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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 1998 Commission file number 1-8572
TRIBUNE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-1880355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
435 North Michigan Avenue, Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 222-9100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock (without par value) New York Stock Exchange
Preferred Share Purchase Rights Chicago Stock Exchange
Pacific Stock Exchange
6 1/4% Exchangeable Notes Due August 15, 2001 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the Company's voting and non-voting common equity
held by non-affiliates on March 9, 1999, based upon the closing price of the
Company's Common Stock as reported on the New York Stock Exchange Composite
Transactions list for such date: approximately $6,314,000,000.
At March 9, 1999 there were 119,436,839 shares of the Company's Common Stock
outstanding.
The following documents are incorporated by reference, in part:
1998 Annual Report to Shareholders (Parts I and II, to the extent
described therein).
Definitive Proxy Statement for the May 4, 1999 Annual Meeting of
Shareholders (Part III, to the extent described therein).
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<PAGE>
PART I
ITEM 1. BUSINESS.
Tribune Company (the "Company") is a media company. Through its
subsidiaries, the Company is engaged in the publishing of newspapers, books,
educational materials and information in print and digital formats and the
broadcasting, development and distribution of information and entertainment
principally in metropolitan areas in the United States. The Company was founded
in 1847 and incorporated in Illinois in 1861. As a result of a corporate
restructuring in 1968, the Company became a holding company incorporated in
Delaware. References in this report to "the Company" include Tribune Company and
its subsidiaries, unless the context otherwise indicates. The information in
this Item 1 should be read in conjunction with the information contained under
the heading "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in the Company's 1998 Annual Report to Shareholders, which
information is incorporated herein by reference.
This Annual Report on Form 10-K contains certain forward-looking statements
that are based largely on the Company's current expectations. Such
forward-looking statements include estimates and statements regarding the
Company's plans to address Year 2000 issues and associated costs and risks.
Forward-looking statements are subject to certain risks, trends and
uncertainties that could cause actual results and achievements to differ
materially from those expressed in the forward-looking statements. Such risks,
trends and uncertainties, which in some instances are beyond the Company's
control, include changes in advertising demand; newsprint prices; interest
rates; regulatory rulings and other economic conditions; the effect of
acquisitions, investments and divestitures on the Company's results of
operations and financial condition; and the Company's reliance on third-party
vendors for various services. The words "believe," "expect," "anticipate,"
"estimate" and similar expressions generally identify forward-looking
statements. Readers are cautioned not to place undue reliance on such
forward-looking statements, which are as of the date of this filing.
Business Segments
The Company's operations are divided into three industry segments,
identified according to product: publishing, broadcasting and entertainment, and
education. These segments operate primarily in the United States. The following
table sets forth operating revenues and profit information for each segment of
the Company (in thousands).
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues: (1)
Publishing........................................... $1,498,573 $1,436,718 $1,336,639
Broadcasting and Entertainment....................... 1,153,006 1,057,529 876,750
Education............................................ 329,310 225,533 192,316
---------- ---------- ----------
Total Operating Revenues........................ $2,980,889 $2,719,780 $2,405,705
---------- ---------- ----------
Operating Profit: (2)
Publishing........................................... $ 377,137 $ 354,585 $ 291,257
Broadcasting and Entertainment....................... 317,355 285,896 203,531
Education............................................ 43,232 35,976 39,504
Corporate Expenses................................... (35,435) (34,426) (30,935)
---------- ---------- ----------
Total Operating Profit.......................... $ 702,289 $ 642,031 $ 503,357
---------- ---------- ----------
- -----
(1) Includes revenues earned outside the United States, which were not
significant.
(2) Operating profit for each segment excludes interest income and expense,
non-operating gains and losses, equity income and losses and income taxes.
</TABLE>
1
<PAGE>
The following table sets forth asset information for each industry segment
(in thousands).
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Assets:
Publishing........................................... $ 800,853 $ 668,532 $ 686,730
Broadcasting and Entertainment....................... 3,148,814 2,923,663 1,616,797
Education............................................ 782,438 717,301 544,226
Corporate............................................ 1,203,465 468,058 853,147
---------- ---------- ----------
Total Assets.................................... $5,935,570 $4,777,554 $3,700,900
---------- ---------- ----------
</TABLE>
Prior to 1993, the Company also owned a newsprint segment, which consisted
entirely of QUNO Corporation ("QUNO") and operated in Canada. In 1993 and 1994,
the Company reduced its ownership holdings in QUNO and in March 1996, the
Company completed the sale of its holdings in QUNO as part of QUNO's merger with
Donohue Inc. QUNO has been accounted for as a discontinued operation in the
consolidated financial statements.
The Company's 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. Results for the
second quarter usually reflect spring advertising, while the fourth quarter
includes advertising related to the holiday season. In education, second and
third quarter revenues are typically higher than first and fourth quarter
revenues. Results for the second and third quarters generally reflect the timing
of sales to educational institutions for the upcoming school year, which begins
in September. Fiscal years 1998, 1997 and 1996 all comprised 52 weeks.
Publishing
The publishing segment represented 50% of the Company's consolidated
operating revenues in 1998. The 12-month combined average circulation in 1998
of the Company's daily newspapers was approximately 1.3 million daily and 1.9
million Sunday. The Company's primary newspapers are the Chicago Tribune, the
South Florida-based Sun-Sentinel, The Orlando Sentinel and the Hampton Roads
(VA)-based Daily Press. The Company formerly owned two daily newspapers and a
weekly newspaper located in suburban areas in the San Diego, California market
that were sold in July 1995. For 1998, the portion of total publishing operating
revenues represented by each of the Company's newspaper subsidiaries was as
follows: Chicago Tribune Company--54%; Sun-Sentinel Company--22%; Orlando
Sentinel Communications Company--17%; and The Daily Press, Inc.--4%. In
addition, the Company owns a newspaper syndication and media marketing company,
a Chicago-area cable television news channel and other publishing-related
businesses.
Each of the Company's newspapers operates independently to most effectively
meet the needs of the area it serves. Local management establishes editorial
policies. The Company coordinates certain aspects of operations and resources in
order to provide greater operating efficiency and economies of scale.
The Company's newspapers compete for readership and advertising in varying
degrees with other metropolitan, suburban and national newspapers, as well as
with television, radio, Internet services and other media. Competition for
newspaper advertising is based upon circulation levels, readership demographics,
price, service and advertiser results, while competition for circulation is
based upon the content of the newspaper, service and price.
2
<PAGE>
The Company's newspapers are printed in Company-owned production
facilities. The principal raw material is newsprint. In 1998, the Company's
newspapers consumed approximately 387,000 metric tons of newsprint. In 1995, the
North American newsprint industry increased newsprint prices several times due
to higher demand for newsprint in the U.S. and overseas. Newsprint prices peaked
in the first quarter of 1996 and then declined throughout the remainder of 1996
and the beginning of 1997. Although newsprint prices increased moderately after
the first quarter of 1997, average newsprint transaction prices for the year
decreased 15% in 1997 from 1996. Average newsprint prices remained relatively
steady throughout 1998, increasing 3% from 1997.
The Company is party to a contract with Donohue Inc., expiring in 2007, to
supply newsprint based on market prices. Under the contract, the Company has
agreed to purchase specified minimum amounts of newsprint each year subject to
certain limitations. The specified minimum annual volume is 250,000, 225,000,
200,000 and 175,000 metric tons in years 1999 to 2002, respectively, and 150,000
metric tons in each of years 2003 to 2007. In 1998, approximately 69% of the
newspapers' newsprint supply was purchased from Donohue.
The following table provides a breakdown of revenues for the publishing
segment for the last three years.
Operating Revenues
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Advertising
Retail............................................... $ 469,588 $ 455,104 $ 433,373
General.............................................. 154,696 149,681 140,741
Classified .......................................... 537,655 510,753 456,912
---------- ---------- ----------
Total.............................................. 1,161,939 1,115,538 1,031,026
Circulation ........................................... 243,842 250,558 252,263
Other (1).............................................. 92,792 70,622 53,350
---------- ---------- ----------
Total.............................................. $1,498,573 $1,436,718 $1,336,639
---------- ---------- ----------
- -----
(1) Primarily includes revenues from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; delivery of other publications; direct mail
operations; revenues from Internet/electronic products; cable television
news programming; and other publishing-related activities.
</TABLE>
Advertising revenues grew in 1998 due to both linage and rate increases, as
well as the acquisition of South Florida Newspaper Network. Retail advertising
revenues, excluding South Florida Newspaper Network, rose mainly due to
improvements in hardware advertising in Chicago and Fort Lauderdale; movies and
food and drug advertising in Chicago; department store advertising in Fort
Lauderdale; and also due to higher Internet advertising. General advertising
revenues increased primarily due to increased transportation and high-tech
advertising in Chicago. Classified advertising revenues rose mainly due to
higher help wanted advertising at all of the newspapers; increased automotive
advertising in Chicago and Fort Lauderdale; and higher Internet advertising.
3
<PAGE>
Chicago Tribune Company
Founded in 1847, the Chicago Tribune is published daily, including Sunday,
and primarily serves an eight-county market in northern Illinois and Indiana.
This market ranks third in the United States in number of households. For the
six months ended September 1998, the Chicago Tribune ranked 7th in average daily
circulation and 4th in average Sunday circulation in the nation, based on Audit
Bureau of Circulations ("ABC") averages. For the six months ended September
1998, the Chicago Tribune had a 34% lead in total daily paid circulation and a
148% lead in Sunday paid circulation over its principal competitor, the Chicago
Sun-Times, based on ABC averages. The Chicago Tribune's total advertising volume
and operating revenues are estimated to be substantially greater than those of
the Sun-Times. The Chicago Tribune also competes with other city, suburban and
national daily newspapers, direct mail operations, local and national Internet
services and other media. Approximately 76% of the paper's daily and 60% of its
Sunday circulation is sold through home delivery, with the remainder sold at
newsstands and vending boxes. The daily edition's newsstand price increased by
$.15 to $.50 in September 1992. The Sunday edition's newsstand price increased
by $.25 to $1.75 in October 1995. In August 1998, the weekly home delivery price
increased $.10 to $4.20. The following tables set forth selected information for
the Chicago Tribune daily newspaper and other related activities.
<TABLE>
<CAPTION>
Averages for the Twelve Months Ended December
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Circulation:
Daily ............................................... 653,000 656,000 674,000
Sunday............................................... 1,027,000 1,028,000 1,052,000
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December
-------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Advertising Inches (in thousands):
Full Run (all zones)
Retail............................................. 907 923 953
General............................................ 367 361 354
Classified......................................... 1,420 1,406 1,330
-------- -------- --------
Total........................................... 2,694 2,690 2,637
Part Run............................................. 5,325 5,445 4,877
Preprinted Inserts................................... 4,229 3,347 2,967
-------- -------- --------
Total Inches.................................... 12,248 11,482 10,481
-------- -------- --------
Operating Revenues (in thousands)...................... $808,705 $788,577 $735,158
-------- -------- --------
</TABLE>
The 1998 improvement in advertising volume was mainly due to increased
preprinted inserts for retailers.
The Chicago Tribune publishes Exito!, a weekly newspaper targeting
Spanish-speaking households. Other businesses owned by the Chicago Tribune
include Tribune Direct Marketing, a direct mail operation; audiotext services
and publications targeting specific consumer market segments; and RELCON, Inc.,
a publisher of free apartment and new-home guides and a provider of
apartment-rental referral services to prospective renters.
4
<PAGE>
Sun-Sentinel Company (Fort Lauderdale)
The Sun-Sentinel is published daily, including Sunday, and leads the
Broward/South Palm Beach market in circulation. The Miami/Fort Lauderdale market
ranks 16th in the nation in terms of households. The paper's principal
competition comes from the Miami Herald and national and local publications, as
well as other media. Approximately 72% of the paper's daily and 67% of its
Sunday circulation is sold through home delivery, with the remainder sold at
newsstands and vending boxes. The daily Broward edition's newsstand price
increased by $.10 to $.35 in May 1995. The daily South Palm Beach edition's
newsstand price increased $.15 to $.50 in January 1996. The newsstand price of
all Sunday editions was increased by $.25 to $1.00 in November 1989. In January
1992, the newsstand price of the South Palm Beach Sunday edition increased by
$.25 to $1.25. In March 1996, the weekly home delivery price for the Broward
edition increased $.15 to $2.75. In November 1996, the weekly home delivery
price for the South Palm Beach edition increased $.25 to $3.00. The following
tables set forth selected information for the Sun-Sentinel daily newspaper and
other related activities.
<TABLE>
<CAPTION>
Averages for the Twelve Months Ended December
---------------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Circulation:
Daily ............................................... 261,000 257,000 256,000
Sunday............................................... 374,000 372,000 371,000
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Advertising Inches (in thousands)(1):
Full Run (all zones)
Retail............................................. 1,266 1,190 1,161
General............................................ 242 245 240
Classified......................................... 2,683 2,417 2,425
-------- -------- --------
Total........................................... 4,191 3,852 3,826
Part Run............................................. 2,822 2,938 2,980
Preprinted Inserts................................... 1,857 1,754 1,521
-------- -------- --------
Total Inches.................................... 8,870 8,544 8,327
-------- -------- --------
Operating Revenues (in thousands)...................... $326,217 $308,023 $292,248
-------- -------- --------
- -----
(1) Excludes inches for South Florida Newspaper Network, Gold Coast Shopper and
other targeted publications.
</TABLE>
The 1998 improvement in advertising volume was mainly due to increased
classified help wanted inches and higher preprinted inserts for retailers,
partially offset by lower part run inches.
The Sun-Sentinel Company owns Gold Coast Shopper, a publication located in
Deerfield Beach and City Link (formerly known as XS), a weekly publication. In
December 1997, Exito!, a weekly publication of the Sun-Sentinel Company
targeting young adults and Spanish-speaking households, ceased publication. The
Sun-Sentinel also offers delivery of other publications, direct mail services
and publications targeted to specific consumer market segments, such as South
Florida Parenting, acquired in 1994. The Sun-Sentinel Company acquired the South
Florida Newspaper Network, Inc. ("SFNN"), a group of 33 community-based
weeklies, in September 1998. SFNN publishes the Jewish Journal, a collection of
six newspapers serving South Florida's Jewish community. SFNN expanded in 1999
to 35 community-based weeklies.
5
<PAGE>
Orlando Sentinel Communications Company
The Orlando Sentinel is published daily, including Sunday, and serves
primarily a five-county area in Central Florida. It is the only major daily
newspaper in the Orlando market, although it competes with other Florida and
national newspapers, as well as other media. The Orlando/Daytona Beach/Melbourne
market ranks 22nd among U.S. markets in terms of households. Approximately 77%
of the paper's daily and 68% of its Sunday circulation is sold through home
delivery, with the remainder sold at newsstands and vending boxes. In March
1992, the newsstand price of the daily edition increased $.15 to $.50, except
for most Thursday editions, which had been priced at $.50 since February 1991.
The newsstand price of the Sunday edition was increased to $1.50 from $1.25 at
the end of 1990. In January 1999, the weekly home delivery price increased by
$.10 to $3.95. The following tables set forth selected information for The
Orlando Sentinel daily newspaper and other related activities.
<TABLE>
<CAPTION>
Averages for the Twelve Months Ended December
---------------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Circulation:
Daily ............................................... 259,000 259,000 261,000
Sunday............................................... 381,000 382,000 383,000
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Advertising Inches (in thousands):
Full Run (all zones)
Retail............................................. 904 964 914
General............................................ 175 158 133
Classified......................................... 1,691 1,720 1,728
-------- -------- --------
Total........................................... 2,770 2,842 2,775
Part Run ............................................ 1,594 1,481 1,387
Preprinted Inserts................................... 3,199 3,155 2,764
-------- -------- --------
Total Inches. .................................. 7,563 7,478 6,926
-------- -------- --------
Operating Revenues (in thousands)...................... $260,903 $253,570 $232,874
-------- -------- --------
</TABLE>
The 1998 improvement in advertising volume was mainly due to higher part
run inches and preprinted inserts for retailers, partially offset by lower full
run retail inches as a result of department store and electronic store
consolidations and a decline in the health care category.
The Orlando Sentinel also publishes US/Express, a free weekly entertainment
publication that is used to distribute advertising to non-subscribers, which is
syndicated nationally, a group of parenting magazines and the RELCON apartment
guide for the Central Florida market. In 1997, The Orlando Sentinel began
publishing New Homes and Auto Finder, which are free publications distributed in
the Central Florida market.
The Daily Press, Inc. (Newport News, Virginia)
The Daily Press is published daily, including Sunday, and serves the
Hampton Roads market. The Daily Press constitutes the only major daily newspaper
in the market, although it competes with other regional and national newspapers,
as well as other media. The Hampton Roads market includes Newport News, Hampton,
Williamsburg and eight other cities and counties in Virginia. This market area
is also commonly called the Virginia Peninsula and, together with Norfolk,
Portsmouth and Virginia Beach, is the 40th largest U.S. market in terms of
households. Approximately 82% of the paper's daily and 76% of its Sunday
circulation is sold through home delivery, with the remainder sold at newsstands
and vending boxes. The newsstand price of the daily edition increased by $.15 to
$.50 in July 1996. The Sunday edition newsstand price was increased to $1.50
from $1.25 in October 1995. The weekly home delivery price was increased by $.30
to $3.05 in October 1995.
6
<PAGE>
The following tables set forth selected information for the Daily Press.
<TABLE>
<CAPTION>
Averages for the Twelve Months Ended December
---------------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Circulation:
Daily ............................................... 98,000 98,000 100,000
Sunday............................................... 117,000 118,000 121,000
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Advertising Inches (in thousands):
Full Run (all zones)
Retail............................................. 629 630 610
General............................................ 37 35 28
Classified......................................... 983 926 858
------- ------- -------
Total........................................... 1,649 1,591 1,496
Part Run ............................................ 156 150 125
Preprinted Inserts .................................. 1,381 1,282 1,184
------- ------- -------
Total Inches.................................... 3,186 3,023 2,805
------- ------- -------
Operating Revenues (in thousands)...................... $57,595 $55,721 $52,618
------- ------- -------
</TABLE>
The 1998 improvement in advertising volume was mainly due to higher
preprinted inserts for retailers and grocery chains and increased full run
classified inches, primarily in the automotive and help wanted categories.
Related Businesses
The Company is also involved in syndication activities, advertising
placement services, Internet and other online-related businesses, cable
television news programming and other publishing-related activities. The
syndication activities, conducted primarily through Tribune Media Services
("TMS"), involve the marketing of columns, features, information and comic
strips to newspapers. TMS is also engaged in advertising placement services for
television and movie listings in newspapers and the development of news products
and services for electronic and print media. In February 1999, TMS acquired both
Premier DataVision, Inc. ("PDI") and JDTV, Inc. ("JDTV"). PDI distributes movie
show-time data and advertisements. JDTV distributes television listings
information to the cable and satellite television industries. Internet and other
online-related businesses include the electronic publishing of each of the
Company's daily newspapers with enhanced content on the Internet. In addition,
the Company owns and operates the Digital City affiliate in each of the
Company's markets. See "Investments" for a discussion of the Company's
investment in Digital City. The Company also operates CLTV News, a regional
24-hour cable television news channel in the Chicagoland area. CLTV News was
launched in January 1993 and currently is available to more than 1.7 million
cable households in the Chicago-area market. Total operating revenues for these
publishing-related businesses are shown below, net of intercompany revenues.
Operating Revenues
(In thousands)
Fiscal Year Ended
December
--------
1998................................ $45,153
1997................................ 30,827
1996................................ 23,741
Other revenues rose in 1998 partially due to increased revenues from
Internet/electronic products.
