- --------------------------------------------------------------------------------
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 30, 1997
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 8, 1997 there were 122,741,658 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>
First Quarter Ended
-------------------------------
March 30, 1997 March 31,1996
-------------- -------------
<S> <C> <C>
Operating Revenues................................................. $593,919 $537,122
Operating Expenses
Cost of sales (exclusive of items shown below)..................... 278,724 282,874
Selling, general and administrative................................ 161,369 136,031
Depreciation and amortization
of intangible assets............................................ 37,417 31,142
-------- --------
Total operating expenses........................................... 477,510 450,047
-------- --------
Operating Profit................................................... 116,409 87,075
Interest income.................................................... 9,430 8,550
Interest expense................................................... (15,574) (10,955)
-------- --------
Income from Continuing Operations Before Income Taxes.............. 110,265 84,670
Income taxes....................................................... (45,760) (34,291)
-------- --------
Income from Continuing Operations.................................. 64,505 50,379
Discontinued Operations of QUNO, net of tax........................ - 89,317
-------- --------
Net Income......................................................... 64,505 139,696
Preferred dividends, net of tax.................................... (4,699) (4,696)
-------- --------
Net Income Attributable to Common Shares........................... $ 59,806 $135,000
======== ========
Net Income Per Share:
Primary: Continuing operations............................ $ .49 $ .37
Discontinued operations.......................... - .72
-------- --------
Net income....................................... $ .49 $ 1.09
======== ========
Fully diluted: Continuing operations............................ $ .45 $ .34
Discontinued operations.......................... - .66
-------- --------
Net income....................................... $ .45 $ 1.00
======== ========
Dividends per common share......................................... $ .16 $ .15
======== ========
</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 30, 1997 December 29, 1996
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term investments................................... $ 22,039 $ 274,170
Accounts receivable, net.......................................... 375,532 350,773
Inventories....................................................... 83,580 80,525
Broadcast rights.................................................. 184,707 154,904
Prepaid expenses and other........................................ 52,757 26,349
---------- ----------
Total current assets.............................................. 718,615 886,721
Property, plant and equipment..................................... 1,496,382 1,456,209
Accumulated depreciation.......................................... (832,656) (813,501)
---------- ----------
Net properties.................................................... 663,726 642,708
Broadcast rights.................................................. 184,208 173,552
Intangible assets, net............................................ 2,483,584 1,251,470
Investments....................................................... 583,263 629,129
Other............................................................. 118,835 117,320
---------- ----------
Total assets...................................................... $4,752,231 $3,700,900
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Long-term debt due within one year................................ $ 30,035 $ 31,073
Contracts payable for broadcast rights............................ 231,014 178,589
Deferred income .................................................. 81,844 51,591
Accounts payable, income taxes and other current liabilities...... 431,204 411,848
---------- ----------
Total current liabilities......................................... 774,097 673,101
Long-term debt.................................................... 1,768,890 979,754
Deferred income taxes............................................. 350,136 189,673
Contracts payable for broadcast rights............................ 218,152 209,754
Compensation and other obligations................................ 111,245 109,112
---------- ----------
Total liabilities................................................. 3,222,520 2,161,394
Shareholders' equity
Series B convertible preferred stock.............................. 304,094 312,470
Common stock and additional paid-in capital....................... 155,740 150,879
Retained earnings................................................. 2,254,918 2,210,024
Treasury stock (at cost).......................................... (1,059,175) (1,034,012)
Unearned compensation related to ESOP............................. (218,668) (218,668)
Unrealized gain on investments.................................... 92,802 118,813
---------- ----------
Total shareholders' equity........................................ 1,529,711 1,539,506
---------- ----------
Total liabilities and shareholders' equity........................ $4,752,231 $3,700,900
========== ==========
</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 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Operations
Net income............................................................ $ 64,505 $ 139,696
Adjustments to reconcile net income to net cash
provided by operations:
Discontinued operations of QUNO, net of tax................... - (89,317)
Depreciation and amortization of intangible assets............ 37,417 31,142
Other, net.................................................... 55,589 46,373
---------- ----------
Net cash provided by operations....................................... 157,511 127,894
---------- ----------
Investments
Capital expenditures.................................................. (14,886) (20,070)
Acquisitions and investments.......................................... (1,131,788) (437,492)
Proceeds from sale of QUNO............................................ - 426,828
Other, net............................................................ (2,261) (159)
---------- ----------
Net cash used for investments......................................... (1,148,935) (30,893)
---------- ----------
Financing
Proceeds from issuance of long-term debt.............................. 793,681 73,000
Repayments of long-term debt.......................................... (6,101) (69,474)
Sale of common stock to employees, net................................ 5,622 5,717
Purchase of treasury stock............................................ (34,298) (96,264)
Dividends............................................................. (19,611) (18,488)
---------- ----------
Net cash provided by (used for) financing............................. 739,293 (105,509)
---------- ----------
Net decrease in cash and short-term investments....................... (252,131) (8,508)
Cash and short-term investments at the beginning of year.............. 274,170 22,899
---------- ----------
Cash and short-term investments at the end of quarter................. $ 22,039 $ 14,391
========== ==========
</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 30, 1997 and the results of their operations
and their cash flows for the quarters ended March 30, 1997 and March 31, 1996.
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. The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the related notes
included by reference in the Company's Annual Report on Form 10-K. All share and
per share data has been restated to reflect a two-for-one common stock split
effective January 15, 1997.
Note 2:
- -------
Inventories consist of (in thousands):
March 30, 1997 Dec. 29, 1996
-------------- -------------
Finished goods......................... $61,986 $60,341
Newsprint (at LIFO).................... 11,905 10,186
Supplies and other..................... 9,689 9,998
------- -------
Total inventories...................... $83,580 $80,525
======= =======
Newsprint inventories are valued under the LIFO method and were less than
current cost by approximately $8.3 million at March 30, 1997 and $11.4 million
at December 29, 1996. 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
---------------------------
1997 1996
------- -------
Primary................................ 122,546 123,432
Fully diluted.......................... 135,024 136,330
5
<PAGE>
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128 requires
presentation on the face of the income statement of both basic and diluted net
income per share. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, and requires restatement of all prior
period net income per share data presented. The adoption of this statement is
not expected to materially affect either future or prior period net income per
share of the Company.
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 $.72 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.
At the beginning of the 1997 second quarter, the Company sold its Farm
Journal subsidiary for approximately $17 million in cash. The Company had
acquired Farm Journal in 1994 for approximately $17 million.
Note 5:
- -------
On March 25, 1997, the Company completed its acquisition of Renaissance
Communications Corp., a publicly traded company owning six television stations,
for approximately $1.1 billion in cash. The stations acquired were WB affiliates
KDAF-Dallas and WDZL-Miami and Fox affiliates KTXL-Sacramento,
WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Federal Communications
Commission ("FCC") order granting the Company's application to acquire the
Renaissance stations contained waivers of two FCC rules. First, the FCC
temporarily waived its duopoly rule relating to the overlap of WTIC's and WPMT's
broadcast signals with those of other Tribune stations. The temporary waivers
were granted subject to the outcome of pending FCC rulemaking that is expected
to make duopoly waivers unnecessary. Second, the FCC granted a 12-month waiver
of its rule prohibiting television/newspaper cross-ownership in the same market,
relating to the Miami television station and the Fort Lauderdale Sun-Sentinel.
