shall confer upon any Director any
right to serve as a Director for a period of time or to continue his or her
present or any other rate of compensation.
4.7 Requirements of Law; Governing Law. The awarding and the issuance of shares
of Common Stock shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.
4.8 Effective Date. The Plan shall, subject to the approval of the holders of a
majority of the votes of all shares present, or represented, and entitled to be
cast on the matter at the 1996 Annual Meeting, be deemed effective as of such
Annual Meeting. No grants shall be made hereunder after May 31, 2006.
sjg/cc
3/6/96
3
<TABLE>
<CAPTION>
EXHIBIT 11
TRIBUNE COMPANY
STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE
(In thousands, except per share amounts)
First Quarter Ended
-----------------------------------------
March 31, 1996 March 26, 1995
-------------- --------------
<S> <C> <C>
PRIMARY
- -------
Income from continuing operations $ 50,379 $ 63,298
Income from discontinued operations of QUNO 89,317 4,665
----------- -----------
Net income 139,696 67,963
Preferred dividends, net of tax (4,696) (4,621)
----------- -----------
Net income attributable to common shares $ 135,000 $ 63,342
----------- -----------
Weighted average common shares outstanding 61,716 65,981
----------- -----------
Primary net income per share:
Continuing operations (A) $ .74 $ .89
Discontinued operations 1.45 .07
----------- -----------
Total $ 2.19 $ .96
=========== ===========
FULLY DILUTED
- -------------
Income from continuing operations $ 50,379 $ 63,298
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (3,374) (3,601)
----------- ----------
Adjusted income from continuing operations 47,005 59,697
Income (loss) from discontinued operations of QUNO 89,317 4,665
----------- ----------
Adjusted net income $ 136,322 $ 64,362
----------- ----------
Weighted average common shares outstanding 61,716 65,981
Assumed conversion of preferred shares into common shares 5,703 5,903
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 746 613
----------- ----------
Adjusted weighted average common shares outstanding 68,165 72,497
----------- ----------
Fully diluted net income per share:
Continuing operations $ .69 $ .82
Discontinued operations 1.31 .07
----------- ----------
Total $ 2.00 $ .89
=========== ==========
</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.
<TABLE>
EXHIBIT 12
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
Fiscal Year Ended
First Quarter -------------------------------------------------------------------
Ended 3/31/96 1995 1994 1993 1992 1991
------------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations before
cumulative effects of accounting changes $ 50,379 $ 245,458 $ 233,149 $ 204,646 $ 179,534 $ 158,049
Add:
Income tax expense 34,291 167,076 158,698 142,212 120,089 106,514
Losses on equity investments 5,639 13,209 9,739 1,857 1,903 1,107
--------- -------- --------- --------- -------- ---------
Subtotal 90,309 425,743 401,586 348,715 301,526 265,670
--------- -------- --------- --------- -------- ---------
Fixed charge adjustments
Add:
Interest expense 10,955 21,814 20,585 24,660 35,301 45,588
Amortization of capitalized interest 527 2,253 2,362 2,392 2,434 2,435
Interest component of rental expense (A) 2,100 8,200 8,236 8,732 8,182 7,647
--------- -------- --------- --------- -------- ---------
Earnings, as adjusted $ 103,891 $ 458,010 $ 432,769 $ 384,499 $ 347,443 $ 321,340
========= ======== ========= ========= ======== =========
Fixed charges:
Interest expense $ 10,955 $ 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) 2,100 8,200 8,236 8,732 8,182 7,647
Interest related to guaranteed ESOP debt (B) 4,963 22,057 24,017 25,742 27,019 27,500
--------- -------- -------- --------- -------- ---------
Total fixed charges $ 18,186 $ 52,681 $ 52,838 $ 60,233 $ 71,594 $ 80,881
========= ======== ========= ========= ======== =========
Ratio of Earnings to Fixed Charges 5.7 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 first
quarter ended March 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,900
<SECURITIES> 1,491
<RECEIVABLES> 324,621
<ALLOWANCES> 30,373
<INVENTORY> 90,076
<CURRENT-ASSETS> 602,165
<PP&E> 1,398,601
<DEPRECIATION> 748,186
<TOTAL-ASSETS> 3,432,989
<CURRENT-LIABILITIES> 733,668
<BONDS> 0
<COMMON> 1,018
0
312,470
<OTHER-SE> 1,072,460
<TOTAL-LIABILITY-AND-EQUITY> 3,432,989
<SALES> 0
<TOTAL-REVENUES> 537,122
<CGS> 0
<TOTAL-COSTS> 282,874
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,955
<INCOME-PRETAX> 84,670
<INCOME-TAX> 34,291
<INCOME-CONTINUING> 50,379
<DISCONTINUED> 89,317
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,696
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 2.00
</TABLE>