7
<PAGE>
Broadcasting and Entertainment
The broadcasting and entertainment segment represented 39% of the Company's
consolidated operating revenues in 1998. At December 27, 1998, the segment
included WB television affiliates located in New York, Los Angeles, Chicago,
Philadelphia, Boston, Dallas, Houston, Seattle, Miami, Denver and San Diego; Fox
television affiliates in Sacramento, Indianapolis, Hartford, Grand Rapids and
Harrisburg; a CBS television affiliate in Atlanta; an ABC television affiliate
in New Orleans; four radio stations, one located in Chicago and three located in
Denver; the Chicago Cubs baseball team; and Tribune Entertainment, a company
that develops and distributes first run television programming.
In December 1997, the Company reached an agreement with Emmis Broadcasting
Corporation to exchange substantially all of the assets of the Company's WQCD
radio station in New York and cash for the assets of television stations
KTZZ-Seattle and WXMI-Grand Rapids. Emmis agreed to acquire these television
stations as part of its acquisition of Dudley Communications Corporation. The
exchange was completed in June 1998. The divestiture of WQCD was accounted for
as a sale and the acquisition of the television stations was recorded as a
purchase.
In March 1997, the Company acquired Renaissance Communications Corp., a
publicly traded company that owned six television stations, for $1.1 billion in
cash. The stations acquired were KDAF-Dallas, WBZL-Miami (formerly WDZL),
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 such duopoly waivers unnecessary.
Second, the FCC granted a 12-month waiver of its rule prohibiting
television/newspaper cross-ownership in the same market, which relates to the
Miami television station and the Fort Lauderdale Sun-Sentinel newspaper. The FCC
subsequently issued a rule review to consider modifying its cross-ownership
rule. In March 1998, the FCC granted the Company a waiver extension to allow
continued ownership of both the Miami television station and the Sun-Sentinel
newspaper until the rule review was concluded. The Company cannot predict the
outcome of the FCC duopoly rulemaking or cross-ownership rule review.
In January 1996, the Company acquired television station KHTV-Houston for
$102 million in cash. In February 1996, the Company acquired the remaining
minority interest in WPHL-Philadelphia for $23 million in cash. In April 1996,
the Company acquired television station KSWB-San Diego for $72 million in cash.
In November 1995, the Company swapped its two Sacramento radio stations, KYMX
and KCTC, for $3 million in cash and a Denver radio station. The Company
acquired television station WLVI-Boston in April 1994, for $25 million in cash.
In June 1994, the Company acquired Farm Journal Inc., publisher of The Farm
Journal, a leading farm magazine, for $17 million in cash. Farm Journal results
were reported in radio until March 1997, when it was sold by the Company for
approximately $17 million in cash. The acquisitions were accounted for as
purchases.
In August 1998, the Company reached an agreement with Meredith Corporation
to acquire the assets of television station KCPQ-Seattle in exchange for the
assets of the Company's WGNX-Atlanta television station and cash. On March 1,
1999 and in a three-way transaction, Meredith purchased KCPQ from Kelly
Television Co. and then exchanged the station for WGNX. The divestiture of WGNX
will be accounted for as a sale and the acquisition of KCPQ will be recorded as
a purchase. The Company will record the assets of KCPQ at fair market value,
which will result in an estimated pretax gain of $350 million in the first
quarter of 1999. Current FCC regulations preclude the Company from owning both
KCPQ and the Company's KTZZ-Seattle television station. As part of the
transaction, the Company transferred the assets of KTZZ into a disposition
trust. Pursuant to the terms of the disposition trust, an independent trustee is
charged with finding a buyer for KTZZ by September 1, 1999.
8
<PAGE>
The following table shows sources of revenue for the broadcasting and
entertainment segment for the last three years.
Operating Revenues
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended December
---------------------------------------------
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
Television(1).......................................... $ 964,387 $ 861,434 $680,504
Radio(2)............................................... 52,633 71,641 89,260
Entertainment/other(3)................................. 135,986 124,454 106,986
---------- ---------- --------
Total.............................................. $1,153,006 $1,057,529 $876,750
---------- ---------- --------
- -----
(1) Includes KTZZ-Seattle and WXMI-Grand Rapids since their acquisition in June
1998, the six Renaissance stations since their acquisition in March 1997,
KHTV-Houston since its acquisition in January 1996 and KSWB-San Diego since
its acquisition in April 1996.
(2) Includes Farm Journal until its sale in March 1997 and WQCD, which
transferred station operations to Emmis Broadcasting Corporation effective
July 1, 1997 in return for an annual management fee. WQCD was subsequently
exchanged for television stations KTZZ-Seattle and WXMI-Grand Rapids in
June 1998.
(3) 1997 and 1998 reflect the impact of two syndicated programs launched by
Tribune Entertainment in September 1997: "Gene Roddenberry's Earth: Final
Conflict" and "NightMan."
</TABLE>
Television
In 1998, television contributed 84% of broadcasting and entertainment
operating revenues. The Company's television stations compete for audience and
advertising with other television and radio stations, cable television and other
media serving the same markets. Competition for audience and advertising is
based upon various interrelated factors including programming content, audience
acceptance and price. Selected data for the Company's television stations is
shown in the following table.
<TABLE>
<CAPTION>
Market (1) Major
----------------------------- Commercial Expiration
National % of U.S. FCC Stations in of FCC Year
Rank Households % Channel Affiliation Market (2) License (3) Acquired
-------- ---------- ----- ------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WPIX - New York, NY......... 1 6.9 6.9 11-VHF WB 6 1999 (4) 1948
KTLA - Los Angeles, CA...... 2 5.2 5.2 5-VHF WB 7 1998 (5) 1985
WGN - Chicago, IL.......... 3 3.2 3.2 9-VHF WB 7 2005 1948
WPHL - Philadelphia, PA..... 4 2.7 1.3 17-UHF WB 6 1999 (6) 1992
WLVI - Boston, MA........... 6 2.2 1.1 56-UHF WB 7 1999 (7) 1994
KDAF - Dallas, TX .......... 7 2.0 1.0 33-UHF WB 8 2006 1997
WGNX - Atlanta, GA (8)...... 10 1.7 0.9 46-UHF CBS 7 2005 1984
KHTV - Houston, TX ......... 11 1.7 0.8 39-UHF WB 7 2006 1996
KCPQ - Seattle, WA (8)...... 12 1.6 1.6 13-VHF Fox 7 2007 1999
KTZZ - Seattle, WA (8)...... 12 1.6 0.8 22-UHF WB 7 2007 1998
WBZL - Miami, FL............ 16 1.4 0.7 39-UHF WB 7 2005 (9) 1997
KWGN - Denver, CO........... 18 1.2 1.2 2-VHF WB 6 2006 1966
KTXL - Sacramento, CA....... 20 1.1 0.6 40-UHF Fox 6 2006 1997
WXIN - Indianapolis, IN..... 25 1.0 0.5 59-UHF Fox 6 2005 1997
KSWB - San Diego, CA........ 26 1.0 0.5 69-UHF WB 6 2006 1996
WTIC - Hartford, CT......... 27 0.9 0.5 61-UHF Fox 6 1999 (7) 1997
WXMI - Grand Rapids, MI..... 38 0.7 0.3 17-UHF Fox 6 2005 1998
WGNO - New Orleans, LA...... 41 0.6 0.3 26-UHF ABC 6 2005 1983
WPMT - Harrisburg, PA....... 46 0.6 0.3 43-UHF Fox 5 1999 (6) 1997
</TABLE>
- -----
(1) Source: Nielsen Station Index (DMA Market and Demographic Rank Report,
September 1998). Ranking of markets is based on number of
television households in DMA (Designated Market Area).
9
<PAGE>
(2) Source: Nielsen Station Index (Viewers in Profile Reports, 1998).
Major commercial stations program for a broad, general audience
and have a large viewership in the market.
(3) See "Governmental Regulation."
(4) Expires June 1999. Renewal application filed in February 1999 is pending.
(5) Expired December 1998. Renewal application filed in August 1998 is pending.
(6) Expires August 1999. Renewal application will be filed.
(7) Expires April 1999. Renewal application filed in December 1998 is pending.
(8) On March 1, 1999, WGNX was exchanged for KCPQ. Current FCC regulations
preclude the Company from owning both KCPQ and KTZZ. As part of the
transaction, the Company transferred the assets of KTZZ into a disposition
trust. Pursuant to the terms of the disposition trust, an independent
trustee is charged with finding a buyer for KTZZ by September 1, 1999.
(9) The FCC has granted the Company a waiver extension to allow continued
ownership of both the Miami television station and the Fort Lauderdale
Sun-Sentinel newspaper until the FCC has completed a review of the
newspaper/television cross-ownership rule. See "Item 3, Legal Proceedings"
for a discussion of the cross-ownership rule.
Programming emphasis at the Company's WB and Fox affiliated stations is
placed on network provided shows, syndicated series, feature motion pictures,
local and regional sports coverage, news and children's programs. These stations
acquire most of their programming from outside sources, including The WB
Television Network ("The WB Network") and the Fox Network, although a
significant amount is produced locally or supplied by Tribune Entertainment (see
"Entertainment/Other"). The Company's stations affiliated with other major
networks acquire much of their programming from those networks. Contracts for
purchased programming generally cover a period of one to five years, with
payment also typically made over several years. The expense for amortization of
television broadcast rights in 1998 was $277 million, which represented
approximately 29% of total television operating revenues.
Average audience share information for the Company's television stations
for the past three years is shown in the following table.
Average Audience Share (1)
Year Ended December
----------------------------
1998 1997 1996
----- ----- -----
WPIX - New York, NY....................... 10.5% 10.0% 11.0%
KTLA - Los Angeles, CA.................... 7.8 8.3 8.5
WGN - Chicago, IL........................ 9.8 10.0 10.0
WPHL - Philadelphia, PA................... 4.8 4.5 4.8
WLVI - Boston, MA......................... 5.0 4.5 4.3
KDAF - Dallas, TX......................... 8.0 8.3 8.3
WGNX - Atlanta, GA........................ 8.3 8.3 8.3
KHTV - Houston, TX........................ 6.3 6.5 5.8
KCPQ - Seattle, WA........................ 7.3 8.0 9.3
KTZZ - Seattle, WA........................ 4.0 3.0 2.8
WBZL - Miami, FL.......................... 6.0 6.3 6.5
KWGN - Denver, CO......................... 6.5 8.0 8.8
KTXL - Sacramento, CA..................... 8.3 9.0 9.3
WXIN - Indianapolis, IN................... 7.3 8.0 7.8
KSWB - San Diego, CA...................... 4.5 4.0 3.3
WTIC - Hartford, CT....................... 6.8 7.5 8.3
WXMI - Grand Rapids, MI................... 7.8 8.5 8.8
WGNO - New Orleans, LA.................... 9.5 9.8 7.3
WPMT - Harrisburg, PA..................... 6.3 7.8 7.3
- -----
(1) Represents the estimated number of television households tuned to a
specific station as a percent of total viewing households in a defined
area. The percentages shown reflect the average Nielsen ratings shares for
the February, May, July and November measurement periods for 7 a.m. to 1
a.m. daily.
10
<PAGE>
Radio
In 1998, the Company's radio operations contributed 4% of broadcasting and
entertainment operating revenues. The largest radio station owned by the
Company, measured in terms of operating revenues, is WGN in Chicago. Radio
operations also include three stations in Denver and Tribune Radio Networks
(which produces and distributes farm and sports programming to radio stations,
primarily in the Midwest). Also included were WQCD (which transferred station
operations to Emmis Broadcasting through a management agreement in July 1997,
and was subsequently exchanged for television stations KTZZ-Seattle and
WXMI-Grand Rapids in June 1998) and Farm Journal (until its sale in March 1997).
Selected information for the Company's radio operations is shown in the
following table.
<TABLE>
<CAPTION>
Number of
National Operating
Market Stations in Audience
Format Frequency Rank (1) Market (2) Share (3)
------------------------ --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
WGN - Chicago, IL Personality/Infotainment
/Sports 720-AM 3 38 6.6%
KOSI - Denver, CO Adult Contemporary 101.1-FM 23 28 5.8%
KEZW - Denver, CO Nostalgia/Big Band 1430-AM 23 28 3.1%
KKHK - Denver, CO All Rock & Roll Hits 99.5-FM 23 28 4.0%
- -----
(1) Source: Radio markets ranked by Arbitron Metro Survey Area, Arbitron
Company 1998.
(2) Source: Arbitron Company 1998.
(3) Source: Average of Winter, Spring, Summer and Fall 1998 Arbitron shares
for persons 12 years old and over, 6 a.m. to midnight
daily during the period measured.
</TABLE>
Entertainment/Other
In 1998, entertainment/other contributed 12% of the segment's operating
revenues. This portion of the broadcasting and entertainment segment includes
Tribune Entertainment Company and the Chicago Cubs baseball team.
Tribune Entertainment Company was formed to acquire and develop weekly
programming for Company television stations and for syndication. Tribune
Entertainment participates in the production and/or distribution of first-run
programming, including television shows, music and variety shows, movies and
specials. In September 1997, Tribune Entertainment launched two weekly action
shows: "Gene Roddenberry's Earth: Final Conflict" and "NightMan." "Gene
Roddenberry's Earth: Final Conflict" is aired on 203 stations that cover 97% of
U.S. television households and has been renewed for the 1999-2000 and 2000-2001
seasons. During the 1997-1998 television season, "NightMan" was aired on 161
stations that covered 96% of U.S. television households; "NightMan" has not been
renewed. In addition, Tribune Entertainment produced and syndicated "The Geraldo
Rivera Show," a one-hour, daily talk show, which ended after the 1997-1998
season. During the 1998-1999 television season, Tribune Entertainment originated
or syndicated approximately 4.5 hours of first-run programs per week. On
average, the Company's 18 television stations utilized approximately six hours
per week of programming furnished by Tribune Entertainment.
The Company owns the Chicago Cubs baseball team. In addition to providing
local sports entertainment, the Cubs represent an important source of live
programming for the Company's Chicago-based broadcasting operations and regional
cable programming channel.
11
<PAGE>
Education
The education segment represented 11% of the Company's consolidated
operating revenues in 1998. The education segment specializes in learning
products and services for use in schools and homes. The segment's primary
business is supplemental and core curriculum materials for kindergarten through
grade 12. The education segment also derives revenues from the adult basic
education and consumer publishing markets.
In 1998, the education segment's revenues were derived as follows: 56% from
sales to the U.S. school market, 38% from sales to the U.S. consumer market and
6% from sales outside the U.S. The market for education and consumer materials
is highly competitive. The segment sells its products through several market
channels, including direct-to-school, catalogs targeting teachers and
administrators, parent/teacher stores, school and public libraries, bookstores,
mass merchandisers, direct-to-consumer, teacher workshops, international
distribution, and educational toy stores.
Total operating revenues for the education segment for the last three years
are shown below.
Operating Revenues
(In thousands)
Fiscal Year Ended
December
--------
1998.............................. $329,310
1997.............................. 225,533
1996.............................. 192,316
Education operating revenues in 1998 increased mainly due to the
acquisitions of Landoll (in December 1997) and Shortland (in September 1997) and
increased sales to both school and consumer markets at existing businesses.
In March 1999, the Company acquired Mimosa Publications. Mimosa is an
Australia-based company that publishes reading, language arts, mathematics,
science and English language teaching materials for several international school
markets. In January 1998, the Company acquired ownership of the North American
Sunshine line of educational materials. In September 1997, the Company acquired
Shortland Publications Limited for $32 million in cash. Shortland is a New
Zealand-based company that publishes reading, language arts, science and social
studies materials for several international elementary school markets. In
December 1997, the Company acquired approximately 80% of Landoll, Inc. for $77
million in cash. Landoll publishes children's books for the mass market. In
March 1996, the Company acquired Educational Publishing Corporation for $205
million in cash and NTC Publishing Group for $83 million in cash. Educational
Publishing publishes supplemental and core curriculum education materials
through its Creative Publications and Ideal/Instructional Fair divisions. NTC
Publishing publishes trade books and educational products for the school and
consumer markets. In August 1995, the Company acquired Everyday Learning
Corporation, a publisher of mathematics materials for grades kindergarten
through 6, for $25 million in cash. In February 1994, the Company acquired The
Wright Group, a publisher of supplemental education materials for the elementary
school market, for $96 million in cash. In July 1993, the Company acquired
Contemporary Books, Inc., a publisher of non-fiction trade titles and
educational books and materials, for $22 million in cash and $18.5 million in
common stock. In September 1993, the Company acquired Compton's Multimedia
Publishing Group for $57 million in cash. The Company sold Compton's to The
Learning Company, Inc. in December 1995. The acquisitions were accounted for as
purchases.
12
<PAGE>
Investments
The Company has investments in several public and private companies. See
Note 5 to the Company's Consolidated Financial Statements in the 1998 Annual
Report to Shareholders for a discussion of the Company's significant cost and
equity method investments.
The principal equity method investments include The WB Network, Qwest
Broadcasting and Digital City. The Company acquired a 13% equity interest in The
WB Network in 1995, and exercised options to increase its ownership interest to
22% in 1997 and 25% in March 1998. The WB is a growing network that provides the
Company's WB affiliate television stations with original prime-time and
children's programming. In 1995, the Company acquired a 33% equity interest in
Qwest Broadcasting, which owns WB affiliate television stations in Atlanta and
New Orleans. In 1996, the Company purchased a 20% equity interest in Digital
City, a venture with America Online to develop a national network of local
interactive services.
Non-Recurring Items
In 1998, the Company sold its WQCD radio station subsidiary, sold a portion
of its investment portfolio and wrote down certain investments. In 1997, the
Company sold a portion of its investment portfolio and wrote down certain
investments. In 1996, the Company recorded non-recurring equity income
representing the Company's interest in a gain recorded by Qwest Broadcasting for
the cancellation of an option to purchase a television station. See Note 2 to
the Company's Consolidated Financial Statements in the 1998 Annual Report to
Shareholders for a discussion of these non-recurring items.
Discontinued Operations (QUNO Corporation)
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 Company owned approximately 34% of QUNO's common stock plus $138.8
million in convertible debt. The sale resulted in a 1996 after-tax gain of $89.3
million, or $.66 per diluted share. 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.
Governmental Regulation
Various aspects of the Company's operations are subject to regulation by
governmental authorities in the United States.
The Company's television and radio broadcasting operations are subject to
Federal Communications Commission ("FCC") jurisdiction under the Communications
Act of 1934, as amended. FCC rules, among other things, govern the term, renewal
and transfer of radio and television broadcasting licenses, and limit
concentrations of broadcasting control inconsistent with the public interest.
Federal law also regulates the rates charged for political advertising and the
quantity of advertising within children's programs. The Company is permitted to
own both newspaper and broadcast operations in the Chicago market by virtue of
"grandfather" provisions in the FCC regulations and in the Fort Lauderdale/Miami
market by virtue of a temporary waiver of the television/newspaper
cross-ownership rule. Congress removed national limits on the number of
broadcast stations a licensee may own in 1996. However, federal law continues to
limit the number of radio and television stations a single owner may own in a
local market, and the percentage of the national television audience that may be
reached by a licensee's television stations in the aggregate. Both the
television/newspaper cross-ownership rule and the station limitation rule are
currently under review by the FCC. Television and radio broadcasting licenses
are subject to renewal by the FCC, at which time they may be subject to
competing applications for the licensed frequencies. At December 27, 1998, the
Company had FCC authorization to operate 18 television stations and two AM and
two FM radio stations.