The Company has appealed the FCC's ruling on the cross-ownership issue and a
petition requesting a rulemaking procedure has been filed with the FCC since the
FCC issued the order. The Company cannot predict the outcome of such FCC
rulemaking or any such appeal.
In March 1997, the Company agreed to exercise an option for $21 million to
increase its equity ownership in The WB Television Network to 21.9%.
In January 1996, the Company acquired Houston television station KHTV for
approximately $102 million in cash. In February 1996, the Company acquired the
remaining minority interest in Philadelphia television station WPHL for
approximately $23 million in cash. In March 1996, the Company acquired
Educational Publishing Corporation for $205 million in cash and NTC Publishing
Group for $83 million in cash. In April 1996, the Company acquired San Diego
television station KSWB for approximately $72 million in cash.
6
<PAGE>
The acquisitions are being accounted for by the purchase method, and
accordingly, the results of operations of the companies have been included in
the consolidated financial statements since their respective dates of
acquisition. The purchase accounting for the Renaissance acquisition reflected
in the condensed consolidated financial statements is preliminary and will
likely change as appraisals are finalized and more facts become known. No
material adjustments are expected.
The following table presents the unaudited pro forma results of operations
of the Company for the first quarters of 1997 and 1996 as if the acquisitions
and dispositions discussed in Notes 4 and 5 had occurred at the beginning of
each period presented. The pro forma results may not be indicative of the
results that would have been reported if the transactions had actually occurred
at the beginning of each period presented, or of results that may be attained in
the future. The unaudited pro forma results do not reflect any synergies
anticipated by the Company as a result of the acquisitions.
<TABLE>
<CAPTION>
First Quarter Ended
---------------------------------
March 30, 1997 March 31, 1996
(In thousands, except per share data) -------------- --------------
<S> <C> <C>
Operating Revenues................................ $622,880 $584,538
Income from Continuing Operations................. $55,563 $35,766
Primary Net Income Per Share
from Continuing Operations.................... $.42 $.25
</TABLE>
Note 6:
- -------
The aggregate cost basis, net unrealized gain and fair value for
investments recorded at fair value under SFAS No. 115 at March 30, 1997 were
$335.3 million, $152.7 million and $488.0 million, respectively. At March 30,
1997, the net unrealized gain on investments included an $87 million unrealized
loss on The Learning Company common stock investment. The Company believes this
loss was temporary at March 30, 1997. The difference between cost and fair
value, net of related tax effects, is recorded in a separate component of
shareholders' equity and amounted to a net gain of $92.8 million at March 30,
1997.
7
<PAGE>
Note 7:
- -------
Financial data for each of the Company's business segments is as follows
(in thousands):
<TABLE>
<CAPTION>
First Quarter Ended
---------------------------------
March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Operating revenues:
Publishing................................. $355,126 $327,333
Broadcasting and Entertainment............. 201,390 187,195
Education.................................. 37,403 22,594
-------- --------
Total operating revenues...................... $593,919 $537,122
======== ========
Operating profit:
Publishing................................. $ 95,305 $ 63,243
Broadcasting and Entertainment............. 29,684 29,024
Education.................................. (207) 2,222
Corporate expenses......................... (8,373) (7,414)
-------- --------
Total operating profit........................ $116,409 $ 87,075
======== ========
</TABLE>
8
<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 1997 to the first
quarter of 1996. All share and per share data has been restated to reflect a
two-for-one common stock split effective January 15, 1997.
SIGNIFICANT EVENTS
- ------------------
On March 25, 1997, the Company completed its acquisition of Renaissance
Communications Corp., a publicly traded company owning six television stations,
for approximately $1.1 billion in cash. The stations acquired were WB affiliates
KDAF-Dallas and WDZL-Miami and Fox affiliates KTXL-Sacramento,
WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Federal Communications
Commission ("FCC") order granting the Company's application to acquire the
Renaissance stations contained waivers of two FCC rules. First, the FCC
temporarily waived its duopoly rule relating to the overlap of WTIC's and WPMT's
broadcast signals with those of other Tribune stations. The temporary waivers
were granted subject to the outcome of pending FCC rulemaking that is expected
to make duopoly waivers unnecessary. Second, the FCC granted a 12-month waiver
of its rule prohibiting television/newspaper cross-ownership in the same market,
relating to the Miami television station and the Fort Lauderdale Sun-Sentinel.
The Company has appealed the FCC's ruling on the cross-ownership issue and a
petition requesting a rulemaking procedure has been filed with the FCC since the
FCC issued the order. The Company cannot predict the outcome of such FCC
rulemaking or any such appeal.
The Company also acquired four businesses in 1996: Houston television
station KHTV in January, Educational Publishing Corporation and NTC Publishing
Group in March and San Diego television station KSWB in April. The results of
these businesses have been included in the consolidated financial statements
since their respective dates of acquisition.
In March 1996, the Company 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 $.72 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.
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 education revenues are typically higher than first and fourth quarter
revenues. Results for the 1997 and 1996 first quarters reflect these seasonal
patterns.
9
<PAGE>
This Management's Discussion and Analysis of Results of Operations and
Financial Condition contains certain forward-looking statements that are subject
to certain risks, trends and uncertainties that could cause actual results to
differ materially from those anticipated. Among such risks, trends and
uncertainties are changes in advertising demand, newsprint prices, interest
rates and other economic conditions and the effect of acquisitions and
dispositions on the Company's results of operations and financial condition.
CONSOLIDATED
The Company's consolidated operating results for the first quarter of 1997
and 1996 and the percentage changes from 1996 were as follows:
(Dollars in millions, First Quarter
except per share amounts) ---------------------------
1997 1996 Change
---- ---- ------
Operating revenues $594 $537 + 11%
Operating profit 116 87 + 34%
Income from continuing operations 65 50 + 28%
Discontinued operations of QUNO, net of tax - 89 *
Net income 65 140 - 54%
Primary net income per share
Continuing operations .49 .37 + 32%
Discontinued operations - .72 *
Total .49 1.09 - 55%
*Not meaningful
Net Income Per Share -- Primary net income per share from continuing operations
for the 1997 first quarter was $.49, up 32% from $.37 last year. The increase
was mainly due to a 51% gain in publishing profits.