13
<PAGE>
The FCC has approved technical standards and channel assignments for
digital television ("DTV") service. DTV will permit broadcasters to transmit
video images with higher resolution than existing analog signals. Operators of
full-power television stations (including those owned by the Company) have each
been assigned a second channel for DTV while they continue analog broadcasts on
the original channel. After the transition is complete, broadcasters will be
required to return one of the two channels to the FCC and transmit exclusively
in digital format. By law, the transition to DTV is to occur by December 31,
2006, subject to extension under certain circumstances. Conversion to digital
transmission will require all television broadcasters, including those owned by
the Company, to invest in digital equipment and facilities. The Company does not
believe that the required capital expenditures will have a material effect on
its consolidated financial position or results of operations.
The FCC has not yet issued regulations governing some aspects of DTV
operation. These include the obligations of cable television systems and other
multichannel video providers to carry DTV signals and additional "public
interest" obligations that may be imposed on broadcasters' use of DTV. The FCC
has adopted rules requiring broadcasters transmitting subscription-based
services over the DTV channel to pay to the government fees in the amount of 5%
on gross revenues collected from such services.
From time to time, the FCC revises existing regulations and policies in
ways that could affect the Company's broadcasting operations. In addition,
Congress from time to time considers and adopts substantive amendments to the
governing communications legislation. The Company cannot predict what
regulations or legislation may be proposed or finally enacted or what effect, if
any, such regulations or legislation could have on the Company's broadcasting
operations. See "Item 3, Legal Proceedings" for a discussion of pending FCC
rulemaking and rule review.
Employees
The average number of full-time equivalent employees of the Company in 1998
was 12,700, approximately 1,100 more than the average for 1997. The increase was
mainly due to the net impact of the 1997 and 1998 acquisitions and divestitures
and the growth of the Company's Internet/online businesses.
Eligible employees participate in the Company's Employee Stock Ownership
Plan ("ESOP"). Pension and other employee benefit plans are provided for
substantially all employees of the Company. In connection with the establishment
of the ESOP, the Company amended, effective January 1989, its Company-sponsored
pension plan for employees not covered by a collective bargaining agreement. The
pension plan continued to provide substantially the same pension benefits as
under the pre-amended plan until December 1998. After that date, the plan
provides that the pension benefit credits be frozen in terms of pay and service.
The Company also maintains several small plans for other employees.
During 1998, the Company's publishing segment employed approximately 8,100
full-time equivalent employees, about 6% of whom were represented by a total of
four unions. Contracts with unionized employees of the publishing segment expire
at various times through September 1999.
Broadcasting and entertainment had an average of 3,000 full-time equivalent
employees in 1998. Approximately 22% of these employees were represented by a
total of 21 unions. Contracts with unionized employees of the broadcasting and
entertainment segment expire at various times through July 2003.
Education had an average of 1,500 full-time equivalent employees in 1998.
Approximately 3% of these employees were represented by one union. The contract
with the unionized employees of the education segment expires in October 2001.
14
<PAGE>
Executive Officers of the Company
Information with respect to the executive officers of the Company as of
March 9, 1999 is set forth below. The descriptions of the business experience of
these individuals include the principal positions held by them since March 1994.
Robert D. Bosau (52)
President since May 1997 and Executive Vice President from August 1994 to May
1997 of Tribune Education Company*; Vice President/Administration of Tribune
Publishing Company* until August 1994.
James C. Dowdle (65)
Executive Vice President of the Company; President and Chief Executive Officer
of Tribune Broadcasting Company* until May 1997; President of Tribune Publishing
Company* from August 1994 to May 1997; Director of the Company since 1985.
Dennis J. FitzSimons (48)
President since May 1997 and Executive Vice President from August 1994 until May
1997 of Tribune Broadcasting Company*; President of Tribune Television Company*
until August 1994.
Jack W. Fuller (52)
President since May 1997 of Tribune Publishing Company*; President and Publisher
until May 1997 of Chicago Tribune Company*.
Donald C. Grenesko (50)
Senior Vice President/Finance and Administration since August 1996, Senior Vice
President and Chief Financial Officer until August 1996 of the Company.
David D. Hiller (45)
Senior Vice President/Development of the Company.
Crane H. Kenney (36)
Vice President/General Counsel and Secretary since August 1996, Vice
President/Chief Legal Officer from February 1996 to August 1996, Senior Counsel
from March 1995 to January 1996 and Counsel until February 1995 of the Company.
Luis E. Lewin (50)
Vice President/Human Resources since October 1996 and Director of Human
Resources from March 1994 to October 1996 of the Company; Acting Publisher of
Exito! in Chicago from December 1995 to September 1996.
John W. Madigan (61)
Chairman since January 1996, Chief Executive Officer since May 1995, President
since May 1994, Chief Operating Officer from May 1994 to May 1995 and Executive
Vice President of the Company until May 1994; President of Tribune Publishing
Company* until May 1994; Publisher of the Chicago Tribune until May 1994;
Director of the Company since 1975.
Ruthellyn Musil (47)
Vice President/Corporate Relations since March 1995 and Director of
Communications until March 1995 of the Company.
Jeff R. Scherb (41)
Senior Vice President/Chief Technology Officer since August 1996 of the Company;
Chief Technology Officer and Senior Vice President, Dun & Bradstreet Software
from March 1995 to August 1996; Vice President/Systems Development, Turner
Broadcasting from 1994 to 1995; Senior Vice President/Product Development,
Delphi Information Systems until 1994.
- -----
* A subsidiary of the Company.
15
<PAGE>
ITEM 2. PROPERTIES.
The corporate headquarters of the Company are located at 435 North Michigan
Avenue, Chicago, Illinois. The general character, location and approximate size
of the principal physical properties used by the Company on December 27, 1998
are listed below. In addition to those listed, the Company owns or leases
transmitter sites, parking lots and other properties aggregating approximately
812 acres in 63 separate locations, and owns or leases an aggregate of
approximately 1,522,000 square feet of space in 193 locations. The Company also
owns the 39,000-seat stadium used by the Chicago Cubs baseball team. The Company
considers its various properties to be in good condition and suitable for the
purposes for which they are used.
<TABLE>
<CAPTION>
Approximate Area in Square Feet
-------------------------------
General Character of Property Owned Leased
- ----------------------------- --------- -------
<S> <C> <C>
Publishing:
Printing plants, business and editorial offices and warehouse space located in:
Chicago, IL....................................................................... 1,327,000 (1) 156,000
Orlando, FL....................................................................... 424,000 103,000
Deerfield Beach, FL............................................................... 386,000 -
Northlake, IL..................................................................... - 216,000
Newport News, VA.................................................................. 207,000 -
Fort Lauderdale, FL............................................................... - 106,000
Broadcasting and Entertainment:
Business offices, studios and transmitters located in:
Los Angeles, CA................................................................... 256,000 -
New York, NY...................................................................... - 131,000
Chicago, IL....................................................................... 99,000 4,000
Oak Brook, IL..................................................................... - 69,000
Denver, CO........................................................................ 44,000 11,000
Indianapolis, IN.................................................................. 5,000 37,000
Houston, TX....................................................................... 36,000 -
Dallas, TX........................................................................ 33,000 -
Boston, MA........................................................................ 28,000 -
San Diego, CA..................................................................... - 26,000
Philadelphia, PA.................................................................. 22,000 2,000
Sacramento, CA.................................................................... 24,000 -
Hartford, CT...................................................................... - 22,000
New Orleans, LA................................................................... - 22,000
Grand Rapids, MI.................................................................. 21,000 -
Atlanta, GA....................................................................... - 21,000
Miami, FL......................................................................... 20,000 -
York, PA.......................................................................... 20,000 -
Seattle, WA....................................................................... - 18,000
Education:
Printing plants, business offices and warehouse space located in:
Ashland, OH....................................................................... - 683,000
Chicago, IL....................................................................... 185,000 29,000
Alsip, IL......................................................................... - 171,000
Kirkland, WA...................................................................... - 126,000
Lincolnwood, IL................................................................... - 71,000
Bothell, WA....................................................................... - 60,000
Grand Rapids, MI.................................................................. - 53,000
Denver, CO........................................................................ - 10,000
Oakdale, IA....................................................................... - 6,000
- -----
(1) Includes Tribune Tower, an approximately 630,000-square-foot office building in downtown Chicago which houses the Company's
corporate Headquarters, the Chicago Tribune's business and editorial offices, offices of various subsidiary companies and
approximately 62,000 square feet of space leased to unaffiliated tenants; and Freedom Center, an approximately 697,000-square-
foot production center of the Chicago Tribune which houses the Chicago Tribune's printing, packaging and distribution
operations.
</TABLE>
16
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are defendants from time to time in
actions for matters arising out of their business operations. In addition, the
Company and its subsidiaries are involved from time to time as parties in
various regulatory, environmental and other proceedings with governmental
authorities and administrative agencies.
In March 1997, the Company acquired Renaissance Communications Corp., a
publicly traded company that owned six television stations, for $1.1 billion in
cash. The stations acquired were KDAF-Dallas, WBZL-Miami (formerly WDZL),
KTXL-Sacramento, WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The 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 such duopoly
waivers unnecessary. Second, the FCC granted a 12-month waiver of its rule
prohibiting television/newspaper cross-ownership in the same market, which
relates to the Miami television station and the Fort Lauderdale Sun-Sentinel
newspaper. The FCC subsequently issued a rule review to consider modifying its
cross-ownership rule. In March 1998, the FCC granted the Company a waiver
extension to allow continued ownership of both the Miami television station and
the Sun-Sentinel newspaper until the rule review has concluded. The Company
cannot predict the outcome of the FCC duopoly rulemaking or cross-ownership rule
review.
The Company does not believe that any of the matters or proceedings
presently pending will have a material adverse effect on its consolidated
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is presently listed on the New York, Chicago and
Pacific stock exchanges. The high and low sales prices of the Common Stock by
fiscal quarter for the two most recent fiscal years, as reported on the New York
Stock Exchange Composite Transactions list, were as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
Quarter High Low High Low
------- -------- --------- --------- --------
<S> <C> <C> <C> <C>
First......................................... $68 3/4 $58 5/16 $42 3/8 $35 1/2
Second........................................ 72 3/8 62 13/16 50 5/16 39 3/4
Third......................................... 75 1/16 50 54 13/16 48
Fourth........................................ 67 1/2 44 3/4 61 1/2 51 9/16
</TABLE>
At March 9, 1999, there were 5,855 holders of record of the Company's
Common Stock.
Quarterly cash dividends declared on Common Stock were $.17 per share in
1998 and $.16 per share in 1997. Total cash dividends declared on Common Stock
by the Company were $82,426,000 for 1998 and $78,646,000 for 1997.
During 1998, the Company did not sell any of its equity securities in
transactions that were not registered under the Securities Act of 1933, as
amended.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The information for the years 1994 through 1998 contained under the heading
"Eleven Year Financial Summary" in the Company's 1998 Annual Report to
Shareholders is incorporated herein by reference.
The following table shows basic earnings per share for the last 11 years.
Basic Earnings (Loss) per Share
Continuing Operations
---------------------------
Before
Non-Recurring Discontinued Net
Items Total (1) Operations Income
------------- --------- ------------ ------
1998 $2.74 $3.26 $ - $3.26
1997 2.49 3.05 - 3.05
1996 2.10 2.15 .73 2.88
1995 1.68 1.75 .25 2.00
1994 1.60 1.60 .06 1.66
1993 1.40 1.40 (.12) 1.28
1992 1.24 1.24 (.33) .78 (2)
1991 1.09 1.09 (.12) .97
1990 1.44 (.49) (.12) (.61)
1989 1.38 1.38 .21 1.59
1988 .99 .99 .40 1.39
- -----
(1) Includes non-recurring items as follows: gain on the sales of subsidiary
and investments, net of write-downs, totaling $.52 per share in 1998; gain
on the sales of investments, net of write-downs, totaling $.56 per share in
1997; equity income related to Qwest Broadcasting of $.05 per share in
1996; gain on the sale of investment and subsidiaries totaling $.07 per
share in 1995; and charges relating to the New York Daily News totaling
$1.93 per share in 1990.
(2) The adoption of new accounting rules for retiree benefits, income taxes and
postemployment benefits decreased net income per share by $.13 per share in
1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information contained under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Company's 1998
Annual Report to Shareholders is incorporated herein by reference.
YEAR 2000 COMPLIANCE
The Company relies on various technologies throughout its business operations
that could be affected by the date change in the Year 2000. The Company is
progressing through a comprehensive program to evaluate and address the impact
of the Year 2000 issue on its operational and financial reporting systems and
equipment with embedded technology and the Year 2000 risks associated with its
vendors and customers. The program has been assigned a high priority in relation
to other business projects. The Company has formed a Project Management Office
to provide company-wide leadership, oversight and coordination of the Year 2000
project. The Company's Chief Technology Officer and Chief Financial Officer head
the Project Management Office. These project heads receive frequent updates from
the other members of the Project Management Office team. In addition, progress
reports on the Year 2000 program are presented regularly to the Company's board
of directors and senior management.
18
<PAGE>
State of Readiness
Both internal and external resources are being utilized throughout the Company
to implement the program, which includes the following overlapping phases:
system and equipment inventory and analysis; remediation, testing and
implementation; contingency planning; and vendors and investments. The Company
expects that its internal operational and financial reporting systems and
equipment will be Year 2000 compliant by June 30, 1999. None of the Company's
other significant information technology projects has been delayed as a result
of the Company's Year 2000 compliance efforts.
System and Equipment Inventory and Analysis -- The system and equipment
inventory and analysis phase consists of compiling a detailed inventory of all
of the Company's information and non-information technology hardware, software,
systems and equipment to determine which of these items are date-sensitive and
require remediation to become Year 2000 compliant. This analysis involves both
an internal assessment and contact with the systems and equipment manufacturers.
The principal systems and equipment identified by the Company as requiring
remediation are financial systems, human resource systems and news production
systems. This phase is complete.
Remediation, Testing and Implementation -- The remediation, testing and
implementation phase consists of determining and implementing a remediation
method (upgrade, replace or discontinue) for date-sensitive items. The
remediated item is tested and returned to normal operations when compliant.
Testing for significant systems may include functional testing of remedial
measures and regression testing to validate that changes have not altered
existing functionality. A separate Year 2000 mainframe environment has been
created to test all operating system software and program product software. This
Year 2000 environment is designed to accomplish "end to end" testing of the
larger systems applications and to validate interface communications between
systems applications. The Company is also performing its own tests of mission
critical vendor-provided systems and equipment, even if vendor certification of
Year 2000 compliance has been received. The Company is working with the
manufacturers of its affected systems and other outside vendors to implement
required upgrades. The Company has also identified vendors from which the
Company can procure new systems and equipment to replace non-compliant systems
and equipment. The Company is currently in the middle stages of this phase and
expects to be substantially complete by June 30, 1999.
Contingency Planning -- Contingency planning consists of developing solutions
and options in the event that the Company experiences a failure in its
production processes or in the operations of certain of the Company's vendors.
Contingency plans and enactment dates for production processes and vendors are
being developed, but have not yet been finalized. The Company will continue to
develop, review, test and revise contingency plans, as more information becomes
available from internal testing and external vendor assessment.
Vendors and Investments -- Vendor management consists of assessing vendor
readiness, and if necessary, identifying alternate channels to receive critical
materials and/or supplies. The Company has initiated formal communications with
its vendors through an assessment survey. For critical vendors, including
utilities, banks, newsprint and ink suppliers and a satellite provider, site
visits have been completed. In the event that satisfactory commitments from key
suppliers are not received, the Company is forming plans for the continuing
availability of critical materials and supplies through alternate channels. In
general, the Company is comfortable with the progress made by critical vendors
to date and no critical issues have been identified, except for a general
concern with the utilities industry, as alternative suppliers may not be
available. Tribune is also assessing Year 2000 compliance of the companies in
its venture investment portfolio. Tribune will continue to monitor information
provided by these companies regarding their progress toward remediation of Year
2000 issues.
Risks
The Company may discover additional Year 2000 problems, including that
remediation or contingency plans are not feasible or that the costs of such
plans exceed current expectations. In many cases, the Company is relying on
assurances from vendors that their systems, or that new or upgraded systems
acquired by the Company, will be Year
19
<PAGE>
2000 compliant. The Company believes that one of its principal Year 2000 risks
is the effect the Year 2000 issue will have on its vendors, especially the
utilities industry. A substantial part of the Company's day-to-day operations is
dependent on power and telecommunications services, for which alternative
sources of service may be limited. The Company will continue to investigate the
readiness of its suppliers, including utilities, and pursue the availability of
alternatives to further analyze and diminish the extent of any impact Year 2000
issues may have on the Company. Although there can be no assurance that the
Company will be able to complete all of the modifications in the required
timeframe and that unanticipated events will not occur, it is management's
belief that the Company is taking adequate action to address Year 2000 issues.
In the event that either the Company or the Company's vendors fail to adequately
address Year 2000 issues, the Company could suffer business interruptions. If
such interruptions cause the Company to be unable to fulfill its obligations to
third parties, the Company could be exposed to liability to such third parties.
Costs
The Company does not currently expect that the costs of addressing the Year 2000
issue will have a material effect on the consolidated financial position or
results of operations of the Company. Year 2000 compliance costs are expensed as
incurred and are funded through operating cash flow. The Company currently
estimates total expenses to range from $20 to $25 million, of which $7 million
was incurred in 1998.
20
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The information provided below about the Company's market sensitive
financial information contains forward-looking statements.
Interest rate risk. The Company's debt is subject to changes in interest rates
in the United States. All of the Company's borrowings are denominated in U.S.
dollars. The Company's policy is to manage interest rate risk through the use of
a combination of medium-term notes and promissory notes.
Information pertaining to the Company's debt at December 27, 1998 is shown
in the table below.
<TABLE>
<CAPTION>
Fixed Rate Weighted Avg. Variable Rate Weighted Avg.
Maturities (in thousands) Debt Interest Rate Debt Interest Rate
- ------------------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1999 (1) $ 61,905 7.4% $150,643 5.1%
2000 80,222 6.8% - -
2001 (1) (2) 254,641 6.6% - -
2002 92,809 7.1% - -
2003 92,762 6.7% - -
Thereafter 913,179 6.2% - -
---------- --------
Total at Dec. 27, 1998 $1,495,518 $150,643
---------- --------
Fair Value at Dec. 27, 1998 (3) $1,533,617 $150,643
---------- --------
- -----
(1) As discussed in Note 6 to the Company's Consolidated Financial Statements
in the 1998 Annual Report to Shareholders, medium-term notes (fixed rate
debt) of $32.0 million and promissory notes (variable rate debt) of $150.6
million scheduled to mature in 1999 were presented as maturing in 2001 for
financial statement presentation because of the Company's ability and
intent to refinance these maturities.
(2) Includes $118.5 million of 6.25% Debt Exchangeable for Common Stock
securities ("DECS"), related to the Company's investment in The Learning
Company ("TLC") common stock. At maturity, the DECS will be repaid using
shares of TLC common stock or, at the Company's option, the cash equivalent
thereof. See Note 6 to the Company's Consolidated Financial Statements in
the 1998 Annual Report to Shareholders for further discussion.
(3) Fair value was determined based on quoted market prices for similar issues
or on current rates available to the Company for debt of the same remaining
maturities and similar terms.
</TABLE>
Information pertaining to the Company's debt at December 28, 1997 is shown
in the table below.
<TABLE>
<CAPTION>
Fixed Rate Weighted Avg. Variable Rate Weighted Avg.
Maturities (in thousands) Debt Interest Rate Debt Interest Rate
- ------------------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1998 (1) $ 37,098 8.4% $476,375 5.9%
1999 61,914 7.5% - -
2000 80,052 7.4% - -
2001 (1) 36,166 8.4% - -
2002 92,827 7.1% - -
Thereafter 770,369 6.5% - -
---------- --------
Total at Dec. 28, 1997 $1,078,426 $476,375
---------- --------
Fair Value at Dec. 28, 1997 (2) $1,099,046 $476,375
---------- --------
- -----
(1) As discussed in Note 7 to the Company's Consolidated Financial Statements
in the 1997 Annual Report to Shareholders, medium-term notes (fixed rate
debt) of $3.8 million and promissory notes (variable rate debt) of $476.4
million scheduled to mature in 1998 were presented as maturing in 2001 for
financial statement presentation because of the Company's ability and
intent to refinance these maturities.
(2) Fair value was determined based on quoted market prices for similar issues
or on current rates available to the Company for debt of the same remaining
maturities and similar terms.
</TABLE>
21
<PAGE>
Equity price risk. The Company has common stock investments in several publicly
traded companies that are subject to market price volatility. These investments
are classified as available-for-sale and are recorded on the balance sheet at
fair value with unrealized gains or losses, net of related tax effects, reported
in the accumulated other comprehensive income component of shareholders' equity.
The following analysis presents the hypothetical change in the fair value
of the Company's common stock investments in publicly traded companies assuming
hypothetical stock price fluctuations of plus or minus 10%, 20% and 30% in each
stock's price. At December 27, 1998, this analysis excludes 4.6 million shares
of TLC common stock related to the Company's DECS. See Note 6 in the Company's
Consolidated Financial Statements in the 1998 Annual Report to Shareholders.
<TABLE>
<CAPTION>
Valuation of Investments Valuation of Investments
Assuming Indicated Decrease in Assuming Indicated Increase in
Each Stock's Price Each Stock's Price
------------------------------ Dec. 27, 1998 --------------------------------------
(In thousands) -30% -20% -10% Fair Value +10% +20% +30%
-------- -------- -------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock investments
in public companies $637,700 $728,800 $819,900 $911,000(1) $1,002,100 $1,093,200 $1,184,300
- -----
(1) Includes America Online common stock investment of $818,800.
</TABLE>
During the last 12 quarters preceding December 27, 1998, market price
movements caused the fair value of the Company's common stock investments in
publicly traded companies to change by 10% or more in nine of the quarters, by
20% or more in eight of the quarters and by 30% or more in five of the quarters.
The fair value of the Company's common stock investments in publicly traded
companies at December 28, 1997 assuming hypothetical stock price fluctuations of
plus or minus 10%, 20% and 30% would be as follows:
<TABLE>
<CAPTION>
Valuation of Investments Valuation of Investments
Assuming Indicated Decrease in Assuming Indicated Increase in
Each Stock's Price Each Stock's Price
------------------------------ Dec. 28, 1997 --------------------------------
(In thousands) -30% -20% -10% Fair Value +10% +20% +30%
-------- -------- -------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock investments
in public companies $184,329 $210,661 $236,994 $263,327(1) $289,659 $315,992 $342,325
- -----
(1) Includes America Online common stock investment of $133,500.
</TABLE>
During the last 12 quarters preceding December 28, 1997, market price
movements caused the fair value of the Company's common stock investments in
publicly traded companies to change by 10% or more in nine of the quarters, by
20% or more in five of the quarters and by 30% or more in three of the quarters.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's Consolidated Financial Statements and Notes thereto and the
information contained under the heading "Business Segments" appearing on pages
39 through 63 of the Company's 1998 Annual Report to Shareholders, together with
the report thereon of PricewaterhouseCoopers LLP dated February 9, 1999, except
as to Note 2, which is as of March 1, 1999, appearing on page 68 of such Annual
Report, and the information contained under the heading "Quarterly Results
(Unaudited)" on pages 64 and 65, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Executive Officers of the
Company" in Item 1 hereof, and the information contained under the heading
"Board of Directors" and contained under the subheading "Section 16(a)
Beneficial Ownership Reporting Compliance" under the heading "Stock Ownership"
in the definitive Proxy Statement for the Company's May 4, 1999 Annual Meeting
of Shareholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the heading "Executive Compensation"
(except that portion relating to Item 13, below) and contained under the
subheading "Director Compensation" under the heading "Board of Directors" in the
definitive Proxy Statement for the Company's May 4, 1999 Annual Meeting of
Shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the subheadings "Principal Shareholders"
and "Management Ownership" under the heading "Stock Ownership" in the definitive
Proxy Statement for the Company's May 4, 1999 Annual Meeting of Shareholders is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the subheading "Related Transactions" under
the heading "Stock Ownership" and under the subheading "Compensation Committee
Interlock and Insider Participation" under the heading "Executive Compensation"
(except that portion relating to Item 11, above) in the definitive Proxy
Statement for the Company's May 4, 1999 Annual Meeting of Shareholders is
incorporated herein by reference.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)&(2) Financial Statements and Financial Statement Schedule filed as
part of this report
As listed in the Index to Financial Statements and Financial
Statement Schedule on page 27 hereof.
(a)(3) Index to Exhibits filed as part of this report
As listed in the Exhibit Index beginning on page 30 hereof.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
22, 1999.
TRIBUNE COMPANY
(Registrant)
/s/ John W. Madigan
-------------------
John W. Madigan
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 22, 1999.
Signature Title
--------- -----
/s/ John W. Madigan
-------------------
John W. Madigan Chairman, President and Chief Executive Officer
and Director (principal executive officer)
/s/ James C. Dowdle
-------------------
James C. Dowdle Executive Vice President and Director
/s/ Donald C. Grenesko
----------------------
Donald C. Grenesko Senior Vice President/Finance and Administration
(principal financial officer)
/s/ R. Mark Mallory
-------------------
R. Mark Mallory Vice President and Controller
(principal accounting officer)
25
<PAGE>
Signature Title
--------- -----
/s/ Diego E. Hernandez
----------------------
Diego E. Hernandez Director
/s/ Robert E. La Blanc
----------------------
Robert E. La Blanc Director
/s/ Nancy Hicks Maynard
-----------------------
Nancy Hicks Maynard Director
/s/ Dudley S. Taft
------------------
Dudley S. Taft Director
/s/ Arnold R. Weber
-------------------
Arnold R. Weber Director
26
<PAGE>
TRIBUNE COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page
----
Consolidated Statements of Income for each of the three fiscal
years in the period ended December 27, 1998............................. *
Consolidated Balance Sheets at December 27, 1998 and
December 28, 1997....................................................... *
Consolidated Statements of Cash Flows for each of the
three fiscal years in the period ended December 27, 1998................ *
Consolidated Statements of Shareholders' Equity for each of the
three fiscal years in the period ended December 27, 1998................ *
Notes to Consolidated Financial Statements................................. *
Report of Independent Accountants on Consolidated Financial Statements..... *
Report of Independent Accountants on Financial Statement Schedule.......... 28
Financial Statement Schedule for each of the three fiscal years in the
period ended December 27, 1998.......................................... 29
Schedule II Valuation and qualifying accounts and reserves.
- -----
* Incorporated by reference to the Company's 1998 Annual Report to Shareholders.
See Item 8 of this Annual Report on Form 10-K.
-----
All other schedules required under Regulation S-X are omitted because they are
not applicable or not required.
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Tribune Company
Our audits of the consolidated financial statements referred to in our report
dated February 9, 1999, except as to Note 2, which is as of March 1, 1999,
appearing in the 1998 Annual Report to Shareholders of Tribune Company (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
February 9, 1999, except as to Note 2,
which is as of March 1, 1999
28
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
TRIBUNE COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands of dollars)
Additions Additions
Balance at Charged to Recorded Balance
Beginning Costs and Upon at End of
Description of Period Expenses Acquisitions Deductions Period
----------- ---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Valuation accounts deducted from assets
to which they apply:
Year ended December 27, 1998
Accounts receivable allowances:
Bad debts................................. $31,709 $19,931 $ 548 $20,463 $31,725
Rebates, volume discounts and other....... 11,496 17,497 4,030 20,346 12,677
------- ------- ------ ------- -------
Total.................................. $43,205 $37,428 $4,578 $40,809 $44,402
======= ======= ====== ======= =======
Year ended December 28, 1997
Accounts receivable allowances:
Bad debts................................. $24,445 $19,135 $4,158 $16,029 $31,709
Rebates, volume discounts and other....... 9,961 19,945 633 19,043 11,496
------- ------- ------ ------- -------
Total.................................. $34,406 $39,080 $4,791 $35,072 $43,205
======= ======= ====== ======= =======
Year ended December 29, 1996
Accounts receivable allowances:
Bad debts................................. $23,078 $19,846 $ 992 $19,471 $24,445
Rebates, volume discounts and other....... 7,076 20,313 1,331 18,759 9,961
------- ------- ------ ------- -------
Total.................................. $30,154 $40,159 $2,323 $38,230 $34,406
======= ======= ====== ======= =======
</TABLE>
29
<PAGE>
TRIBUNE COMPANY
EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by reference to
documents previously filed by Tribune Company with the Securities and Exchange
Commission, as indicated. Exhibits marked with a circle (o) are management
contracts or compensatory plan contracts or arrangements filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with
this Report.
Number Description
------ -----------
3.1 * Restated Certificate of Incorporation of Tribune
Company, dated April 21, 1987; Certificate of Designations
of Series B Convertible Preferred Stock, dated April 4,
1989 (Exhibit 3.1 to Annual Report on Form 10-K for 1991).
3.1a * Amended Certificate of Designation of Series A Junior
Participating Preferred stock, dated December 2, 1997
(Exhibit 3.1a to Annual Report on Form 10-K for 1997).
3.2 * By-Laws of Tribune Company As Amended and In Effect on
October 20, 1998 (Exhibit 3.2 to Quarterly Report on Form
10-Q for the quarter ended September 27, 1998).
4 * Rights Agreement between Tribune Company and First Chicago
Trust Company of New York, as Rights Agent, dated as of
December 12, 1997 (Exhibit 1 to Form 8-K Current Report
dated December 12, 1997).
4.1 * Indenture, dated as of March 1, 1992 between Tribune
Company and Continental Bank, National Association
(Incorporated by reference to Registration Statement on
Form S-3, Registration No. 333-02831).
4.2 * Indenture, dated as of January 1, 1997 between Tribune
Company and Bank of Montreal Trust Company (Incorporated
by reference to Registration Statement on Form S-3,
Registration No. 333-18921).
10.1 o* Chicago Tribune Company Split-Dollar Insurance Plan
dated June 29, 1978, together with first amendment dated
August 28, 1981, covering certain employees of Tribune
Company and Chicago Tribune Company (Exhibit 10.4 in File
No. 2-86087).
10.2 o* Tribune Company Supplemental Retirement Plan, as amended
and restated on January 1, 1989 (Exhibit 10.6 to Annual
Report on Form 10-K for 1988).
10.2a o* First Amendment of Tribune Company Supplemental
Retirement Plan, effective January 1, 1994 (Exhibit 10.4b
to Annual Report on Form 10-K for 1993).
10.3 o* Tribune Company Directors' Deferred Compensation Plan,
as amended and restated on July 1, 1994 (Exhibit 10.7 to
Annual Report on Form 10-K for 1994).
10.4 o* Tribune Company Bonus Deferral Plan, dated as of December
14, 1993 (Exhibit 10.8 to Annual Report on Form 10-K for
1993).
10.4a o* First Amendment of Tribune Company Bonus Deferral Plan,
effective December 1, 1996 (Exhibit 10.4a to Annual Report
on Form 10-K for 1996).
30
<PAGE>
Number Description
------ -----------
10.5 o* Tribune Company Amended and Restated 1984 Long-Term
Performance Plan, effective as of July 25, 1989 (Exhibit
19.2 to Form 10-Q Quarterly Report for the quarter ended
June 25, 1989); Forms of Incentive Stock Option Agreement
and Non-Qualified Stock Option Agreements for Tribune
Company Amended and Restated 1984 Long-Term Performance
Plan (Exhibit 19.2 to Form 10-Q Quarterly Report for the
quarter ended July 1, 1990).
10.6 o* Tribune Company 1992 Long-Term Incentive Plan, dated as of
April 29, 1992 and as amended and in effect on April 19,
1994 (Exhibit 10.11 to Annual Report on Form 10-K for
1994).
10.7 o* Tribune Company Executive Financial Counseling Plan, dated
October 19, 1988 and as amended effective January 1,
1994 (Exhibit 10.13 to Annual Report on Form 10-K for
1993).
10.8 o Tribune Company Amended and Restated Transitional
Compensation Plan for Executive Employees, effective as of
December 7, 1998.
10.9 o Tribune Company Supplemental Defined Contribution Plan,
effective as of January 1, 1994 and as amended effective
January 1, 1999.
10.10 o* Tribune Company Amended and Restated Employee Stock
Purchase Plan, dated May 5, 1998 (Exhibit 10.11 to Form
10-Q Quarterly Report for the quarter ended March 29,
1998).
10.11 o* 1988 Restricted Stock Plan For Outside Directors, dated
February 16, 1988 (Exhibit 10.12 to Annual Report on
Form 10-K for 1992).
10.11a o* Amendment effective April 28, 1992 to the 1988 Restricted
Stock Plan For Outside Directors (Exhibit 10.12b to Annual
Report on Form 10-K for 1993).
10.12 o* Tribune Company Amended and Restated 1995 Nonemployee
Director Stock Option Plan, dated October 22, 1996
(Exhibit 10.19 to Form 10-Q Quarterly Report for the
quarter ended September 29, 1996).
10.13 o* Tribune Company Amended and Restated 1996 Nonemployee
Director Stock Compensation Plan, dated as of February 17,
1998 (Exhibit 10.14 to Annual Report on Form 10-K for
1997).
10.14 o* Tribune Company 1997 Incentive Compensation Plan effective
December 29, 1996 (Exhibit 10.15 to Form 10-Q Quarterly
Report for the quarter ended March 30, 1997).
12 Computation of Ratios of Earnings to Fixed Charges.
13 The portions of the Company's 1998 Annual Report to
Shareholders which are specifically incorporated herein by
reference.
21 Table of subsidiaries of Tribune Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
99 Form 11-K financial statements for the Tribune Company
Savings Incentive Plan (to be filed by amendment).
31
Exhibit 10.8
Tribune Company
Transitional Compensation Plan for Executive Employees
Tribune Company, by resolution of its Board of Directors, adopted the Tribune
Company Transitional Compensation Plan for Executive Employees (the "Plan") on
December 9, 1985, to attract and retain executives of outstanding competence and
to provide additional assurance that they will remain with Tribune Company and
its subsidiaries on a long-term basis. The following provisions constitute an
amendment and restatement of the Plan effective as of December 7, 1998.
1. Participation. Any full-time, key executive employee of Tribune Company
or of any of its subsidiaries shall be eligible to participate in the
Plan in one of two separate tiers, if at the time his employment
terminates he has been designated by the Committee as being covered by
the Plan within a specific tier, and such designation has not been
revoked; provided, however, that no revocation of such designation shall
be effective if made: (a) on the day of, or within 36 months after,
occurrence of a "Change in Control," as such term is hereinafter defined;
or (b) prior to a Change in Control, but at the request of any third
party participating in or causing the Change in Control; or (c) otherwise
in connection with or in anticipation of a Change in Control.
For the purposes of the Plan, the term "subsidiary" shall mean any
corporation, more than 50 percent of the outstanding, voting stock in
which is owned by Tribune Company or by a subsidiary.
2. Administration. The Plan shall be administered by the Governance and
Compensation Committee of the Board of Directors of Tribune Company (the
"Committee") or by a successor committee. The Committee shall have the
authority to make rules and regulations governing the administration of
the Plan, to designate executive employees to be covered by the Plan, to
revoke such designations, and to make all other determinations or
decisions, and to take such actions, as may be necessary or advisable for
the administration of the Plan. The Committee's determinations need not
be uniform, and may be made selectively among eligible employees, whether
or not they are similarly situated.
3. Eligibility for Transitional Compensation. An executive who is a
Participant in the Plan shall be eligible to receive transitional
compensation, in the amounts and at the times described in paragraph 5,
if:
(a) His employment with the Company and all of its subsidiaries is
terminated:
(i) On the day of, or within 36 months after, occurrence of a
"Change in Control," as such term is hereinafter defined; or
(ii) Prior to a Change in Control, but at the request of any third
party participating in or causing the Change in Control; or
(iii) Otherwise in connection with or in anticipation of a Change in
Control; and
(b) The Participant's termination of employment was not:
(i) On account of his death;
<PAGE>
(ii) On account of a physical or mental condition that would
entitle him to long-term disability benefits under the Tribune
Company Salary Continuation Plan, as then in effect (whether
or not he is actually a Participant in such plan);
(iii) For conduct involving dishonesty or willful misconduct which,
in either case, is detrimental in a significant way to the
business of Tribune Company or any of its subsidiaries; or
(iv) On account of the employee's voluntary resignation; provided
that a resignation shall not be considered to be "voluntary"
for the purposes of the Plan in the following situations:
(x) if the termination by Tribune Company's Chairman,
President & Chief Executive Officer or those designated as
Tier I participants as of January 1, 1995 occurs during the
30-day period immediately following the first anniversary of
the Change in Control (i.e., this provision is not available
for Tier II Participants); or (y) if the termination occurs
under the circumstances described in paragraph 13(a) of the
Plan; or (z) if, subsequent to the Change in Control and
prior to such resignation, there has been a reduction in the
nature or scope of the Participant's compensation or benefits,
or a change in the city in which he is required to perform his
duties.
4. Change in Control. For the purposes of the Plan, a "Change in Control"
shall mean:
(a) The acquisition, other than from Tribune Company, by any person,
entity, or "group" (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act")), excluding for this purpose the Robert R. McCormick Tribune
Foundation, the Cantigny Foundation (or any charitable trust,
foundation, organization, or similar entity or entities succeeding to
one or both of those Foundations or any substantial part thereof) and
any employee benefit plan or trust of Tribune Company or its
subsidiaries, of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20 percent or more of
either the then outstanding shares of common stock or the combined
voting power of Tribune Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(b) Individuals who, as of December 7, 1998, constitute the Board of
Directors of Tribune Company (as of December 7, 1998 the "Incumbent
Board" and, generally, the "Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election, by the shareholders of Tribune Company was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the members of the Board of Tribune Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be considered as though such persons were a
member of the Incumbent Board; or
(c) Approval by the shareholders of Tribune Company of a reorganization,
merger, or consolidation, in each case, with respect to which persons
who were the shareholders of Tribune Company immediately prior to
such reorganization, merger, or
2
<PAGE>
consolidation do not, immediately thereafter, own, directly or
indirectly, more than 60 percent of the combined voting power for the
then outstanding securities entitled to vote generally in the
election of directors of the reorganized, merged, or consolidated
company, or a liquidation or dissolution of Tribune Company, or the
sale of all or substantially all of the assets of Tribune Company.
5. Amount and Payment of Transitional Compensation. A Participant who is
eligible for transitional compensation shall receive:
(a) A lump-sum cash payment, payable within 30 calendar days after the
date on which his employment terminates, in an amount equal to the
sum of:
(i) For Tier I Participants, three (3) multiplied by the sum of
the Participant's highest annual rate of Base Salary in effect
within the three years prior to or upon the effective date of
termination, and by the Participant's average annual bonus
paid over the prior three years, or shorter period equal to
the Participant's total years of prior service (a target bonus
will be paid to Participants with less than one year of prior
service); or
(ii) For Tier II Participants, two (2) multiplied by the sum of the
Participant's highest annual rate of Base Salary in effect
within the three years prior to or upon the effective date of
termination, and by the Participant's average annual bonus
paid over the prior three years, or shorter period equal to
the Participant's total years of prior service (a target bonus
will be paid to Participants with less than one year of prior
service);
(b) Outplacement services at a qualified agency selected by Tribune
Company;
(c) Continuation of coverage under his employer's group medical, group
life, and group long-term disability plans, if any, and under any
policy or policies of "split dollar" life insurance maintained by
his employer, until the earliest to occur of:
(i) The expiration of 36 months for Tier I Participants, and the
expiration of 24 months for Tier II Participants, from the
date on which his employment terminates; or
(ii) The date on which he obtains comparable coverage provided by a
new employer.