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:
10
<PAGE>
First Quarter
---------------------------
(Dollars in millions) 1997 1996 Change
---- ---- ------
Operating revenues
Publishing $355 $327 + 8%
Broadcasting & Entertainment 201 187 + 8%
Education 38 23 + 66%
---- ----
Total operating revenues $594 $537 + 11%
EBITDA*
Publishing $115 $ 81 + 42%
Broadcasting & Entertainment 42 40 + 6%
Education 4 4 - 7%
Corporate expenses (7) (7) - 10%
---- ----
Total EBITDA $154 $118 + 30%
Operating profit
Publishing $ 95 $ 63 + 51%
Broadcasting & Entertainment 29 29 + 2%
Education - 2 - 109%
Corporate expenses (8) (7) - 13%
---- ----
Total operating profit $116 $ 87 + 34%
* EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. The Company has presented EBITDA because it is comparable to
the data provided by other companies in the industry and is a common
alternative measure of performance. EBITDA does not represent cash provided
by operating activities as reflected in the Company's consolidated
statements of cash flows, is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
Consolidated operating revenues increased 11% in the 1997 first quarter to
$594 million from $537 million in 1996. This resulted from higher advertising
revenues and the recent acquisitions. Excluding recently acquired businesses,
revenues were up 7% for the first quarter.
Consolidated operating profit grew 34% and EBITDA increased 30% in the
first quarter of 1997 due primarily to gains in the publishing group. Publishing
operating profit increased 51% in the first quarter due to higher advertising
revenues and lower newsprint prices. Broadcasting and entertainment operating
profit improved 2% in the first quarter due mainly to significant growth in
television, partially offset by higher equity losses from the Company's
increased investment in The WB Network. Education reported a 1997 first quarter
operating loss of $.2 million, compared with a profit of $2.2 million in 1996,
due primarily to companies acquired in March 1996. First quarter results for
these companies reflect the seasonality of their businesses.
11
<PAGE>
Operating Expenses -- Consolidated operating expenses increased 6% in the
quarter as follows:
First Quarter
--------------------------
(Dollars in millions) 1997 1996 Change
---- ---- ------
Cost of sales $279 $283 - 1%
Selling, general & administrative 161 136 + 19%
Depreciation & amortization
of intangible assets 38 31 + 20%
---- ----
Total operating expenses $478 $450 + 6%
Cost of sales decreased 1%, or $4 million, in the 1997 first quarter due
to lower newsprint and ink expense, partially offset by the effect of the
acquisitions and higher compensation expense. Excluding the acquisitions, cost
of sales decreased 4%, or $12 million in the quarter. Newsprint and ink expense
decreased $19 million, or 28%, in the 1997 first quarter, while compensation
expense increased $3 million, or 4%. Selling, general and administrative
expenses were up $25 million, or 19%, in the 1997 first quarter. Excluding the
acquisitions, SG&A expense increased $16 million, or 12%, primarily due to
increased losses from equity investments and expenses for development activities
of $6 million and increased compensation expense of $9 million. The increase in
depreciation and amortization of intangible assets reflects the acquisitions and
capital expenditures made in 1996 and 1997.
PUBLISHING
Operating Profit and Revenues -- The following table 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, delivery
of other publications, direct mail operations, online/electronic products and,
for EBITDA and operating profit, equity losses from investments.
First Quarter
--------------------------
(Dollars in millions) 1997 1996 Change
---- ---- ------
Operating revenues
Daily newspapers $336 $310 + 8%
Other publications/
services/development 19 17 + 9%
---- ----
Total operating revenues $355 $327 + 8%
EBITDA
Daily newspapers $116 $ 85 + 36%
Other publications/
services/development (1) (4) + 80%
---- -----
Total EBITDA $115 $ 81 + 42%
Operating profit
Daily newspapers $ 98 $ 68 + 45%
Other publications/
services/development (3) (5) + 34%
---- ----
Total operating profit $ 95 $ 63 + 51%
12
<PAGE>
Publishing operating revenues for the 1997 first quarter were up 8% to
$355 million from $327 million in 1996 due to higher advertising revenues at all
of the newspapers. Advertising revenues increased 10% due to higher rates and
linage. Operating profit for the 1997 first quarter was $95 million, up 51% from
$63 million, primarily due to higher advertising revenues and lower newsprint
expense. Daily newspaper operating margins increased to 29.3% from 22.0% in
1996.
Publishing group revenues by classification were as follows:
First Quarter
--------------------------
(Dollars in millions) 1997 1996 Change
---- ---- ------
Advertising
Retail $106 $100 + 6%
General 37 34 + 8%
Classified 130 115 + 13%
---- ----
Total advertising 273 249 + 10%
Circulation 65 65 + 1%
Other 17 13 + 24%
---- ----
Total revenues $355 $327 + 8%
Retail advertising revenues for the 1997 first quarter rose mainly due to
improvements in the department store, health care and furniture store categories
in Orlando, the movie, electronics and general merchandise categories in Chicago
and the health care and furniture store categories in Fort Lauderdale.
Classified advertising increased in the quarter due to increased help wanted
advertising at all of the newspapers and advertising from Internet and other
electronic products.
Total advertising linage increased 5% in the 1997 first quarter. Full run
retail advertising linage increased 4% due to increases at Orlando, Newport News
and Fort Lauderdale. Full run general advertising linage increased 10% due to
increases at Chicago, Orlando and Newport News. Part run advertising linage was
up 2% due primarily to increases in Chicago in classified and in Fort Lauderdale
and Orlando in retail. Preprint advertising linage was up 13% due to increases
at all of the daily newspapers. The following summary presents advertising
linage for the first quarter:
First Quarter
---------------------------
(Inches in thousands) 1997 1996 Change
----- ----- ------
Full run
Retail 886 853 + 4%
General 196 178 + 10%
Classified 1,610 1,594 + 1%
----- -----
Total full run 2,692 2,625 + 3%
Part run 2,376 2,322 + 2%
Preprint 2,041 1,802 + 13%
----- -----
Total inches 7,109 6,749 + 5%
Circulation revenues increased 1% in the 1997 first quarter due to
selected price increases at certain Company newspapers and increased circulation
at Fort Lauderdale. Total average daily circulation was
13
<PAGE>
down 2% to 1,314,000 copies in the 1997 first quarter, and total average Sunday
circulation was down 2% to 1,962,000 copies.
Other revenues are derived from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; delivery of other publications; direct mail
operations; and other publishing-related activities. The increase in other
revenues in the 1997 first quarter resulted primarily from higher revenues from
direct mail operations and usage revenues from Internet/electronic projects.
Operating Expenses -- Publishing operating expenses decreased 2%, or $4 million,
in the first quarter of 1997. Newsprint and ink expense decreased $19 million,
or 28%, as average newsprint prices were down 30%, while newsprint consumption
increased 5%. Other expenses were up 7%, or $15 million, mainly due to higher
compensation costs and increased development of Internet businesses, including
Digital City.
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 and, for EBITDA and operating profit,
the Company's equity income or loss from its investments in The WB Network, TV
Food Network and Qwest Broadcasting.