For purposes of this paragraph 5, a Participant's annual rate of base
salary shall be determined prior to any reduction for deferred
compensation, "401(k)" plan contributions, and similar items, provided
that any reduction in a Participant's annual rate of salary, group
insurance or split dollar coverage, occurring within 36 months after a
Change in Control shall be disregarded, and the payments and coverage
under this paragraph shall be governed by the annual salary, group
insurance and split dollar coverage, provided to such Participant
immediately prior to such reduction.
6. Taxes. If, for any reason, any part or all of the amounts payable to a
Tier I or Tier II Participant pursuant to the Plan (or otherwise, if such
amounts are paid by Tribune Company or any of its subsidiaries after there
has been a Change in Control) are deemed to be "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Internal Revenue
3
<PAGE>
Code of 1986, as amended (the "Code"), Tribune Company shall pay to such
Participant, in addition to any other amounts that he may be entitled to
receive pursuant to the Plan, an amount which, after all federal, state,
and local taxes (of whatever kind) imposed on the Participant with respect
to such amount are subtracted therefrom, is equal to the excise taxes
imposed on such excess parachute payments pursuant to Section 4999 of the
Code.
7. No Funding of Transitional Compensation. Nothing herein contained shall
require or be deemed to require Tribune Company or a subsidiary to
segregate, earmark, or otherwise set aside any funds or other assets to
provide for any payments required to be made hereunder, and the rights of
a terminating Participant to transitional compensation hereunder shall be
solely those of a general, unsecured creditor of Tribune Company.
However, Tribune Company may, in its discretion, deposit cash or
property, or both, equal in value to all or a portion of the amounts
anticipated to be payable hereunder for any or all Participants into a
trust, the assets of which are to be distributed at such times as are
provided for in the Plan; provided that such assets shall be subject at
all times to the rights of Tribune Company's general creditors.
8. Death. In the event of a Participant's death, any amount or benefit payable
or distributable to him pursuant to paragraph 5(a) and paragraph 6 shall be
paid to the beneficiary designated by such Participant for such purpose in
the last written instrument received by the Committee prior to the
Participant's death, if any, otherwise, to the Participant's estate.
9. Rights in the Event of Dispute. If a claim or dispute arises concerning
the rights of a Participant or beneficiary to benefits under the Plan,
regardless of the party by whom such claim or dispute is initiated,
Tribune Company shall, upon presentation of appropriate vouchers, pay all
legal expenses, including reasonable attorneys' fees, court costs, and
ordinary and necessary out-of-pocket costs of attorneys, billed to and
payable by the Participant or by anyone claiming under or through the
Participant (such person being hereinafter referred to as the Participant's
"claimant"), in connection with the bringing, prosecuting, defending,
litigating, negotiating, or settling such claim or dispute; provided that:
(a) The Participant or the Participant's claimant shall repay to Tribune
Company any such expenses theretofore paid or advanced by Tribune
Company if and to the extent that the party disputing the
Participant's rights obtains a judgment in its favor from a court of
competent jurisdiction from which no appeal may be taken, whether
because the time to do so has expired or otherwise, and it is
determined that such expenses were not incurred by the Participant or
the Participant's claimant while acting in good faith; provided
further that
(b) In the case of any claim or dispute initiated by a Participant or
the Participant's claimant, such claim shall be made, or notice of
such dispute given, with specific reference to the provisions of
this Plan, to the Committee within one year after the occurrence of
the event giving rise to such claim or dispute.
10. Amendment or Termination. The Board of Directors of Tribune Company
reserves the right to amend, modify, suspend, or terminate the Plan at any
time; provided that:
4
<PAGE>
(a) Without the consent of the Participant, no such amendment,
modification, suspension, or termination shall reduce or diminish
his right to receive any payment or benefit which becomes due and
payable under the Plan as then in effect by reason of his termination
of employment prior to the date on which such amendment,
modification, suspension, or termination becomes effective; and
(b) No such amendment, modification, suspension, or termination which
has the effect of reducing or diminishing the right of any
Participant to receive any payment or benefit under the Plan will
become effective prior to the expiration of the 36 consecutive month
period commencing on the date of a Change in Control, if such
amendment, modification, suspension, or termination was effected:
(i) on the day of or subsequent to the Change in Control; (ii) prior
to the Change in Control, but at the request of any third party
participating in or causing the Change in Control; or (iii) otherwise
in connection with or in anticipation of a Change in Control.
11. No Obligation to Mitigate Damages. In the event a Participant becomes
eligible to receive benefits hereunder, the Participant shall have no
obligation to seek other employment in an effort to mitigate damages. To
the extent a Participant shall accept other employment after his
termination of employment, the compensation and benefits received from
such employment shall not reduce any compensation and benefits due under
this Plan, except as provided in paragraph 5(c).
12. Other Benefits. The benefits provided under the Plan shall, except to the
extent otherwise specifically provided herein, be in addition to, and not
in derogation or diminution of, any benefits that a Participant or his
beneficiary may be entitled to receive under any other plan or program
now or hereafter maintained by Tribune Company or by any of its
subsidiaries.
13. Successors.
(a) Tribune Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of Tribune Company,
to expressly assume and agree to perform Tribune Company's
obligations under this Plan in the same manner and to the same extent
that Tribune Company would be required to perform them if no such
succession had taken place unless, in the opinion of legal counsel
mutually acceptable to a majority of the Participants, such
obligations have been assumed by the successor as a matter of law.
Failure of Tribune Company to obtain such agreement prior to the
effectiveness of any such succession (unless the foregoing opinion is
rendered to the Participants) shall entitle each Participant to
terminate his employment and to receive the payments provided for in
paragraphs 5 and 6 above. As used in this Plan, "Tribune Company"
shall mean such company, as presently constituted, and any successor
to its business and/or assets which executes and delivers the
agreement provided for in this paragraph 13 or which otherwise
becomes bound by all the terms and provisions of the Plan as a matter
of law.
(b) A Participant's rights under this Plan shall inure to the benefit of,
and shall be enforceable by, the Participant's legal representative
or other successors in interest, but shall not otherwise be
assignable or transferable.
5
<PAGE>
14. Notices. Any notices referred to herein shall be in writing and shall be
sufficient if delivered in person or sent by U.S. registered or certified
mail to the Participant at his address on file with his employer (or to
such other address as the Participant shall specify by notice), or to
Tribune Company at 435 North Michigan Avenue, Chicago, Illinois 60611,
Attention: Governance and Compensation Committee.
15. Waiver. Any waiver of any breach of any of the provisions of the Plan shall
not operate as a waiver of any other breach of such provisions or any other
provisions, nor shall any failure to enforce any provision of the Plan
operate as a waiver of any party's right to enforce such provision or any
other provision.
16. Severability. If any provision of the Plan or the application thereof is
held invalid or unenforceable by a court of competent jurisdiction, the
invalidity or unenforceability thereof shall not affect any other
provisions or applications of this Plan which can be given effect without
the invalid or unenforceable provision or application.
17. Governing Law. The validity, interpretation, construction, and performance
of the Plan shall be governed by the laws of the state of Illinois.
18. Headings. The headings and paragraph designations of the Plan are included
solely for convenience of reference and shall in no event be construed to
effect or modify any provisions of the Plan.
19. Gender and Number. In the Plan where the context admits, words in any
gender shall include the other gender, words in the plural shall include
the singular, and words in the singular shall include the plural.
6
Exhibit 10.9
TRIBUNE COMPANY
---------------
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
--------------------------------------
(As in effect January 1, 1999)
<PAGE>
TRIBUNE COMPANY SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
------------------------------------------------------
(As in effect January 1, 1999)
SECTION 1
---------
Introduction
------------
1.1. The Plan. TRIBUNE COMPANY SUPPLEMENTAL DEFINED CONTRIBUTION PLAN (the
"Plan"), as set forth herein, has been established by TRIBUNE COMPANY, a
Delaware corporation (the "Company"), effective January 1, 1994 (the "Effective
Date").
1.2. Purpose. The Company and certain of its subsidiaries maintain, and are
Employers under, the Tribune Company Employee Stock Ownership Plan (the "ESOP")
which is intended to constitute an employee stock ownership plan that meets the
requirements for qualification under Sections 401(a) and 4975(e)(7) of the
Internal Revenue Code. Sections 401(a)(17) and 404(l) of the Internal Revenue
Code limit the amount of employees' annual compensation that may be taken into
account after December 31, 1993 in determining the amount of deductible Employer
contributions that may be allocated to their accounts under a qualified employee
stock ownership plan or other qualified defined contribution plan, to $150,000
(subject to cost-of-living adjustments of that amount calculated as described in
said Section 401(a)(17)) (the "Compensation Limitation"). The purpose of this
Plan is to provide for Participants in this Plan the amount of Employer
contributions that would have been allocated to their respective accounts under
the ESOP but for the Compensation Limitation.
1.3. Employers. The Company and each subsidiary of the Company that is an
Employer under the ESOP shall be an "Employer" under this Plan unless specified
to the contrary by the Company by written notice filed with the Committee
described in subsection 1.4.
1.4. Plan Administration. The Plan will be administered by the Governance and
Compensation Committee of the Board of Directors of the Company (or such
successor committee of said Board as shall from time to time have responsibility
for compensation matters) (the "Committee"). The Committee has, to the extent
appropriate and in addition to the powers described in subsection 2.1 below, the
same powers, rights, duties and obligations with respect to the Plan as the
Administrative Committee under the ESOP has with respect to that plan. The
Committee's determinations hereunder need not be uniform, and may be made
selectively among eligible employees, whether or not they are similarly
situated. The Plan
<PAGE>
will be administered on the basis of a "Plan Year" which is each calendar year
beginning on or after the Effective Date.
SECTION 2
---------
Participation and Supplemental Benefits
---------------------------------------
2.1. Eligibility. Subject to the conditions and limitations of the Plan, each
Employee of an Employer on or after the Effective Date who is a participant in
the ESOP shall become a "Participant" under this Plan, entitled to "Supplemental
Benefits" payable under this Plan, as of the first day of the first plan year
under the ESOP which begins on or after the Effective Date, and during which:
(a) such participant under the ESOP has been designated by the Board of
Directors of the Company (by resolutions adopted on December 14,
1993) or thereafter by the Committee (by a written instrument filed
with the Secretary of the Company) as being part of a select group of
management or highly compensated employees covered by this Plan, and
such designation has not been revoked by the Committee; provided,
that no revocation of a designation under this subparagraph (a) shall
be effective if made (i) on the day of, or within 36 months after,
the occurrence of a "Change-In-Control" (as defined in subsection 3.1
below), (ii) prior to a Change-In-Control but at the request of any
third party participating in or causing the Change-In-Control, or
(iii) otherwise in connection with or in anticipation of a Change-In-
Control; and
(b) the Compensation (as defined in the ESOP) of such participant
under the ESOP is greater than the Compensation Limitation.
In the event of the death of such a Participant, his beneficiary shall be
entitled to participate in the Plan as of the date benefit payments to such
beneficiary commence under the Plan, to the extent provided by the following
subsections of the Plan.
2.2. Amount of Supplemental Benefits. The Committee shall maintain or cause to
be maintained in the records of the Plan a separate account in the name of each
Participant. As of the last day of each Plan Year that ends after the date as of
which he first became a Participant, the Committee shall:
2
<PAGE>
(a) First, charge to each Participant's account all payments (if any)
made from that account since the last day of the preceding Plan Year
that have not been charged previously;
(b) Next, increase the net credit balance in each Participant's account,
as adjusted as described in subparagraph (a) above, by 7.75 percent
thereof; and
(c) Finally, credit each Participant's account with an amount, expressed
as cash, equal to the difference between (i) the value of the number
of shares of Company Stock that would have been credited to the
Participant's accounts under the ESOP for that Plan Year pursuant to
subparagraph 5.2(d) of the ESOP if there had been no Compensation
Limitation in effect for that Plan Year and (ii) the value of the
number of shares of Company Stock that were in fact credited to the
Participant's accounts under the ESOP for that Plan Year pursuant to
subparagraph 5.2(d) of the ESOP after application of the Compensation
Limitation actually in effect for that Plan Year.
A Participant's Supplemental Benefits under the Plan as of any Valuation Date
shall be the Nonforfeitable Percentage (determined in accordance with the
vesting schedule under the ESOP) of the net credit balance in his account under
this Plan as of that Valuation Date.
2.3. Payment of Supplemental Benefits. The Supplemental Benefits that a
Participant (or, in the event of the Participant's death, the Participant's
beneficiary) becomes entitled to receive under the Plan on account of the
retirement, other termination of employment or death of the Participant on or
after the Effective Date shall be paid at the same time and in the same manner
as benefits that are to be paid to the Participant (or his beneficiary) under
the Tribune Company Bonus Deferral Plan. Notwithstanding any other provision of
this Plan to the contrary, the Committee, in its sole discretion, is empowered
to accelerate the payment of a Participant's Supplemental Benefits or of all
Participants' Supplemental Benefits, to a smaller number of installment payments
or to a single lump sum payment, for any reason the Committee may determine to
be appropriate. Neither the Employers nor the Committee shall have any
obligation to make any such acceleration for any reason whatsoever.
2.4. Funding. Supplemental Benefits payable under this Plan to a Participant or
his beneficiary shall be paid (i) directly by the Employers from their general
assets and/or (ii) from Tribune Company Deferred Benefit Trust, in such
proportions as the Company shall determine. The provisions of this Plan shall
not require that the Employers segregate on their
3
<PAGE>
books or otherwise any amount to be used for payment of Supplemental Benefits
under this Plan, except as to any amounts paid or payable to Tribune Company
Deferred Benefit Trust.
SECTION 3
---------
General Provisions
------------------
3.1. Terms. References in this Plan to an individual as being a "participant" in
the ESOP and (unless expressly provided to the contrary in this Plan) terms used
in this Plan that also are used in the ESOP as to that individual shall have the
meanings for those terms set forth in the ESOP, except that a reference in this
Plan to the "beneficiary" of a Participant shall mean for purposes of this Plan
any person who becomes entitled to benefits under the ESOP because of the
Participant's death. For purposes of this Plan, a "subsidiary" of the Company
shall mean any corporation, more than 50% of the voting stock in which is owned,
directly or indirectly, by the Company, and the term "Change-In-Control" shall
mean a change in control as defined in the Tribune Company Transitional
Compensation Plan for Executive Employees as in effect on the Effective Date of
this Plan.
3.2. Employment Rights. Establishment of the Plan shall not be construed to give
any participant in the ESOP the right to be retained in the service of the
Company or any of its subsidiaries or to any benefits not specifically provided
by the Plan.
3.3. Interests Not Transferable. Except as to withholding of any tax under the
laws of the United States or any state or municipality, the interests of
Participants and any other persons who become entitled to a Supplemental Benefit
under the Plan are not subject to the claims of their creditors and may not be
voluntarily or involuntarily transferred, assigned, alienated or encumbered.
3.4. Controlling Law. To the extent not superseded by the laws of the United
States, the laws of Illinois shall be controlling in all matters relating to the
Plan.
3.5. Gender and Number. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
4
<PAGE>
3.6. Action by the Company. Any action required of or permitted by the Company
under the Plan shall be by resolution of its Board of Directors or by a duly
authorized committee of its Board of Directors, or by any person or persons
authorized by resolution of its Board of Directors or such committee.
3.7. Successor to the Company or Any Other Employer. The term "Company" as used
in the Plan shall include any successor to the Company by reason of merger,
consolidation, the purchase or transfer of all or substantially all of the
Company's assets, or otherwise. The term "Employer" as used in the Plan with
respect to the Company or any of its subsidiaries shall include any successor to
that corporation by reason of merger, consolidation, the purchase or transfer of
all or substantially all of the assets of that corporation, or otherwise.
3.8. Facility of Payment. Any amounts payable under this Plan to any person
under a legal disability or who, in the judgment of the Committee, is unable to
properly manage his affairs may be paid to the legal representative of such
person or may be applied for the benefit of such person in any manner which the
Committee may select.
3.9. Rights in the Event of Dispute. If a claim or dispute arises concerning the
rights of a Participant or beneficiary to benefits under the Plan, regardless of
the party by whom such claim or dispute is initiated, the Company shall, upon
presentation of appropriate vouchers, pay all legal expenses, including
reasonable attorneys' fees, court costs, and ordinary and necessary
out-of-pocket costs of attorneys, billed to and payable by the Participant or by
anyone claiming under or through the Participant (such person being hereinafter
referred to as the Participant's "claimant"), in connection with the bringing,
prosecuting, defending, litigating, negotiating, or settling of such claim or
dispute; provided, that:
(a) the Participant or the Participant's claimant shall repay to the
Company any such expenses theretofore paid or advanced by the Company
if and to the extent that the party disputing the Participant's
rights obtains a judgment in its favor from a court of competent
jurisdiction from which no appeal may be taken, whether because the
time to do so has expired or otherwise, and it is determined that
such expenses were not incurred by the Participant or the
Participant's claimant while acting in good faith; provided further,
that
(b) in the case of any claim or dispute initiated by a Participant or the
Participant's claimant, such claim shall be made, or notice of such
dispute given, with specific reference to the provisions of this
Plan, to
5
<PAGE>
the Committee within one year after the occurrence of the
event giving rise to such claim or dispute.
3.10. Other Benefits. The benefits provided under the Plan shall, except to the
extent otherwise specifically provided herein, be in addition to, and not in
derogation or diminution of, any benefits that a Participant or his beneficiary
may be entitled to receive under any other plan or program now or hereafter
maintained by the Company or by any of its subsidiaries.
SECTION 4
---------
Amendment and Termination
-------------------------
While the Company and its subsidiaries that become Employers expect to continue
the Plan, the Company must necessarily reserve and reserves the right to amend
the Plan from time to time or to terminate the Plan at any time. However,
neither an amendment of the Plan nor termination of the Plan may:
(a) cause the reduction or cessation of any Supplemental Benefits (and of
the Employers' obligation to provide such benefits) which had accrued
as of the date such amendment is made or the termination of the Plan
occurs and which, but for such amendment or termination, are payable
under this Plan on, or would become payable under this Plan after,
the date such amendment is made or the termination of the Plan
occurs; or
(b) cause the modification, rescission or revocation of (i) the
provisions of subsection 2.1 with respect to a Change-In-Control or
(ii) any written determinations by the Committee pursuant to
subsection 2.3 as to the form of payment of Supplemental Benefits to
any person that are in effect on said date.
In addition, no amendment or termination of the Plan which has the effect of
reducing or diminishing the right of any participant to receive any payment or
benefit under the Plan will become effective prior to the expiration of the 36
consecutive month period commencing on the date of a Change-In-Control, if such
amendment or termination was adopted (i) on the day of or subsequent to the
Change-In-Control, (ii) prior to the Change-In-Control, but at the request of
any third party participating in or causing the Change-In-Control, or (iii)
otherwise in connection with or in anticipation of a Change-In-Control.