First Quarter
----------------------------
(Dollars in millions) 1997 1996 Change
---- ---- ------
Operating revenues
Television $162 $148 + 9%
Radio 25 25 + 1%
Entertainment/Chicago Cubs 12 12 - 2%
Cable Programming/Development 2 2 + 33%
---- ----
Total operating revenues $201 $187 + 8%
EBITDA
Television $ 51 $ 42 + 23%
Radio 5 5 + 10%
Entertainment/Chicago Cubs (4) (3) - 51%
Cable Programming/Development (10) (4) -152%
---- ----
Total EBITDA $ 42 $ 40 + 6%
Operating profit
Television $ 41 $ 33 + 23%
Radio 4 4 + 12%
Entertainment/Chicago Cubs (5) (4) - 35%
Cable Programming/Development (11) (4) -142%
---- ----
Total operating profit $ 29 $ 29 + 2%
14
<PAGE>
Broadcasting and entertainment first quarter 1997 operating revenues
increased 8% to $201 million from $187 million in 1996 due mainly to a 9%, or
$14 million, increase in television revenues. Television gains were primarily
attributed to improvement at WGN-Chicago and the acquisition of the six
television stations from Renaissance Communications in late March 1997 and of
KSWB-San Diego in April 1996. Excluding the acquisitions, television revenues
increased 5%.
First quarter 1997 operating profit for broadcasting and entertainment was
up 2% to $29 million in 1997 and EBITDA was up 6% to $42 million. A television
operating profit increase of 23% (21% without acquisitions) to $41 million was
partially offset by higher equity losses in The WB Network. In the first quarter
of 1997, Tribune increased its equity position in The WB Network to 21.9% from
12.5%. First quarter 1997 operating profit includes an $11 million loss from The
WB Network compared to $3 million in 1996.
Operating Expenses -- Broadcasting and entertainment operating expenses
increased 9%, or $14 million, in the 1997 first quarter primarily due to the
acquisitions and the $8 million increase in equity losses from The WB. Excluding
the acquisitions and the equity losses from The WB Network, broadcasting and
entertainment operating expenses increased 1%, or $1 million, for the first
quarter.
EDUCATION
Operating Profit and Revenues -- The following table presents operating
revenues, EBITDA and operating profit for the education segment:
First Quarter
--------------------------
(Dollars in millions) 1997 1996 Change
---- ---- ------
Operating revenues $ 38 $ 23 + 66%
EBITDA 4 4 - 7%
Operating profit - 2 -109%
Education first quarter 1997 operating revenues were up 66% to $38 million
from $23 million in 1996 due to the March 1996 acquisitions and improvements at
existing business units. Excluding the acquisitions, education operating
revenues were up 12%.
Education first quarter operating loss was $.2 million in 1997 versus an
operating profit of $2.2 million in 1996. The decline was due primarily to the
acquisition of Educational Publishing Corporation and NTC Publishing Group in
March 1996. First quarter results for these companies reflect the seasonality of
their businesses.
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Operating Expenses -- Education operating expenses were up 85%, or $17 million,
primarily due to the recent acquisitions. Excluding the acquisitions, first
quarter operating expenses were up 14%, or $2 million, mainly due to increased
compensation and cost of goods sold as a result of higher sales.
OTHER
Interest expense for the 1997 first quarter increased 42% to $16 million
from $11 million last year due to higher debt levels related to acquisitions and
stock repurchases. Interest income for the 1997 first quarter grew 10% to $9
million. The effective tax rate was 41.5% and 40.5% for the 1997 and 1996 first
quarters, respectively.
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 increased to
$158 million in 1997 from $128 million in 1996 mainly due to higher income from
continuing operations. 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 $1.1 billion in the first quarter of
1997 and related mainly to the acquisition of Renaissance Communications Corp.
Net cash provided by financing activities in the 1997 first quarter was
$739 million as proceeds from the issuance of debt and the sale of stock to
employees were partially offset by purchases of treasury stock, dividends and
repayments of debt. In the first quarter of 1997, the Company issued $794
million of commercial paper and repurchased .9 million shares of its common
stock for $34 million. At March 30, 1997, the Company had authorization to
repurchase an additional 4.1 million shares and expects to continue to
repurchase shares in 1997. The first quarter 1997 dividend increased 7% to $.16
per share from $.15 per share in 1996.
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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 6, 1997.
(b) No answer required.
(c) Proposal 1 involved the election of four directors to serve until
the 2000 Annual Meeting and one director to serve until the 1999
Annual Meeting. Those directors and the voting results are as
follows:
Votes Votes
"For" "Not For"
----------- ---------
2000 Annual Meeting:
James C. Dowdle 119,458,756 1,081,383
Diego E. Hernandez 119,429,357 1,110,782
Robert E. La Blanc 119,528,471 1,011,668
Andrew J. McKenna 119,471,551 1,068,588
1999 Annual Meeting:
Patrick G. Ryan 119,199,535 1,340,604
Proposal 2 involved the adoption of the Tribune Company 1997
Incentive Compensation Plan.
Votes Votes Votes
"For" "Not For" "Abstained"
----------- --------- -----------
103,106,822 8,770,742 1,585,591
Proposal 3 involved the ratification of the selection of Price
Waterhouse LLP to serve as the Company's independent accountants
for 1997.
Votes Votes Votes
"For" "Not For" "Abstained"
----------- --------- -----------
118,485,813 1,615,531 438,795
(d) Not applicable.
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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.
10.15 - 1997 Incentive 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 two 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 14, 1997,
which reported 2 events under Item 5. The first event was the
Registration on Form S-3 of $500 million of Series E medium-term notes
on December 27, 1996. The registration statement was declared effective
by the Securities and Exchange Commission on January 9, 1997. The second
event was a two-for-one common stock split effected by a 100% stock
dividend distributed on January 15, 1997, to holders of record on
December 27, 1996. No financial statements were filed as part of the
report.
o The Company filed a Form 8-K dated March 26, 1997, which included Items
2 and 7. Item 2 reported the acquisition of Renaissance Communications
Corp. Item 7 incorporated by reference the financial statements of
Renaissance and the pro forma financial information of the Company
previously filed as a Form 8-K Current Report dated July 26, 1996
(as subsequently amended).
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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 13, 1997 /s/ R. Mark Mallory
---------------------
R. Mark Mallory
Vice President and Controller
(on behalf of the Registrant
and as Chief Accounting Officer)
19
Exhibit 10.15
TRIBUNE COMPANY
1997 INCENTIVE COMPENSATION PLAN
ARTICLE I
Purpose
The purpose of the 1997 Incentive Compensation Plan (the "Plan") is to
enable Tribune Company (the "Company") to provide management and other employees
of the Company and its Subsidiaries stock options and other stock and cash
incentives based upon the achievement of financial and other performance goals,
thereby attracting, retaining and rewarding such employees and strengthening the
mutuality of interests between the employees and the Company's stockholders.
ARTICLE II
Definitions
2.1 "Board" shall mean the Board of Directors of the Company.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor legislation.
2.3 "Committee" shall mean the Committee as defined in Section 3.1
hereof.