6
EXHIBIT 12
TRIBUNE COMPANY
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Fiscal Year Ended December
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income from continuing operations $414,272 $393,625 $282,750 $245,458 $233,149
Add:
Income tax expense 290,817 265,375 191,663 167,076 158,698
Losses on equity investments 33,980 34,696 13,281 13,209 9,739
-------- -------- -------- -------- --------
Subtotal 739,069 693,696 487,694 425,743 401,586
-------- -------- -------- -------- --------
Fixed charge adjustments
Add:
Interest expense 88,451 86,502 47,779 21,814 20,585
Amortization of capitalized interest 2,068 2,076 2,108 2,253 2,362
Interest component of rental expense (A) 10,671 10,416 9,362 8,200 8,236
-------- -------- -------- -------- --------
Earnings, as adjusted $840,259 $792,690 $546,943 $458,010 $432,769
======== ======== ======== ======== ========
Fixed charges:
Interest expense $ 88,451 $ 86,502 $ 47,779 $ 21,814 $ 20,585
Interest capitalized 1,897 224 168 610 -
Interest component of rental expense (A) 10,671 10,416 9,362 8,200 8,236
Interest related to guaranteed ESOP debt (B) 15,578 17,901 20,134 22,057 24,017
-------- -------- -------- -------- --------
Total fixed charges $116,597 $115,043 $ 77,443 $ 52,681 $ 52,838
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 7.2 6.9 7.1 8.7 8.2
======== ======== ======== ======== ========
</TABLE>
(A) Represents a reasonable approximation of the interest cost component of
rental expense incurred by the Company.
(B) Tribune Company guarantees the debt of its Employee Stock Ownership Plan
(ESOP).
Exhibit 13
Tribune Company and Subsidiaries
Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion presents the significant factors that have affected the
businesses of Tribune Company and its subsidiaries (the "Company") over the last
three years. This commentary should be read in conjunction with the Company's
consolidated financial statements and Eleven Year Financial Summary, which are
also presented in this annual report.
- --------------------------------------------------------------------------------
| FORWARD-LOOKING STATEMENTS |
- --------------------------------------------------------------------------------
This discussion and the information contained in the notes to the consolidated
financial statements contain certain forward-looking statements that are based
largely on the Company's current expectations. Such forward-looking statements
include estimates and statements regarding the Company's plans to address Year
2000 issues and associated costs and risks. Forward-looking statements are
subject to certain risks, trends and uncertainties that could cause actual
results and achievements to differ materially from those expressed in the
forward-looking statements. Such risks, trends and uncertainties, which in some
instances are beyond the Company's control, include changes in advertising
demand; newsprint prices; interest rates; regulatory rulings and other economic
conditions; the effect of acquisitions, investments and divestitures on the
Company's results of operations and financial condition; and the Company's
reliance on third-party vendors for various services. The words "believe,"
"expect," "anticipate," "estimate" and similar expressions generally identify
forward-looking statements. Readers are cautioned not to place undue reliance on
such forward-looking statements, which are as of the date of this filing.
- --------------------------------------------------------------------------------
| SIGNIFICANT EVENTS |
- --------------------------------------------------------------------------------
[Introductory language appearing in large bold face type reads as follows:]
TRIBUNE CONTINUED TO BUILD ITS BROADCASTING AND ENTERTAINMENT SEGMENT BY
ACQUIRING EIGHT TELEVISION STATIONS IN THE LAST TWO YEARS.
In May 1997, the Company reached an agreement with Emmis Broadcasting
Corporation regarding the sale or exchange of the Company's WQCD radio station
in New York. Effective July 1, 1997 and in connection with the agreement, Emmis
assumed responsibility for certain operations of the station for up to three
years for an annual fee of approximately $8 million, after which Emmis had the
right to purchase the station. In December 1997, the Company reached an
agreement with Emmis to exchange substantially all of the assets of WQCD and
cash for the assets of television stations KTZZ-Seattle and WXMI-Grand Rapids,
Mich. Emmis agreed to acquire these television stations as part of its
acquisition of Dudley Communications Corporation. The exchange was completed in
June 1998. The divestiture of WQCD was accounted for as a sale and the
acquisition of the television stations was recorded as a purchase. The
transaction resulted in a pretax gain of $85 million, which increased diluted
earnings per share by $.32.
In March 1997, the Company acquired Renaissance Communications Corp., a
publicly traded company that owned six television stations, for $1.1 billion in
cash. The stations acquired were KDAF-Dallas, WBZL-Miami (formerly WDZL),
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 such duopoly waivers unnecessary.
Second, the FCC granted a 12-month waiver of its rule prohibiting
television/newspaper cross-ownership in the same market, which relates to the
Miami television station and the Fort Lauderdale Sun-Sentinel newspaper. The FCC
subsequently issued a rule review to consider
25
<PAGE>
modifying its cross-ownership rule. In March 1998, the FCC granted the Company a
waiver extension to allow continued ownership of both the Miami television
station and the Sun-Sentinel newspaper until the rule review was concluded. The
Company cannot predict the outcome of the FCC duopoly rulemaking or
cross-ownership rule review.
In August 1998, the Company reached an agreement with Meredith Corporation
to acquire the assets of television station KCPQ-Seattle in exchange for the
assets of the Company's WGNX-Atlanta television station and cash. On March 1,
1999 and in a three-way transaction, Meredith purchased KCPQ from Kelly
Television Co. and then exchanged the station for WGNX. The divestiture of WGNX
will be accounted for as a sale and the acquisition of KCPQ will be recorded as
a purchase. The Company will record the assets of KCPQ at fair market value,
which will result in an estimated pretax gain of $350 million in the first
quarter of 1999. Current FCC regulations preclude the Company from owning both
KCPQ and the Company's KTZZ-Seattle television station. As part of the
transaction, the Company transferred the assets of KTZZ into a disposition
trust. Pursuant to the terms of the disposition trust, an independent trustee is
charged with finding a buyer for KTZZ by September 1, 1999.
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 Company owned approximately 34% of QUNO's common stock plus $138.8
million in convertible debt. The sale resulted in a 1996 after-tax gain of $89.3
million, or $.66 per diluted share. 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 Company's fiscal year ends on the last Sunday in December. Fiscal years
1998, 1997 and 1996 all comprised 52 weeks.
Acquisitions
- --------------------------------------------------------------------------------
The Company completed several acquisitions in 1998, including the North American
Sunshine line of educational materials in January, television stations
KTZZ-Seattle and WXMI-Grand Rapids in June, and South Florida Newspaper Network
Inc. in September. In 1997, the Company acquired Renaissance Communications
Corp. in March, Shortland Publications Limited in September and approximately
80% of Landoll, Inc. in December. In 1996, the Company acquired television
station KHTV-Houston in January, Educational Publishing Corporation and NTC
Publishing Group in March, and television station KSWB-San Diego in April. The
results of these businesses have been included in the consolidated financial
statements since their respective dates of acquisition.
26
<PAGE>
Non-Recurring Items
- --------------------------------------------------------------------------------
In 1998, the Company sold its WQCD radio station subsidiary, sold a portion of
its investment portfolio and wrote down certain investments. In the aggregate,
the sales of the subsidiary and investments, net of write-downs, resulted in a
pretax gain of $119 million and increased diluted earnings per share by $.48.
These non-recurring items are summarized as follows:
<TABLE>
<CAPTION>
Shares Pretax Diluted
1998 (in millions, except per share data) Sold Proceeds Gain EPS
=====================================================================================================
<S> <C> <C> <C> <C>
Sale of WQCD subsidiary - $ - $ 85 $.32
Sales of common stock
America Online .2 14 14 .06
The Learning Company .6 17 11 .05
Other sales of investments, net of write-downs 21 9 .05
- -----------------------------------------------------------------------------------------------------
Sales of subsidiary and investments,
net of write-downs $52 $119 $.48
- -----------------------------------------------------------------------------------------------------
</TABLE>
In 1997, the Company sold a portion of its investment portfolio and wrote
down certain investments. In the aggregate, these sales of investments, net of
write-downs, resulted in a pretax gain of $112 million and increased diluted
earnings per share by $.51. These non-recurring items are summarized as
follows:
<TABLE>
<CAPTION>
Shares Pretax Diluted
1997 (in millions, except per share data) Sold Proceeds Gain (Loss) EPS
=====================================================================================================
<S> <C> <C> <C> <C>
Sales of common stock
America Online 2.6 $134 $131 $.60
CheckFree 2.2 46 35 .16
Open Market 1.0 14 11 .05
Gemstar International .7 17 10 .05
The Learning Company
Sale of convertible notes 123 7 .03
Write-down of stock - (77) (.35)
Other sales of investments, net of write-downs 9 (5) (.03)
- -----------------------------------------------------------------------------------------------------
Sales of investments, net of write-downs $343 $112 $.51
- -----------------------------------------------------------------------------------------------------
</TABLE>
In March 1997, 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. In June 1997, the Company completed the sale of a
building in Fort Lauderdale, which is approximately 35% occupied by the
Company's Sun-Sentinel newspaper subsidiary. The Company received proceeds of
approximately $43 million and deferred, under sale and leaseback accounting
rules, the pretax gain of approximately $11 million, which is being amortized
over the Sun-Sentinel's 14-year lease term.
In December 1996, the Company recorded non-recurring equity income of $10
million, representing the Company's equity interest in a gain recorded by Qwest
Broadcasting for the cancellation of an option to purchase a television station.
This income increased diluted earnings per share by $.04.
27
<PAGE>
Consolidated
- --------------------------------------------------------------------------------
The Company's consolidated financial results for 1998, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
CHANGE
----------------
(In millions, except per share data) 1998 1997 1996 98-97 97-96
============================================================================================================
<S> <C> <C> <C> <C> <C>
Operating revenues $2,981 $2,720 $2,405 + 10% + 13%
Operating profit 702 642 503 + 9% + 28%
Net loss on equity investments (34) (35) (13) - 2% + 161%
Sales of subsidiary and investments,
net of write-downs (non-recurring) 119 112 - + 7% *
Income
Continuing operations
Before non-recurring items 351 325 277 + 8% + 17%
Non-recurring items 63 69 6 - 8% *
Total 414 394 283 + 5% + 39%
Discontinued operations - - 89 - *
Net income 414 394 372 + 5% + 6%
Diluted earnings per share
Continuing operations
Before non-recurring items 2.53 2.30 1.94 + 10% + 19%
Non-recurring items .48 .51 .04 - 6% *
Total 3.01 2.81 1.98 + 7% + 42%
Discontinued operations - - .66 - *
Net income 3.01 2.81 2.64 + 7% + 6%
- ------------------------------------------------------------------------------------------------------------
* Not meaningful
</TABLE>
Earnings Per Share -- Diluted earnings per share in 1998 was $2.53, up 10% from
$2.30 in 1997, excluding non-recurring items. The increase was due to
improvements in all three business segments and fewer shares outstanding,
partially offset by higher net interest expense. Diluted earnings per share from
continuing operations in 1997 was $2.30, up 19% from $1.94 in 1996, excluding
non-recurring items. The improvement was primarily due to gains in broadcasting
and entertainment and publishing, partially offset by higher net interest
expense. In the aggregate, non-recurring items increased diluted earnings per
share from continuing operations by $.48 in 1998, $.51 in 1997 and $.04 in 1996.
Weighted average common shares outstanding decreased 1% in 1998 and were flat in
1997.
28
<PAGE>
Operating Revenues and Profit -- Consolidated operating revenues, EBITDA and
operating profit by business segment were as follows:
<TABLE>
<CAPTION>
CHANGE
--------------
(In millions) 1998 1997 1996 98-97 97-96
======================================================================================================
<S> <C> <C> <C> <C> <C>
Operating revenues
Publishing $1,499 $1,437 $1,336 + 4% + 7%
Broadcasting and Entertainment 1,153 1,057 877 + 9% + 21%
Education 329 226 192 + 46% + 17%
- ------------------------------------------------------------------------------------------------------
Total operating revenues $2,981 $2,720 $2,405 + 10% + 13%
- ------------------------------------------------------------------------------------------------------
EBITDA (1)
Publishing $ 457 $ 430 $ 372 + 6% + 15%
Broadcasting and Entertainment 405 363 249 + 12% + 46%
Education 69 54 54 + 27% + 1%
Corporate expenses (33) (32) (29) - 2% - 12%
- ------------------------------------------------------------------------------------------------------
Total EBITDA $ 898 $ 815 $ 646 + 10% + 26%
- ------------------------------------------------------------------------------------------------------
Operating profit
Publishing $ 377 $ 354 $ 291 + 6% + 22%
Broadcasting and Entertainment 317 286 204 + 11% + 40%
Education 43 36 39 + 20% - 9%
Corporate expenses (35) (34) (31) - 3% - 11%
- ------------------------------------------------------------------------------------------------------
Total operating profit $ 702 $ 642 $ 503 + 9% + 28%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, equity results and non-recurring items. 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 10%, or $261 million, in 1998;
and 13%, or $315 million, in 1997, with all three segments reporting
improvements in both years.
[Introductory language appearing in large bold face type reads as follows:]
CONSOLIDATED OPERATING PROFIT ROSE TO A RECORD $702 MILLION, DUE TO STRONG
REVENUE GROWTH FROM ALL SEGMENTS.
Consolidated operating profit increased 9%, or $60 million, in 1998 as all
three segments reported gains. Broadcasting and entertainment operating profit
rose 11% due to growth in television as a result of improvements at existing
stations and the acquisitions of six Renaissance stations (in March 1997) and
KTZZ-Seattle and WXMI-Grand Rapids (in June 1998). Publishing operating profit
grew 6% mainly due to higher advertising revenues, partially offset by increased
newsprint and ink expense. Education operating profit improved 20% due to growth
at existing businesses and acquisitions. Consolidated operating profit increased
28%, or $139 million, in 1997 due to increases in broadcasting and entertainment
and publishing. Broadcasting and entertainment operating profit was up 40% as a
result of significant growth in television with the acquisition of six
Renaissance stations and improvements at existing stations. Publishing operating
profit was up 22% primarily due to higher advertising revenues and lower
newsprint expense. Education operating profit decreased 9% due to lower sales at
Educational Publishing Corporation's Creative Publications division, partially
offset by improvements at the other education companies. Consolidated 1998
EBITDA increased 10%, or $83 million, and 1997 EBITDA grew 26%, or $169 million,
with all three segments reporting gains in both years.
29
<PAGE>
Operating Expenses -- Consolidated operating expenses were as follows:
<TABLE>
<CAPTION>
CHANGE
--------------
(In millions) 1998 1997 1996 98-97 97-96
====================================================================================================
<S> <C> <C> <C> <C> <C>
Cost of sales $1,391 $1,255 $1,195 + 11% + 5%
Selling, general and administrative 692 650 564 + 6% + 15%
Depreciation and amortization
of intangible assets 196 173 143 + 13% + 21%
- ----------------------------------------------------------------------------------------------------
Total operating expenses $2,279 $2,078 $1,902 + 10% + 9%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Cost of sales increased 11%, or $136 million, in 1998 due to the 1997 and
1998 acquisitions. Excluding the acquisitions and dispositions ("on a
comparable basis"), cost of sales increased 5%, or $65 million, due to higher
compensation costs, increased broadcast rights amortization and higher newsprint
and ink expense. Compensation costs rose 5%, or $19 million. Broadcast rights
amortization grew 7%, or $16 million, largely due to higher program costs at
Tribune Entertainment. Newsprint and ink expense increased 6%, or $14 million,
as both average newsprint prices and consumption rose 3%.
Cost of sales increased 5%, or $60 million, in 1997 due to the 1996 and
1997 acquisitions. On a comparable basis, cost of sales increased 1%, or $14
million, due to higher compensation costs, increased newspaper manufacturing and
distribution costs (including increased costs for supplies, outside services and
delivery of other products) and increased expenses for development activities,
partially offset by lower newsprint and ink expense and reduced broadcast rights
amortization. Compensation costs increased 8%, or $29 million, and newspaper
manufacturing and distribution costs were up 10%, or $16 million. Newsprint and
ink expense decreased 10%, or $25 million, as average newsprint transaction
prices declined 15% while consumption increased 5%. Broadcast rights
amortization decreased 6%, or $15 million.
Selling, general and administrative ("SG&A") expense increased 6%, or $42
million, in 1998 mainly due to acquisitions. On a comparable basis, SG&A expense
increased 1%, or $4 million. SG&A expense increased 15%, or $86 million, in 1997
partially due to the 1996 and 1997 acquisitions. On a comparable basis, SG&A
expense increased 10%, or $49 million, in 1997 primarily due to higher
compensation expense of 15%, or $35 million, increased promotion expenses at the
Company's newspapers and higher expenses for development activities.
The increase in depreciation and amortization of intangible assets in both
1998 and 1997 was principally due to acquisitions and capital expenditures.
Publishing
- --------------------------------------------------------------------------------
Operating Revenues and Profit -- 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, direct
mail operations and Internet/electronic products.
30
<PAGE>
<TABLE>
<CAPTION>
CHANGE
--------------
(In millions) 1998 1997 1996 98-97 97-96
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Operating revenues
Daily newspapers $1,395 $1,359 $1,266 + 3% + 7%
Other publications/services/development 104 78 70 + 33% + 11%
- ----------------------------------------------------------------------------------------------------------
Total operating revenues $1,499 $1,437 $1,336 + 4% + 7%
- ----------------------------------------------------------------------------------------------------------
EBITDA
Daily newspapers $ 463 $ 435 $ 383 + 7% + 13%
Other publications/services/development (6) (5) (11) - 27% + 55%
- ----------------------------------------------------------------------------------------------------------
Total EBITDA $ 457 $ 430 $ 372 + 6% + 15%
- ----------------------------------------------------------------------------------------------------------
Operating profit
Daily newspapers $ 392 $ 367 $ 310 + 7% + 19%
Other publications/services/development (15) (13) (19) - 15% + 29%
- ----------------------------------------------------------------------------------------------------------
Total operating profit $ 377 $ 354 $ 291 + 6% + 22%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Publishing operating revenues increased 4%, or $62 million, in 1998 and 7%,
or $101 million, in 1997 principally due to higher advertising revenues in both
years. Advertising revenues increased 4%, or $46 million, in 1998 and 8%, or $85
million, in 1997.
Operating profit rose 6%, or $23 million, in 1998 mainly due to higher
advertising revenues at all four newspapers, partially offset by higher
newsprint and ink expense. Operating profit increased 22%, or $63 million, in
1997 as all four newspapers reported higher advertising revenues and lower
newsprint and ink expense. Daily newspaper operating margins were 28.1% in 1998,
27.1% in 1997 and 24.5% in 1996.
Total publishing operating revenues by classification were as follows:
CHANGE
-------------
(In millions) 1998 1997 1996 98-97 97-96
===============================================================================
Advertising
Retail $ 469 $ 455 $ 433 + 3% + 5%
General 155 150 141 + 3% + 6%
Classified 538 511 457 + 5% + 12%
- -------------------------------------------------------------------------------
Total advertising 1,162 1,116 1,031 + 4% + 8%
Circulation 244 250 252 - 3% - 1%
Other 93 71 53 + 31% + 32%
- -------------------------------------------------------------------------------
Total operating revenues $1,499 $1,437 $1,336 + 4% + 7%
- -------------------------------------------------------------------------------
Advertising revenues grew in 1998 due to both linage and rate increases, as
well as for the acquisition of South Florida Newspaper Network. Retail
advertising revenues, excluding South Florida Newspaper Network, rose 2% mainly
due to improvements in hardware advertising in Chicago and Fort Lauderdale;
movies and food and drug advertising in Chicago; department store advertising in
Fort Lauderdale; and also due to higher Internet advertising. General
advertising revenues increased primarily due increased transportation and
high-tech advertising in Chicago. Classified advertising revenues rose mainly
due to higher help wanted advertising at all of the newspapers; increased
automotive advertising in Chicago and Fort Lauderdale; and higher Internet
advertising.
31
<PAGE>
Advertising revenues were higher in 1997 due to both linage and rate
increases. The increase in retail advertising revenues was primarily due to
improvements in the movie and electronics categories in Chicago, and the
department store and health care categories in Orlando and Fort Lauderdale. The
increase in general advertising revenues was mainly due to growth in the
resorts, transportation and high-tech categories in Chicago and the
telecommunications, movie and transportation categories in Fort Lauderdale.
Classified advertising revenues were up mainly due to increases in help wanted
advertising at all of the newspapers.