2.4 "Common Stock" shall mean the Common Stock (without par value)
of the Company.
2.5 "Disability" shall mean a disability qualifying the
Participant to receive benefits under the Company's or a Subsidiary's long-term
disability plan. Disability shall be deemed to occur on the date benefit
payments begin.
2.6 "EBITDA" shall mean the earnings of the Company before
deducting interest, taxes, depreciation and amortization.
2.7 "Extraordinary Items" shall mean (i) extraordinary, unusual
and/or non-recurring items of gain or loss, (ii) gains or losses on the
disposition of a business, (iii) changes in tax or accounting regulations or
laws, or (iv) the effect of a merger or acquisition, all of which must be
identified in the audited financial statements, including footnotes, or the
Management Discussion and Analysis section of the Company's annual report.
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2.8 "Fair Market Value" unless otherwise required by any
applicable provision of the Code, or any regulations issued thereunder, shall
mean as of any date the closing price of the Common Stock as reported on the New
York Stock Exchange Composite Transaction List for such day or if the Common
Stock was not traded on such day, then the next preceding day on which the
Common Stock was traded.
2.9 "Incentive Stock Option" shall mean any stock option awarded
under the Plan intended to be, and designated as, an incentive stock option
within the meaning of Section 422 of the Code or any successor provision.
2.10 "Nonqualified Stock Option" shall mean any stock option
awarded under the Plan that is not an Incentive Stock Option.
2.11 "Participant" shall mean an eligible employee to whom an award
has been made pursuant to the Plan.
2.12 "Retirement" shall mean any termination of employment by an
employee (other than by death or Disability) who is at least 55 years of age
after at least 10 years of employment by the Company and/or a Subsidiary.
2.13 "Subsidiary" shall mean any corporation (or partnership, joint
venture or other enterprise) (i) of which the Company owns or controls, directly
or indirectly, 20% or more of the outstanding shares of stock normally entitled
to vote for the election of Directors (or comparable equity participations and
voting power) or (ii) which the Company controls by contract or other means.
"Control" means the power to direct or cause the direction of the management and
policies of a corporation, partnership, joint venture or other enterprise.
2.14 "Termination of Employment" shall mean the termination of a
Participant's employment with the Company or any Subsidiary. A Participant
employed by a Subsidiary shall also be deemed to incur a Termination of
Employment if the Subsidiary ceases to be a Subsidiary and the Participant does
not immediately thereafter become an employee of the Company or another
Subsidiary.
2.15 "Transfer" shall mean anticipation, alienation, attachment,
sale, assignment, pledge, encumbrance, charge or other disposition; and the
terms "Transferred" or "Transferable" shall have corresponding meanings.
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ARTICLE III
Administration
3.1 The Committee. The Plan shall be administered by one or more
committees (any such committee, the "Committee") of the Board. The Board shall
have the sole discretion to appoint, add, remove or replace members of the
Committee, and shall have the sole authority to fill vacancies on the Committee.
Unless otherwise provided by the Board: (i) with respect to any award under the
Plan for which the Committee determines that it is necessary or desirable for
the grant or issuance thereof to be exempt under Rule 16b-3 of the Securities
Exchange Act of 1934 (the "1934 Act"), the Committee shall consist of two or
more directors each of whom is permitted under that Rule to make grants or
awards that are exempt from the operation of 1934 Act Section 16(b), and (ii)
with respect to any award that is intended to qualify as "performance-based
compensation" under Code Section 162(m)(4)(C), the Committee shall consist of
two or more directors, each of whom is an "outside director" (as such term is
defined in applicable regulations under Code Section 162(m)). With respect to
any award that is not intended to satisfy the conditions of 1934 Act Rule 16b-3
or Code Section 162(m)(4)(C), the Committee may delegate all or any of its
responsibilities hereunder to any directors or, except to the extent prohibited
under applicable law, to any officers of the Company (any of whom also may be a
Participant who has been granted or is eligible to be granted awards under the
Plan), and in the context of such awards, references in the Plan to the
"Committee" shall refer to both the Committee and, unless otherwise provided by
the Committee, to any such delegates of the Committee.
3.2 Authority. The Committee shall have full power to select key
employees to whom awards are granted; to determine the size and types of awards
and their terms and conditions; to construe and interpret the Plan; to establish
and amend the rules for the Plan administration; and to make all other
determinations which may be necessary or advisable for the administration of the
Plan. All determinations of the Committee shall be final and conclusive on all
persons, including the Company, its stockholders and Participants, and their
estates and beneficiaries.
ARTICLE IV
Reserved Shares
The number of shares of Common Stock available for awards under the
Plan shall be the sum of the following amounts:
(a) Ten million (10,000,000) shares;
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(b) any shares of Common Stock subject to an award hereunder
or under any prior stock incentive plan of the Company if there is a
lapse, forfeiture, expiration or termination of any such award;
(c) the number of shares of Common Stock exchanged by an
optionee as full or partial payment to the Company of the exercise
price under any stock option exercised under the Plan or any prior
stock incentive plan of the Company;
(d) the number of shares of Common Stock retained by the
Company pursuant to a Participant's tax withholding election or
exchanged by a Participant to satisfy his or her tax withholding
obligations as permitted by Section 15.5 hereof; and
(e) any shares of Common Stock purchased by the Company with
cash obtained upon the exercise of options granted under the Plan or
any prior stock incentive plan of the Company and shares repurchased
with tax savings resulting from deductibility exceeding reported
compensation expense.
All of these shares may be either authorized but unissued or reacquired shares.
Four million (4,000,000) of the Plan shares may, but need not, be issued
pursuant to the exercise of Incentive Stock Options. The maximum number of
shares subject to stock options granted to any Participant during any five-year
period during the term of the Plan shall not exceed one million (1,000,000).
ARTICLE V
Eligibility
All management and other employees of the Company and its Subsidiaries,
including employees who are members of the Board of Directors, shall be eligible
for participation in the Plan or any program contained herein. Participation
under the Plan from among those eligible shall be determined by the Committee.
ARTICLE VI
Types of Awards
Awards under the Plan may be granted in any one or a combination of (a)
stock options, (b) performance equity program awards, and (c) annual management
incentive program awards.
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ARTICLE VII
Stock Option Program
7.1 General Terms. Stock options may be granted to Participants at any
time as determined by the Committee. The Committee shall determine the number of
shares subject to each option and whether the option is an Incentive Stock
Option. The option price for each option shall be determined by the Committee
but shall not be less than 100% of the Fair Market Value of the Common Stock on
the date the option is granted. Each option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
option shall be exercisable later than the tenth (10th) anniversary date of its
grant. Options granted under the Plan shall be exercisable at such time and
subject to such terms and conditions as the Committee shall determine. The
option price upon exercise of any option shall be payable to the Company in full
by (a) cash payment or its equivalent; (b) tendering previously acquired shares
having a Fair Market Value at the time of exercise equal to the option price;
(c) certification of ownership of such previously acquired shares; (d) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale proceeds from the
option shares or loan proceeds to pay the exercise price and withholding taxes
due to Company; or (e) such other methods of payment as the Committee at its
discretion deems appropriate. For purposes of paragraphs (b) and (c), previously
acquired shares must have been owned by the Participant for at least six months
prior to exercise.