Advertising linage for 1998, 1997 and 1996 was as follows:
CHANGE
-------------
Inches (In thousands) 1998 1997 1996 98-97 97-96
===============================================================================
Full run
Retail 3,706 3,707 3,638 - + 2%
General 821 799 755 + 3% + 6%
Classified 6,777 6,469 6,341 + 5% + 2%
- -------------------------------------------------------------------------------
Total full run 11,304 10,975 10,734 + 3% + 2%
Part run 9,897 10,014 9,369 - 1% + 7%
Preprint 10,666 9,538 8,436 + 12% + 13%
- -------------------------------------------------------------------------------
Total inches 31,867 30,527 28,539 + 4% + 7%
- -------------------------------------------------------------------------------
[Introductory language appearing in large bold face type reads as follows:]
DAILY NEWSPAPERS AND INTERNET PRODUCTS CONTINUED TO GENERATE STRONG ADVERTISING
REVENUES.
Total advertising linage increased 4% in 1998 due to gains at all four of
the newspapers. Full run general advertising linage was up 3% due to increases
in Orlando and Chicago. Full run classified advertising linage rose 5% due to
increases in Fort Lauderdale and Newport News. Preprint advertising linage
increased 12% due to gains at all of the newspapers.
Total advertising linage increased 7% in 1997 due to growth at all four of
the newspapers. Full run retail advertising linage was up 2% due to increases in
Orlando, Fort Lauderdale and Newport News. Full run general advertising linage
increased 6% due to gains at all of the newspapers. Full run classified
advertising linage rose 2% due to increases in Chicago and Newport News. Part
run advertising linage increased 7% mainly due to higher classified in Chicago.
Preprint advertising linage grew 13% due to increases at all four newspapers.
Circulation revenues declined 3% in 1998 mainly due to lower Sunday copy
sales and selective promotional discounting in Chicago. Circulation revenues
decreased 1% in 1997 primarily due to lower daily and Sunday copy sales. Total
average daily circulation was up slightly in 1998 to 1,271,000 from 1,270,000
copies in 1997, while total average Sunday circulation declined less than 1% to
1,899,000 from 1,900,000 copies in 1997. Total average daily circulation was
down 2% in 1997 to 1,270,000 from 1,291,000 copies in 1996, and total average
Sunday circulation fell 1% to 1,900,000 in 1997 from 1,927,000 copies in 1996.
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; revenues from Internet/electronic products; cable news programming;
and other publishing-related activities. The increase in other revenues in 1998
resulted mainly from higher revenues from direct mail operations, commercial
printing operations and Internet/electronic products. Other revenues rose in
1997 primarily due to increased revenues from the delivery of other
publications, higher commercial printing and direct mail revenues and increased
revenues from Internet/electronic products.
32
<PAGE>
Operating Expenses -- Publishing operating expenses rose 4%, or $39 million, in
1998. The increase was mainly due to increased newsprint and ink expense, higher
compensation expense, increased expenses for development activities and higher
Year 2000 compliance expenses, partially offset by lower expenses for
circulation and promotion. Newsprint and ink expense grew 6%, or $14 million, as
both average newsprint prices and consumption rose 3%. Compensation expenses
rose 2%, or $10 million. Development spending, primarily for Internet
activities, rose $8 million in 1998.
Publishing operating expenses increased 4%, or $37 million, in 1997. This
growth was due to higher compensation expense of 9%, or $33 million, higher
newspaper manufacturing and distribution costs of $16 million, increased
expenses for development activities of $11 million and higher promotion costs.
These increases were partially offset by a decline in newsprint and ink expense
of 10%, or $25 million, as average newsprint prices were down 15% while
consumption increased 5%.
Broadcasting and Entertainment
- --------------------------------------------------------------------------------
Operating Revenues and Profit -- The following table presents broadcasting and
entertainment operating revenues, EBITDA and operating profit for television,
radio and entertainment/other. Entertainment/other includes Tribune
Entertainment and the Chicago Cubs.
<TABLE>
<CAPTION>
CHANGE
---------------
(In millions) 1998 1997 1996 98-97 97-96
===================================================================================================
<S> <C> <C> <C> <C> <C>
Operating revenues
Television $ 964 $ 861 $681 + 12% + 27%
Radio 53 72 89 - 27% - 20%
Entertainment/other 136 124 107 + 9% + 16%
- ---------------------------------------------------------------------------------------------------
Total operating revenues $1,153 $1,057 $877 + 9% + 21%
- ---------------------------------------------------------------------------------------------------
EBITDA
Television $ 385 $ 336 $228 + 15% + 48%
Radio 19 24 16 - 19% + 44%
Entertainment/other 1 3 5 - 70% - 37%
- ---------------------------------------------------------------------------------------------------
Total EBITDA $ 405 $ 363 $249 + 12% + 46%
- ---------------------------------------------------------------------------------------------------
Operating profit
Television $ 303 $ 268 $191 + 13% + 40%
Radio 17 20 13 - 17% + 61%
Entertainment/other (3) (2) - - 32% *
- ---------------------------------------------------------------------------------------------------
Total operating profit $ 317 $ 286 $204 + 11% + 40%
- ---------------------------------------------------------------------------------------------------
*Not meaningful
</TABLE>
Broadcasting and entertainment revenues rose 9%, or $96 million, in 1998
primarily due to gains in television. Television revenues increased 12%, or $103
million, due to the acquisitions of six Renaissance stations (in March 1997),
KTZZ-Seattle and WXMI-Grand Rapids (in June 1998) and growth at existing
stations. Excluding acquisitions, television revenues were up 5%. Radio revenues
declined 27% in 1998 mainly due to the divestitures of WQCD (in June 1998) and
Farm Journal (in March 1997). Excluding divestitures, radio revenues improved
3%. Entertainment/other revenues increased 9% mainly due to the September 1997
launch of the "Gene Roddenberry's Earth: Final Conflict" and "NightMan"
syndicated programs by Tribune Entertainment and higher Cubs revenues.
33
<PAGE>
Broadcasting and entertainment revenues increased 21%, or $180 million, in
1997 mainly due to increases in television. Television revenues were up 27%, or
$180 million, largely due to the acquisition of the six Renaissance stations in
March 1997. Excluding Renaissance, television revenues were up 4%. Radio
revenues decreased 20% mainly due to the sale of Farm Journal and the management
agreement which transferred station operations of WQCD to Emmis Broadcasting in
July 1997. Excluding Farm Journal and WQCD, radio revenues increased 2%.
Entertainment/other increased due to higher Cubs revenues and more programs in
syndication at Tribune Entertainment.
Broadcasting and entertainment operating profit in 1998 grew to a record
$317 million, up 11% from 1997, due to increases in television. Television
operating profit increased 13%, or $35 million, primarily due to the
acquisitions and gains at KTLA-Los Angeles, KHTV-Houston and WLVI-Boston.
Excluding the acquisitions, television operating profit improved 10%.
Operating profit was up 40%, or $82 million, in 1997 primarily due to
increases in television. Television operating profit increased 40%, or $77
million, mainly from the acquisition of Renaissance and gains at KTLA-Los
Angeles, WGN-Chicago and WPIX-New York. Excluding Renaissance, television
operating profit was up 14%. Radio operating profit increased 61%, or $7
million, due to gains at all of the radio stations.
[Introductory language appearing in large bold face type reads as follows:]
TELEVISION EBITDA CLIMBED 15% AS MARGINS GREW TO 40% IN 1998.
Operating Expenses -- Broadcasting and entertainment operating expenses
increased 8%, or $64 million, in 1998 mainly due to the television station
acquisitions, increased compensation expense and higher broadcast rights
amortization, partially offset by the WQCD and Farm Journal dispositions.
Excluding acquisitions and divestitures, broadcasting and entertainment
operating expenses increased 4%, or $26 million. Compensation increased 5%, or
$11 million, mainly due to increased players' salaries at the Cubs. Broadcast
rights amortization rose 7%, or $16 million, largely due to higher program costs
at Tribune Entertainment.
Broadcasting and entertainment operating expenses increased 15%, or $98
million, in 1997 primarily due to the acquisition of Renaissance. Excluding
Renaissance, KSWB-San Diego, Farm Journal and WQCD, broadcasting and
entertainment operating expenses increased 2%, or $12 million, due to higher
compensation expense of 11%, or $22 million, partially offset by lower broadcast
rights amortization. The increase in compensation expense was partially due to
higher players' salaries at the Cubs. Broadcast rights amortization decreased
$15 million, primarily due to lower amortization for syndicated and feature
programming and lower sports rights at KTLA-Los Angeles.
Education
- --------------------------------------------------------------------------------
Operating Revenues and Profit -- The following table presents education
operating revenues, EBITDA and operating profit.
CHANGE
---------------
(In millions) 1998 1997 1996 98-97 97-96
===============================================================================
Operating revenues $329 $226 $192 + 46% + 17%
EBITDA 69 54 54 + 27% + 1%
Operating profit 43 36 39 + 20% - 9%
- -------------------------------------------------------------------------------
The education segment specializes in learning products and services for use
in schools and homes. The segment's primary business is supplemental and core
curriculum materials for kindergarten through grade 12. The education segment
also derives revenues from the adult basic education and consumer publishing
markets.
Education operating revenues in 1998 increased 46% to $329 million mainly
due to the acquisitions of Landoll (in December 1997) and Shortland (in
September 1997) and increased sales to both school and consumer markets at
existing businesses. Excluding acquisitions, education revenues increased 9% in
1998, largely due to growth from the Everyday Mathematics curriculum and higher
supplemental education sales at Ideal/Instructional Fair. Education operating
revenues in 1997 were up 17% to $226 million primarily due to improvements at
all of the education businesses except
34
<PAGE>
Educational Publishing Corporation's Creative Publications division. Education
operating profit increased 20% to $43 million in 1998. The improvement was due
to growth at existing businesses and acquisitions. Excluding acquisitions,
operating profit rose 12%. Education operating profit was $36 million in 1997,
down $3 million from 1996. The decline in operating profit was due to lower
sales at Creative Publications, which more than offset improvements at the other
education companies.
[Introductory language appearing in large bold face type reads as follows:]
ACQUISITIONS AND GROWTH FROM EXISTING BUSINESSES DROVE REVENUE GAINS OF 46%
Operating Expenses -- Education operating expenses include costs to produce
products including paper, printing and binding; amortization of pre-publication
costs; and royalty expense. Operating expenses also include sales and marketing,
development, fulfillment, depreciation and amortization of intangible assets.
Education operating expenses were up 51%, or $97 million, in 1998 mainly due to
acquisitions. Excluding acquisitions, operating expenses were up 8%, or $15
million, primarily due to increased cost of sales as a result of higher sales
volume and higher marketing and development costs. Education operating expenses
were up 24%, or $37 million, in 1997 primarily due to the 1996 and 1997
acquisitions. Excluding acquisitions, 1997 operating expenses were up 13%, or
$11 million, as a result of higher compensation expense and increased cost of
sales expense at Everyday Learning due to increased sales.
Equity Results
- --------------------------------------------------------------------------------
CHANGE
---------------
(In millions) 1998 1997 1996 98-97 97-96
===============================================================================
Net loss on equity investments $(34) $(35) $(13) - 2% + 161%
- -------------------------------------------------------------------------------
Net loss on equity investments relates primarily to the Company's interest in
the growing WB Network ("The WB") and various Internet investments. The Company
acquired a 13% equity interest in The WB in 1995, and increased its ownership
interest to 22% in 1997 and 25% in 1998. Equity losses declined 2% to $34
million in 1998 due to improved results from The WB and Qwest Broadcasting,
partially offset by higher losses from Internet investments. Equity losses
increased 161% to $35 million in 1997, largely due to increased losses from The
WB. In addition, equity results for 1996 included non-recurring equity income of
$10 million, representing the Company's equity interest in a gain recorded by
Qwest Broadcasting for the cancellation of an option to purchase a television
station.
Interest Income and Expense
- --------------------------------------------------------------------------------
CHANGE
----------------
(In millions) 1998 1997 1996 98-97 97-96
===============================================================================
Interest income $ 6 $ 26 $ 32 - 77% - 18%
Interest expense (88) (86) (48) + 2% + 81%
- -------------------------------------------------------------------------------
Net interest expense $(82) $(60) $(16) + 37% + 284%
- -------------------------------------------------------------------------------
Interest income consists primarily of interest on the Qwest Broadcasting
convertible debentures, short-term marketable securities, The Learning Company
("TLC") convertible debentures (sold in December 1997) and a mortgage note
receivable from a real estate affiliate (repaid in October 1996). Interest
income declined 77% in 1998 primarily due to the sale of the TLC convertible
debentures in 1997. Interest income decreased 18% in 1997 primarily due to the
repayment of the mortgage note receivable in 1996. Interest expense increased 2%
in 1998 and 81% in 1997 mainly due to higher average debt levels resulting from
acquisitions and stock repurchases. Average debt levels increased $24 million in
1998 to $1.6 billion and increased $622 million in 1997 to $1.5 billion.
Outstanding debt was $1.6 billion at year-end 1998 and 1997 and $1.0 billion at
year-end 1996.
35
<PAGE>
- --------------------------------------------------------------------------------
| LIQUIDITY AND CAPITAL RESOURCES |
- --------------------------------------------------------------------------------
Cash flow generated from operations is the Company's primary source of
liquidity. Net cash provided by operations was $546 million in 1998 and $384
million in 1997. The increase was mainly due to higher net income and changes in
working capital items. The Company normally expects to fund dividends, capital
expenditures and other operating requirements with net cash provided by
operations. Funding required for common stock repurchases and acquisitions is
financed by available cash flow from operations and, if necessary, by the
issuance of debt.
Net cash used for investments totaled $348 million in 1998 compared to $982
million in 1997. In 1998, the Company spent approximately $155 million for
acquisitions and $40 million for investments. Capital spending totaled $140
million in 1998. In 1998, the Company advanced $52 million to an investee, which
was repaid in January 1999. Proceeds of $52 million from the sale of investments
partially offset these cash outflows.
[Introductory language appearing in large bold face type reads as follows:]
THE COMPANY ACCELERATED ITS SHARE BUYBACK PROGRAM IN 1998 BY REPURCHASING 5.6
MILLION SHARES ON THE OPEN MARKET.
Net cash used for financing activities was $252 million in 1998 as proceeds
from the issuance of long-term debt and sales of common stock to employees were
more than offset by repayments of debt, repurchases of common stock and payments
of dividends. As part of the Series E medium-term note program, the Company
issued approximately $128.5 million of Debt Exchangeable for Common Stock
securities in 1998. In 1998, the Company repurchased 5.6 million shares of its
common stock for $330 million. Of this total, 1.1 million shares were purchased
for $69 million by the Tribune Stock Compensation Fund ("TSCF"). In July 1998,
the Company established the TSCF to purchase common stock of the Company for the
purpose of funding certain existing stock-based compensation plans. At December
27, 1998, the Company had authorization to repurchase 1.6 million shares and an
additional $500 million of its common stock. The Company has continued to
repurchase shares in 1999. Dividends on common and preferred shares were $101
million in 1998. Dividends on common stock increased 6% in 1998 to $.68 per
share.
At December 27, 1998, the Company had commercial paper outstanding of $151
million with a weighted average interest rate of 5.1%. The Company has revolving
credit agreements with banks in the aggregate amount of $1.2 billion that extend
to December 31, 2001. These agreements are fully available to support the
issuance of commercial paper.
Capital spending for 1999 is expected to total approximately $125 to $150
million for a variety of normal replacement projects, as well as for new
editorial and pagination systems and press enhancements at the newspapers and
the purchase of digital equipment at the television stations.
36
<PAGE>
- --------------------------------------------------------------------------------
| YEAR 2000 COMPLIANCE |
- --------------------------------------------------------------------------------
The Company relies on various technologies throughout its business operations
that could be affected by the date change in the Year 2000. The Company is
progressing through a comprehensive program to evaluate and address the impact
of the Year 2000 issue on its operational and financial reporting systems and
equipment with embedded technology and the Year 2000 risks associated with its
vendors and customers. The program has been assigned a high priority in relation
to other business projects. The Company has formed a Project Management Office
to provide company-wide leadership, oversight and coordination of the Year 2000
project. The Company's Chief Technology Officer and Chief Financial Officer head
the Project Management Office. These project heads receive frequent updates from
the other members of the Project Management Office team. In addition, progress
reports on the Year 2000 program are presented regularly to the Company's board
of directors and senior management.
State of Readiness
- --------------------------------------------------------------------------------
Both internal and external resources are being utilized throughout the Company
to implement the program, which includes the following overlapping phases:
system and equipment inventory and analysis; remediation, testing and
implementation; contingency planning; and vendors and investments. The Company
expects that its internal operational and financial reporting systems and
equipment will be Year 2000 compliant by June 30, 1999. None of the Company's
other significant information technology projects has been delayed as a result
of the Company's Year 2000 compliance efforts.
System and Equipment Inventory and Analysis -- The system and equipment
inventory and analysis phase consists of compiling a detailed inventory of all
of the Company's information and non-information technology hardware, software,
systems and equipment to determine which of these items are date-sensitive and
require remediation to become Year 2000 compliant. This analysis involves both
an internal assessment and contact with the systems and equipment manufacturers.
The principal systems and equipment identified by the Company as requiring
remediation are financial systems, human resource systems and news production
systems. This phase is complete.
Remediation, Testing and Implementation -- The remediation, testing and
implementation phase consists of determining and implementing a remediation
method (upgrade, replace or discontinue) for date-sensitive items. The
remediated item is tested and returned to normal operations when compliant.
Testing for significant systems may include functional testing of remedial
measures and regression testing to validate that changes have not altered
existing functionality. A separate Year 2000 mainframe environment has been
created to test all operating system software and program product software. This
Year 2000 environment is designed to accomplish "end to end" testing of the
larger systems applications and to validate interface communications between
systems applications. The Company is also performing its own tests of mission
critical vendor-provided systems and equipment, even if vendor certification of
Year 2000 compliance has been received. The Company is working with the
manufacturers of its affected systems and other outside vendors to implement
required upgrades. The Company has also identified vendors from which the
Company can procure new systems and equipment to replace non-compliant systems
and equipment. The Company is currently in the middle stages of this phase and
expects to be substantially complete by June 30, 1999.
Contingency Planning -- Contingency planning consists of developing solutions
and options in the event that the Company experiences a failure in its
production processes or in the operations of certain of the Company's vendors.
Contingency plans and enactment dates for production processes and vendors are
being developed, but have not yet been finalized. The Company will continue to
develop, review, test and revise contingency plans, as more information becomes
available from internal testing and external vendor assessment.
37
<PAGE>
Vendors and Investments -- Vendor management consists of assessing vendor
readiness, and if necessary, identifying alternate channels to receive critical
materials and/or supplies. The Company has initiated formal communications with
its vendors through an assessment survey. For critical vendors, including
utilities, banks, newsprint and ink suppliers and a satellite provider, site
visits have been completed. In the event that satisfactory commitments from key
suppliers are not received, the Company is forming plans for the continuing
availability of critical materials and supplies through alternate channels. In
general, the Company is comfortable with the progress made by critical vendors
to date and no critical issues have been identified, except for a general
concern with the utilities industry as alternative suppliers may not be
available. Tribune is also assessing Year 2000 compliance of the companies in
its venture investment portfolio. Tribune will continue to monitor information
provided by these companies regarding their progress toward remediation of Year
2000 issues.
Risks
- --------------------------------------------------------------------------------
The Company may discover additional Year 2000 problems, including that
remediation or contingency plans are not feasible or that the costs of such
plans exceed current expectations. In many cases, the Company is relying on
assurances from vendors that their systems, or that new or upgraded systems
acquired by the Company, will be Year 2000 compliant. The Company believes that
one of its principal Year 2000 risks is the effect the Year 2000 issue will have
on its vendors, especially the utilities industry. A substantial part of the
Company's day-to-day operations is dependent on power and telecommunications
services, for which alternative sources of service may be limited. The Company
will continue to investigate the readiness of its suppliers, including
utilities, and pursue the availability of alternatives to further analyze and
diminish the extent of any impact Year 2000 issues may have on the Company.