7.2 Termination of Employment by Death, Disability or Retirement. If a
Participant's employment by the Company or a Subsidiary terminates by reason of
death, Disability or Retirement, any stock option held by such Participant,
unless otherwise determined by the Committee at grant, shall be fully vested and
may thereafter be exercised by the Participant or by the beneficiary or legal
representative of the estate of a disabled or deceased Participant, for a period
of five years (or such shorter period as the Committee may specify at grant)
from the date of such death, Disability or Retirement or until the expiration of
the stated term of such stock option, whichever period is the shorter.
7.3 Other Termination of Employment. Subject to Article XII, unless
otherwise determined by the Committee at or after grant, if a Participant's
employment by the Company or a Subsidiary terminates for any reason other than
death, Disability or Retirement, the stock option shall terminate at such time
as provided in the award.
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ARTICLE VIII
Performance Equity Program
8.1 General Terms. The Committee may establish performance equity
program awards for Participants subject to such terms and conditions as the
Committee determines appropriate. Performance equity program awards shall
consist of the right to receive shares of Common Stock which may be earned in
whole or in part if certain performance goals established by the Committee are
achieved over a period of time designated by the Committee. The Committee may,
in its discretion, substitute cash for shares of Common Stock based on the Fair
Market Value of the Common Stock.
8.2 Performance Equity Program Award. Each award shall set forth
provisions regarding (a) the number of shares subject to such award or a formula
for determining such number, (b) the performance criteria and level of
achievement related to these criteria which shall determine the number of shares
granted, issued, retainable and/or vested, (c) the period as to which
performance shall be measured for determining achievement of performance (a
"Performance Period"), which period may, in no event, be less than two years,
(d) the timing of any delivery of shares earned by virtue of performance, (e)
restrictions on the Transfer of the performance equity program award, (f)
forfeiture provisions, and (g) such further terms and conditions, in each case
not inconsistent with the Plan, as may be determined from time to time by the
Committee. The maximum number of shares payable as a performance equity program
award may be a multiple of the target amount payable, and the maximum number of
shares payable for a Performance Period to any Participant that is intended to
satisfy the requirements for "performance-based compensation" under Code Section
162(m) shall not exceed 30,000.
8.3 Performance Criteria. The Committee shall establish the performance
criteria and level of achievement related to these criteria which shall
determine the target and maximum number of shares payable under a performance
equity program award, which criteria may be based on financial performance
and/or personal performance evaluations. Notwithstanding anything to the
contrary herein, the performance criteria for any performance equity program
awards that are intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall be a measure
based solely on one or more Qualifying Performance Criteria (as defined in
Article X hereof) selected by the Committee and specified at the time the
performance equity program award is established. The Committee shall certify the
extent to which any Qualifying Performance Criteria has been satisfied, and the
number of shares payable as a result thereof, prior to the delivery of any
shares that are intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m).
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8.4 Timing of Delivery. The Committee shall determine the timing of any
performance equity program award. The Committee may provide for or, subject to
such terms and conditions as the Committee may specify, may permit a Participant
to elect for the delivery of shares or cash payable under any performance equity
program award to be deferred.
8.5 Termination of Employment. Upon a Termination of Employment by a
Participant prior to the end of a Performance Period, the following procedures
shall apply as to any performance equity program awards established for such
Participant, unless determined otherwise by the Committee in its sole
discretion:
(a) Death, Disability or Retirement. Following the death,
Disability or Retirement of a Participant, the Participant shall be
entitled to a pro-rata portion of any performance equity program award.
Such pro-rata portion shall be determined following the termination of
the relevant Performance Period by multiplying (i) the number of shares
as to which the Committee determines the performance criteria
applicable to such award has been satisfied, times (ii) a ratio equal
to the number of full months of the Participant's employment with the
Company during the Performance Period for such award divided by the
number of months in the Performance Period for such award.
(b) Other Termination of Employment. Subject to Article XII,
unless the Committee provides otherwise, upon a Termination of
Employment for any reason other than death, Disability, or Retirement
prior to the end of a Performance Period, the right to any performance
equity program award as to which the performance criteria and any other
condition has not then been satisfied shall be forfeited.
8.6 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the number of shares subject to receipt, issued, retainable
and/or vested under a performance equity program award may be adjusted by the
Committee on the basis of such further considerations as the Committee in its
sole discretion shall determine. However, the Committee may not, in any event,
increase the number of shares earned upon satisfaction of any performance goal
by any Participant who is a "covered employee" within the meaning of Code
Section 162(m).
ARTICLE IX
Annual Management Incentive Program
9.1 General Terms. The Committee may award annual management
incentive program bonuses to Participants upon achievement of such terms and
conditions as the Committee determines appropriate. Annual management incentive
program bonuses shall
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consist of monetary payments earned in whole or in part if certain performance
goals established by the Committee for a specified fiscal year are achieved
during that year.
9.2 Annual Management Incentive Program Bonuses. Each year the
Committee shall set forth provisions regarding (a) the performance criteria and
level of achievement related to these criteria upon which the amount of the
award payment shall be based, (b) the timing of any payment earned by virtue of
performance, (c) restrictions on the Transfer of the annual management incentive
program award prior to actual payment, (d) forfeiture provisions, and (e) such
further terms and conditions, in each case not inconsistent with the Plan. The
maximum amount payable to any Participant as an annual management incentive
program award intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m) shall not exceed the lower of 0.2% of
EBITDA for the fiscal year or $2 million.
9.3 Performance Criteria. The Committee shall establish the performance
criteria and level of achievement related to these criteria upon which the
amount of any award payment shall be based. Notwithstanding anything to the
contrary herein, the performance criteria for any annual management incentive
program bonus that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall be a measure
based solely on one or more Qualifying Performance Criteria (as defined in
Article X hereof) selected by the Committee and specified within the first 90
days of the performance period. The Committee shall certify the extent to which
any Qualifying Performance Criteria has been satisfied, and the amount payable
as a result thereof, prior to payment of any bonus that is intended by the
Committee to satisfy the requirements for "performance-based compensation" under
Code Section 162(m).
9.4 Timing of Payment. The Committee shall determine the timing of
payment of any annual management incentive program bonus. The Committee may
provide for or, subject to such terms and conditions as the Committee may
specify, may permit a Participant to elect for the payment of any annual
management incentive program award to be deferred.
9.5 Termination of Employment. Upon a Termination of Employment for a
Participant prior to the end of a fiscal year, the following procedures shall
apply as to any annual management incentive program bonus for such fiscal year,
unless determined otherwise by the Committee in its sole discretion:
(a) Death, Disability or Retirement. Following the death,
Disability or Retirement of a Participant, the Participant shall be
entitled to receive a pro-rata portion of any annual management
incentive program bonus amount payable based upon performance for such
fiscal year. Such pro-rata portion shall be paid at such time as the
other Participants receive bonuses and shall be determined by
multiplying (i) the amount of the annual management incentive program
bonus that the Committee determines would have been payable to the
Participant for the fiscal year, times (ii) a ratio equal to
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the number of full months of the Participant's employment with the
Company during the fiscal year divided by 12.
(b) Other Termination of Employment. Subject to Article XII,
unless the Committee provides otherwise, upon a Termination of
Employment for any reason other than death, Disability, or Retirement
prior to the end of a fiscal year, the right to receive any payment
from the annual management incentive program bonus for that fiscal year
shall be forfeited.
9.6 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount to be paid under an annual management incentive
program bonus may be adjusted by the Committee on the basis of such further
considerations as the Committee in its sole discretion shall determine. However,
the Committee may not, in any event, increase the amount earned upon
satisfaction of any performance goal by any Participant who is a "covered
employee" within the meaning of Code Section 162(m).
ARTICLE X
Qualifying Performance Criteria
The performance goals established by the Committee with respect to
performance equity program awards and annual management incentive program
bonuses may be based on one or more of the following qualifying performance
criteria selected by the Committee: (a) shareholder value added, (b) cash flow,
(c) earnings per share, (d) EBITDA, (e) return on equity, (f) return on capital,
(g) return on assets or net assets, (h) revenue growth, (i) income or net
income, (j) cost control, (k) operating income or net operating income, (l)
operating profit or net operating profit, (m) operating margin, (n) return on
operating revenue, and (o) market share or circulation, all as determined by the
Committee. Performance may be measured on a Corporate, Group, business unit or
consolidated basis and may be measured absolutely or relative to the Company's
peers. The Committee may adjust the performance goals to account for the effects
of Extraordinary Items.
ARTICLE XI
Nontransferability
No awards granted under the Plan may be Transferred, other than by will
or by the laws of descent and distribution. Further, all stock options granted
to a Participant under the Plan shall be exercisable during his or her lifetime
only by such Participant. Notwithstanding the foregoing, at the discretion of
the Committee, a Nonqualified Stock Option may be transferable
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by the Participant solely to members of the Participant's immediate family or
trusts or family partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Committee.
ARTICLE XII
Change in Control
Upon the grant of an award or as otherwise provided by the
Committee consisting of members of the Incumbent Board (as hereinafter defined),
upon a change in control of the Company all outstanding stock options shall
become exercisable, all shares subject to performance equity program awards
shall be delivered as if the performance goals for the designated period had
been fully achieved and all annual management incentive program awards shall be
paid out as if the performance for the current fiscal year had been fully
achieved. For purposes hereof, a change in control of the Company shall mean:
(a) the acquisition, other than from the Company, by any
person, entity or "group" (within the meaning of Section 13(d)(3) or
14(d)(2) of the 1934 Act), excluding for this purpose the Company, the
Robert R. McCormick Tribune Foundation, the Cantigny Foundation and any
employee benefit plan (or related trust) sponsored or maintained by the
Company or its Subsidiaries, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of
either the then outstanding shares of Common Stock or the combined
voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(b) individuals who, as of May 6, 1997, constitute the Board
of Directors of the Company (as of May 6, 1997 the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election, by the stockholders
of the Company was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of the members of the Board, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) shall be
considered as though such person were a member of the Incumbent Board;
or
(c) approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case, with respect to
which persons who were the stockholders of the Company immediately
prior to such approval do not, immediately after such reorganization,
merger or consolidation, own, directly or indirectly, 50% or more of
the
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combined voting power of the then outstanding securities entitled to
vote generally in the election of directors of the reorganized, merged
or consolidated company, or a liquidation or dissolution of the
Company, or the sale of all or substantially all of the assets of the
Company.
If any amounts payable to a Participant pursuant to the Plan are deemed to be
"excess parachute payments" within the meaning of Section 280G(b)(1) of the
Code, the Committee may provide in the award that the Company shall pay to such
Participant in addition to any amounts payable pursuant to the Plan an amount
which -- after all federal, state and local taxes imposed on the Participant
with respect to such amount are subtracted therefrom -- is equal to the excise
taxes imposed on such excess parachute payment pursuant to Section 4999 of the
Code.
ARTICLE XIII
Adjustment Provisions
13.1 If the Company shall at any time change the number of issued
shares of Common Stock without new consideration to the Company (such as by
stock dividend, stock split, recapitalization, reorganization, exchange of
shares, liquidation, combination or other change in corporate structure
affecting the Common Stock) or make a distribution of cash or property which has
a substantial impact on the value of issued Common Stock, the total number of
shares of Common Stock available for awards under the Plan, the number of shares
which may be made subject to Incentive Stock Options, the maximum number of
shares which may be made subject to a stock option grants during the term of the
Plan and the maximum number of shares under Section 8.2 hereof shall be
appropriately adjusted, and the number of shares covered by each outstanding
award shall be equitably adjusted.
13.2 In the case of any sale of assets, merger, consolidation,
combination or other corporate reorganization or restructuring of the Company
with or into another corporation which results in the outstanding Common Stock
being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), subject to the
provisions of the Plan and any limitation applicable to the award:
(a) any Participant to whom a stock option has been granted
shall have the right thereafter and during the term of the stock
option, to receive upon exercise thereof the Acquisition Consideration
(as defined below) receivable upon the Acquisition by a holder of the
number of shares of Common Stock which might have been obtained upon
exercise of the stock option or portion thereof, as the case may be,
immediately prior to the Acquisition; and
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(b) except as otherwise provided in Article XII, any
Participant to whom performance equity program awards have been awarded
shall have the right thereafter and during the term of the award, upon
fulfillment of the terms of the award, to receive on the date or dates
set forth in the award, the Acquisition Consideration receivable upon
the Acquisition by a holder of the number of shares of Common Stock
which are covered by the Award.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of one share of Common Stock upon consummation of an Acquisition.
13.3 Notwithstanding any other provision of the Plan, the Committee may
authorize the issuance, continuation or assumption of awards or provide for
other equitable adjustments after changes in the Common Stock resulting from any
other merger, consolidation, sale of assets, acquisition of property or stock,
recapitalization, reorganization or similar occurrence upon such terms and
conditions as it may deem equitable and appropriate.
13.4 In the event that another corporation or business entity is being
acquired by the Company, and the Company assumes outstanding employee stock
options and/or stock appreciation rights, the aggregate number of shares of
Common Stock available for awards under the Plan shall be increased accordingly.
ARTICLE XIV
Amendment and Termination
The terms and conditions applicable to any stock option or other award
may be amended or modified by mutual agreement between the Company and the
Participant or such other persons as may then have an interest therein. The
Board of Directors may amend the Plan from time to time or terminate the Plan at
any time. However, no such action shall reduce the amount of any existing award
or change the terms and conditions thereof without the Participant's consent. No
amendment of the Plan shall be made without stockholder approval, if such
amendment increases the number of shares of Common Stock reserved under the Plan
or the maximum number of option shares which may be awarded to any Participant
in any five-year period or if stockholder approval is otherwise required by law
or regulation or stock exchange rule.
-12-
<PAGE>
ARTICLE XV
General Provisions
15.1 Successor. All obligations of the Company under the Plan, with
respect to awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
15.2 Unfunded Status of Plan. This Plan is intended to be unfunded.
With respect to any payments as to which a Participant has a fixed and vested
interest but which are not yet made to a Participant by the Company, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company.
15.3 No Right to Employment. Neither this Plan nor the grant of any
award hereunder shall give any Participant or other employee any right with
respect to continuance of employment by the Company or any Subsidiary, nor shall
there be a limitation in any way on the right of the Company or any Subsidiary
by which an employee is employed to terminate his or her employment at any time.
15.4 No Assignment of Benefits. No award under the Plan shall, except
as otherwise specifically provided hereunder or by law, be Transferable in any
manner, and any attempt to Transfer any such benefit shall be void, and any such
benefit shall not in any manner be subject to the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such benefit, nor
shall it be subject to attachment or legal process for or against such person.
15.5 Taxes. The Company shall be entitled to withhold the amount of any
tax attributable to any amounts payable or shares deliverable under the Plan
after giving the person entitled to receive such payment or delivery notice as
far in advance as practicable, and the Company may defer making payment or
delivery as to any award if any such tax is payable until indemnified to its
satisfaction. The Committee may, in its discretion and subject to such rules as
it may adopt, permit a Participant to pay all or a portion of any withholding
taxes arising in connection with the exercise of a nonqualified stock option or
receipt of shares relating to a performance equity program award, by electing
(i) to have the Company withhold shares having a Fair Market Value equal to the
amount to be withheld or (ii) to deliver shares previously owned for at least
six months having a Fair Market Value equal to the amount to be withheld.
-13-
<PAGE>
15.6 Governing Law. The Plan and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of Delaware (without regard to applicable Delaware principles of conflict
of laws).
ARTICLE XVI
Effective Date and Stockholder Approval
The Plan was adopted by the Board of Directors on December 10, 1996, to
be effective December 29, 1996, subject to stockholder approval.
-14-
EXHIBIT 11
TRIBUNE COMPANY
STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Quarter Ended
------------------------------------------
PRIMARY March 30, 1997 March 31, 1996
- ------- -------------- --------------
<S> <C> <C>
Income from continuing operations $ 64,505 $ 50,379
Discontinued operations of QUNO, net of tax - 89,317
-------------- --------------
Net income 64,505 139,696
Preferred dividends, net of tax (4,699) (4,696)
-------------- --------------
Net income attributable to common shares $ 59,806 $ 135,000
-------------- --------------
Weighted average common shares outstanding 122,546 123,432
-------------- --------------
Primary net income per share:
Continuing operations (A) $ .49 $ .37
Discontinued operations - .72
-------------- -------------
Total $ .49 $ 1.09
============== =============
FULLY DILUTED
- -------------
Income from continuing operations $ 64,505 $ 50,379
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (3,288) (3,374)
-------------- -------------
Adjusted income from continuing operations 61,217 47,005
Discontinued operations of QUNO, net of tax - 89,317
-------------- -------------
Adjusted net income $ 61,217 $ 136,322
-------------- -------------
Weighted average common shares outstanding 122,546 123,432
Assumed conversion of preferred shares into common shares 11,101 11,406
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 1,377 1,492
-------------- -------------
Adjusted weighted average common shares outstanding 135,024 136,330
-------------- -------------
Fully diluted net income per share:
Continuing operations $ .45 $ .34
Discontinued operations - .66
-------------- ------------
Total $ .45 $ 1.00
============== ============
</TABLE>
(A) Primary net income per share from continuing operations is computed by
deducting preferred dividends, net of tax, from continuing operations
and then dividing by weighted average common shares outstanding.
EXHIBIT 12
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Fiscal Year Ended December
First Quarter ------------------------------------------------------------------
Ended 3/30/97 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations before
cumulative effects of accounting changes $ 64,505 $ 282,750 $ 245,458 $ 233,149 $ 204,646 $ 179,534
Add:
Income tax expense 45,760 191,663 167,076 158,698 142,212 120,089
Losses on equity investments 10,855 13,281 13,209 9,739 1,857 1,903
------------- ---------- ---------- ---------- ---------- ----------
Subtotal 121,120 487,694 425,743 401,586 348,715 301,526
------------- ---------- ---------- ---------- ---------- ----------
Fixed charge adjustments
Add:
Interest expense 15,574 47,779 21,814 20,585 24,660 35,301
Amortization of capitalized interest 520 2,108 2,253 2,362 2,392 2,434
Interest component of rental expense (A) 2,450 9,362 8,200 8,236 8,732 8,182
------------- ---------- ---------- ---------- ---------- ----------
Earnings, as adjusted $ 139,664 $ 546,943 $ 458,010 $ 432,769 $ 384,499 $ 347,443
============= ========== ========== ========== ========== ==========
Fixed charges:
Interest expense $ 15,574 $ 47,779 $ 21,814 $ 20,585 $ 24,660 $ 35,301
Interest capitalized 1 168 610 - 1,099 1,092
Interest component of rental expense (A) 2,450 9,362 8,200 8,236 8,732 8,182
Interest related to guaranteed ESOP debt (B) 4,718 20,134 22,057 24,017 25,742 27,019
------------- ---------- ---------- ---------- ---------- ----------
Total fixed charges $ 22,743 $ 77,443 $ 52,681 $ 52,838 $ 60,233 $ 71,594
============= ========== ========== ========== ========== ==========
Ratio of Earnings to Fixed Charges 6.1 7.1 8.7 8.2 6.4 4.9
============= ========== ========== ========== ========== ==========
</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
March 30, 1997 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-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 7,383
<SECURITIES> 14,656
<RECEIVABLES> 412,904
<ALLOWANCES> 37,372
<INVENTORY> 83,580
<CURRENT-ASSETS> 718,615
<PP&E> 1,496,382
<DEPRECIATION> 832,656
<TOTAL-ASSETS> 4,752,231
<CURRENT-LIABILITIES> 774,097
<BONDS> 0
0
304,094
<COMMON> 1,018
<OTHER-SE> 1,224,599
<TOTAL-LIABILITY-AND-EQUITY> 4,752,231
<SALES> 0
<TOTAL-REVENUES> 593,919
<CGS> 0
<TOTAL-COSTS> 278,724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,574
<INCOME-PRETAX> 110,265
<INCOME-TAX> 45,760
<INCOME-CONTINUING> 64,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,505
<EPS-PRIMARY> .49
<EPS-DILUTED> .45
</TABLE>