Although there can be no assurance that the Company will be able to complete all
of the modifications in the required timeframe and that unanticipated events
will not occur, it is management's belief that the Company is taking adequate
action to address Year 2000 issues. In the event that either the Company or the
Company's vendors fail to adequately address Year 2000 issues, the Company could
suffer business interruptions. If such interruptions cause the Company to be
unable to fulfill its obligations to third parties, the Company could be exposed
to liability to such third parties.
Costs
- --------------------------------------------------------------------------------
The Company does not currently expect that the costs of addressing the Year 2000
issue will have a material effect on the consolidated financial position or
results of operations of the Company. Year 2000 compliance costs are expensed as
incurred and are funded through operating cash flow. The Company currently
estimates total expenses to range from $20 to $25 million, of which $7 million
was incurred in 1998.
38
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
Consolidated Statements of Income
(In thousands of dollars, except per share data) Year Ended Dec. 27, 1998 Dec. 28, 1997 Dec. 29, 1996
===================================================================================================================================
<S> <C> <C> <C> <C>
Operating Publishing
Revenues Advertising $1,161,939 $1,115,538 $1,031,026
Circulation 243,842 250,558 252,263
Other 92,792 70,622 53,350
----------------------------------------------------------------------------------------------------------------
Total 1,498,573 1,436,718 1,336,639
Broadcasting and Entertainment 1,153,006 1,057,529 876,750
Education 329,310 225,533 192,316
----------------------------------------------------------------------------------------------------------------
Total operating revenues 2,980,889 2,719,780 2,405,705
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Cost of sales (exclusive of items shown below) 1,391,029 1,254,981 1,195,161
Expenses Selling, general and administrative 692,003 650,255 564,294
Depreciation and amortization of intangible assets 195,568 172,513 142,893
----------------------------------------------------------------------------------------------------------------
Total operating expenses 2,278,600 2,077,749 1,902,348
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Profit 702,289 642,031 503,357
Net loss on equity investments (33,980) (34,696) (13,281)
Sales of subsidiary and investments, net of write-downs 119,119 111,824 -
Interest income 6,112 26,343 32,116
Interest expense (88,451) (86,502) (47,779)
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations Before Income Taxes 705,089 659,000 474,413
Income taxes (290,817) (265,375) (191,663)
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 414,272 393,625 282,750
Discontinued Operations of QUNO, net of tax - - 89,317
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income 414,272 393,625 372,067
Preferred dividends, net of tax (18,782) (18,798) (18,786)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income Attributable to Common Shares $ 395,490 $ 374,827 $ 353,281
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share
Basic: Continuing operations $ 3.26 $ 3.05 $ 2.15
Discontinued operations - - .73
----------------------------------------------------------------------------------------------------------------
Net income $ 3.26 $ 3.05 $ 2.88
----------------------------------------------------------------------------------------------------------------
Diluted: Continuing operations $ 3.01 $ 2.81 $ 1.98
Discontinued operations - - .66
----------------------------------------------------------------------------------------------------------------
Net income $ 3.01 $ 2.81 $ 2.64
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Assets (in thousands of dollars, except share data) Dec. 27, 1998 Dec. 28, 1997
=========================================================================================================================
<S> <C> <C> <C>
Current Assets Cash and short-term investments $ 12,433 $ 66,618
Accounts receivable (less allowances of $44,402 and $43,205) 555,229 442,332
Inventories 99,005 99,491
Broadcast rights 232,394 190,339
Prepaid expenses and other 46,068 48,969
-----------------------------------------------------------------------------------------------------
Total current assets 945,129 847,749
- -------------------------------------------------------------------------------------------------------------------------
Properties Machinery, equipment and furniture 1,130,791 1,061,208
Buildings and leasehold improvements 369,319 359,041
-----------------------------------------------------------------------------------------------------
1,500,110 1,420,249
Accumulated depreciation (987,791) (900,450)
-----------------------------------------------------------------------------------------------------
512,319 519,799
Land 83,691 78,510
Construction in progress 80,725 52,138
-----------------------------------------------------------------------------------------------------
Net properties 676,735 650,447
- -------------------------------------------------------------------------------------------------------------------------
Other Assets Broadcast rights 207,757 162,096
Intangible assets (less accumulated amortization of $373,820
and $294,179) 2,703,993 2,503,069
Investments 1,249,979 481,544
Other 151,977 132,649
-----------------------------------------------------------------------------------------------------
Total other assets 4,313,706 3,279,358
-----------------------------------------------------------------------------------------------------
Total assets $5,935,570 $4,777,554
- -------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
Liabilities and Shareholders' Equity Dec. 27, 1998 Dec. 28, 1997
=========================================================================================================================
<S> <C> <C> <C>
Current Long-term debt due within one year $ 29,905 $ 33,348
Liabilities Accounts payable 157,708 138,897
Employee compensation and benefits 114,202 122,007
Contracts payable for broadcast rights 260,264 210,565
Deferred income 55,097 53,065
Income taxes 59,607 6,867
Accrued liabilities 151,347 116,971
-----------------------------------------------------------------------------------------------------
Total current liabilities 828,130 681,720
- -------------------------------------------------------------------------------------------------------------------------
Long-Term Debt (less portions due within one year) 1,616,256 1,521,453
- -------------------------------------------------------------------------------------------------------------------------
Other Deferred income taxes 701,778 387,686
Non-Current Contracts payable for broadcast rights 268,099 230,832
Liabilities Compensation and other obligations 164,690 129,859
-----------------------------------------------------------------------------------------------------
Total other non-current liabilities 1,134,567 748,377
- -------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (see Notes 8 and 10) - -
- -------------------------------------------------------------------------------------------------------------------------
Shareholders' Series B convertible preferred stock (without par value)
Equity Authorized: 1,600,000 shares
Issued and outstanding: 1,337,926 shares in 1998 and
1,386,572 shares in 1997 (liquidation value $220 per share) 293,203 303,864
Common stock (without par value)
Authorized: 400,000,000 shares; 163,543,316 shares issued 1,018 1,018
Additional paid-in capital 209,474 201,401
Retained earnings 2,819,474 2,506,292
Treasury stock (at cost)
44,127,511 shares in 1998 and 41,012,883 shares in 1997 (1,414,661) (1,159,832)
Treasury Stock held by Tribune Stock Compensation Fund (at cost)
413,774 shares in 1998 (26,602) -
Unearned compensation related to ESOP (156,495) (188,380)
Accumulated other comprehensive income 631,206 161,641
-----------------------------------------------------------------------------------------------------
Total shareholders' equity 2,356,617 1,826,004
-----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $5,935,570 $4,777,554
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands of dollars) Dec. 27, 1998 Dec. 28, 1997 Dec. 29, 1996
=================================================================================================================================
<S> <C> <C> <C> <C>
Operations Net income $414,272 $393,625 $372,067
Adjustments to reconcile net income to net cash
provided by operations:
Discontinued operations of QUNO, net of tax - - (89,317)
Gain on sales of subsidiary and investments, net of write-downs (119,119) (111,824) -
Depreciation and amortization of intangible assets 195,568 172,513 142,893
Deferred income taxes 7,904 (13,959) (24,503)
Net loss on equity investments 33,980 34,696 13,281
Changes in working capital items
excluding effects from acquisitions:
Accounts receivable (49,987) (43,957) (34,917)
Inventories, prepaid expenses and other current assets (4,786) (3,671) (12,920)
Accounts payable, employee compensation and
benefits, deferred income and accrued liabilities 28,400 36,322 3,653
Income taxes 52,514 (46,356) (20,298)
Change in broadcast rights, net of liabilities (1,072) (11,862) 7,554
Other, net (11,795) (21,449) (20,973)
-------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 545,879 384,078 336,520
- ---------------------------------------------------------------------------------------------------------------------------------
Investments Capital expenditures (139,710) (103,845) (93,324)
Acquisitions (154,711) (1,239,612) (501,375)
Investments (40,245) (48,342) (72,127)
Proceeds from sales of investments and subsidiary stock 51,585 402,473 -
Increase in advances to investee (52,244) (1,514) -
Proceeds from sale of QUNO - - 426,828
Proceeds from mortgage note receivable from affiliate - - 83,313
Other, net (12,622) 8,522 10,851
-------------------------------------------------------------------------------------------------------------------
Net cash used for investments (347,947) (982,318) (145,834)
- ---------------------------------------------------------------------------------------------------------------------------------
Financing Proceeds from issuance of long-term debt 469,878 626,375 470,000
Repayments of long-term debt (336,886) (55,437) (219,803)
Sales of common stock to employees, net 46,129 57,145 51,256
Purchases of treasury stock (261,160) (140,038) (148,445)
Purchases of treasury stock by Tribune Stock Compensation Fund (68,988) - -
Dividends (101,090) (97,357) (92,423)
-------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing (252,117) 390,688 60,585
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Short-Term Investments (54,185) (207,552) 251,271
Cash and short-term investments, beginning of year 66,618 274,170 22,899
-------------------------------------------------------------------------------------------------------------------
Cash and short-term investments, end of year $ 12,433 $ 66,618 $274,170
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental Cash paid for:
Cash Flow Interest (net of amounts capitalized) $ 87,320 $ 84,456 $ 44,324
Information Income taxes $168,912 $285,656 $206,371
- ---------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
Consolidated Statements of Shareholders' Equity
Dec. 27, 1998 Dec. 28, 1997 Dec. 29, 1996
---------------------------------- ---------------------------------- ----------------------------------
(In thousands, Shareholders' Comprehensive Shareholders' Comprehensive Shareholders' Comprehensive
except per share data) Equity Income Shares Equity Income Shares Equity Income Shares
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retained Earnings
Balance, beginning of year $2,506,292 $2,210,024 $1,930,380
Net income 414,272 $414,272 393,625 $393,625 372,067 $372,067
-------- -------- --------
Dividends declared
Common ($.68/share in
1998, $.64/share in
1997 and $.60/share
in 1996) (82,426) (78,646) (73,742)
Preferred ($17.05/share) (22,812) (23,641) (24,311)
Tax benefit on dividends
paid the to ESOP (1) 4,148 4,930 5,630
---------- ---------- ---------
Balance, end of year 2,819,474 2,506,292 2,210,024
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated Other
Comprehensive Income
Balance, beginning of year 161,641 118,813 170,284
Change in unrealized gain
on securities, net 475,168 42,828 (70,659)
Foreign currency translation
adjustment (2) (5,603) - 19,188
-------- -------- --------
Other comprehensive income 469,565 469,565 42,828 42,828 (51,471) (51,471)
-------- -------- --------
Comprehensive income $883,837 $436,453 $320,596
---------- -------- ---------- -------- ---------- --------
Balance, end of year 631,206 161,641 118,813
- -----------------------------------------------------------------------------------------------------------------------------------
Series B Convertible Preferred
Stock
Balance, beginning of year 303,864 1,387 312,470 1,426 322,540 1,472
Redemptions of convertible
preferred stock (10,661) (49) (8,606) (39) (10,070) (46)
---------- ------- ---------- ------- ---------- -------
Balance, end of year 293,203 1,338 303,864 1,387 312,470 1,426
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock and Additional
Paid-In Capital
Balance, beginning of year 202,419 163,543 150,879 163,543 127,814 163,543
Redemptions of convertible
preferred stock (477) - 535 - 1,120 -
Shares issued under option
and stock plans 8,550 - 51,005 - 21,945 -
---------- ------- ---------- ------- ---------- -------
Balance, end of year 210,492 163,543 202,419 163,543 150,879 163,543
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury Stock (at cost)
Balance, beginning of year (1,159,832) (41,013) (1,034,012) (40,598) (923,828) (38,440)
Redemptions of convertible
preferred stock 11,138 389 8,071 314 8,950 368
Purchases of treasury stock (261,160) (4,503) (140,038) (2,842) (148,445) (4,531)
Shares issued under option
and stock plans 39,736 1,671 91,221 3,805 82,243 3,410
Shares tendered as payment
for options exercised (44,543) (672) (85,074) (1,692) (52,932) (1,405)
---------- ------- ---------- ------- ---------- -------
Balance, end of year (1,414,661) (44,128) (1,159,832) (41,013) (1,034,012) (40,598)
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury Stock Held by Tribune
Stock Compensation Fund
(at cost)
Balance, beginning of year - - - - - -
Purchases of treasury stock (68,988) (1,057) - - - -
Shares issued under option
and stock plans 85,366 1,297 - - - -
Shares tendered as payment
for options exercised (42,980) (654) - - - -
---------- ------- ---------- ------- ---------- -------
Balance, end of year (26,602) (414) - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Unearned Compensation (ESOP)
Balance, beginning of year (188,380) (218,668) (247,281)
Repayment of ESOP debt 31,885 30,288 28,613
---------- ---------- ----------
Balance, end of year (156,495) (188,380) (218,668)
- -----------------------------------------------------------------------------------------------------------------------------------
Total (3) $2,356,617 119,001 $1,826,004 122,530 $1,539,506 122,945
===================================================================================================================================
</TABLE>
(1) Excludes the tax benefit on allocated preferred shares held by the ESOP,
which is credited to income tax expense.
(2) In 1996, represents the write-off of the cumulative translation adjustment
as a result of the sale of QUNO.
(3) For shares, total represents net common shares outstanding.
See Notes to Consolidated Financial Statements.
43
<PAGE>
Tribune Company and Subsidiaries
Notes To Consolidated Financial Statements
The significant accounting policies of Tribune Company and subsidiaries (the
"Company"), as summarized below, conform with generally accepted accounting
principles and reflect practices appropriate to the businesses in which they
operate. Certain prior year amounts have been reclassified to conform with the
1998 presentation.
- --------------------------------------------------------------------------------
| NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
- --------------------------------------------------------------------------------
Fiscal Year -- The Company's fiscal year ends on the last Sunday in December.
Fiscal years 1998, 1997 and 1996 all comprised 52 weeks.
Principles of Consolidation -- The consolidated financial statements include the
accounts of Tribune Company and all majority-owned subsidiaries. Investments
comprising 20 to 50 percent of the voting stock of companies and certain
partnership interests are accounted for using the equity method. All other
investments are generally accounted for using the cost method. All significant
intercompany transactions are eliminated.
Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Short-Term Investments -- Short-term investments are stated at cost, which
approximates market value. For purposes of the consolidated statements of cash
flows, investments with maturities of three months or less at the time of
purchase are considered to be cash equivalents.
Inventories -- Inventories are stated at the lower of cost or market. Cost is
determined on the last-in, first-out ("LIFO") basis for newsprint and on the
first-in, first-out ("FIFO") or average basis for all other inventories.
Broadcast Rights -- Broadcast rights consist principally of rights to broadcast
syndicated programs, sports and feature films and are stated at the lower of
cost or estimated net realizable value. The total cost of these rights is
recorded as an asset and a liability when the program becomes available for
broadcast. Broadcast rights that have limited showings are generally amortized
using an accelerated method as programs are aired. The current portion of
broadcast rights represents those rights available for broadcast that are
expected to be amortized in the succeeding year.
Properties -- Property, plant and equipment are stated at cost. Depreciation is
computed using the straight-line method over the properties' estimated useful
lives, ranging from 3 to 40 years.
Intangible Assets -- Intangible assets primarily represent the excess of cost
over the fair market value of tangible net assets acquired. The excess cost
related to net assets acquired since 1971 is being amortized on a straight-line
basis over various periods. These periods range from 5 to 40 years for goodwill
(with the majority being amortized over 40 years), 40 years for Federal
Communications Commission ("FCC") licenses, and from 5 to 40 years for other
intangible assets. Intangible assets of $23.5 million related to pre-1971
acquisitions are not being amortized as the Company believes there has been no
diminution of value. The Company evaluates the carrying values of all intangible
assets periodically in relation to the projected future undiscounted cash flows
of the related businesses to determine whether impairment exists. Adjustments to
net realizable value are made as needed; no such adjustments to intangible
assets were required in the periods presented.
44
<PAGE>
Investments -- The Company records its investments in debt and equity securities
at their fair value, except for debt securities that the Company intends to hold
to maturity and equity securities that are accounted for under the equity method
or that are issued by private companies. All investments recorded at fair value
have been classified as available for sale. The difference between cost and fair
value, net of related tax effects, is recorded in the accumulated other
comprehensive income component of shareholders' equity. The cost of securities
sold is determined on an average cost basis.
Pension Plans -- Retirement benefits are provided to substantially all employees
through pension plans sponsored either by the Company or by unions. Under the
Company-sponsored plans, pension benefits are primarily a function of both the
years of service and the level of compensation for a specified number of years,
depending on the plan. It is the Company's policy to fund the minimum for
Company-sponsored pension plans as required by ERISA. Contributions made to
union-sponsored plans are based upon collective bargaining agreements.
Income Taxes -- Provision is made for income taxes on undistributed earnings of
foreign subsidiaries that are expected to be remitted to the U.S. parent
company. No provision for income taxes, however, is made on undistributed
earnings that are intended to be reinvested in facilities and other assets in
the foreign countries for an indefinite period of time. The cumulative amount of
unremitted earnings that has been reinvested indefinitely was immaterial as of
December 27, 1998.
Foreign Currency Translation -- The assets and liabilities of foreign
subsidiaries are translated at year-end exchange rates. Results of operations
are translated at average rates of exchange in effect during the year.
Translation adjustments are included in the accumulated other comprehensive
income component of shareholders' equity.
Stock-Based Compensation -- The Company accounts for its stock-based
compensation plans in accordance with Accounting Principles Board ("APB")
Opinion No. 25 and related Interpretations. Under APB 25, no compensation
expense is recorded because the exercise price of employee stock options equals
the market price of the underlying stock on the date of grant. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation."
New Accounting Pronouncements -- In 1998, the AICPA's Accounting Standards
Executive Committee issued Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use,"
effective for fiscal year 1999. SOP 98-1 requires companies to capitalize and
amortize many of the costs associated with developing or obtaining software for
internal use. The Company does not believe that the effect of adopting SOP 98-1
in fiscal year 1999 will have a material impact on its financial position or
results of operations.
In 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," effective
for fiscal year 2000. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities and requires
companies to recognize derivative instruments as either an asset or liability on
the balance sheet at fair value. Changes in such fair value are required to be
recognized in earnings to the extent the derivative is not effective as a hedge.
This statement will apply to the Company's Debt Exchangeable for Common Stock
securities (see Note 6) and the Company's underlying investment in The Learning
Company common stock. The impact on the Company's financial statements will
depend on a variety of factors, including future interpretative guidance from
the FASB. Management is currently reviewing the impact of this new accounting
pronouncement; however, the Company does not believe that the effect of adopting
SFAS No. 133 will have a material impact on its financial position or results of
operations.
45
<PAGE>
Earnings Per Share -- In 1997, the Company adopted the provisions of SFAS No.
128, "Earnings per Share," which requires presentation on the face of the income
statement of both basic and diluted earnings per share. Basic earnings per share
is computed by dividing net income attributable to common shares by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed based on the assumption that all of the convertible
preferred shares held by the Company's Employee Stock Ownership Plan ("ESOP")
are converted into common shares (see Note 15). For purposes of calculating
diluted earnings per share, net income is reduced by the additional ESOP
contribution that would be required for ESOP debt service, and the weighted
average number of shares outstanding is increased by (i) the additional common
shares that would be issued upon conversion of the preferred shares based on the
stated conversion rate plus any additional common shares that would have to be
issued to meet the redemption price guarantee for all preferred shares that have
been allocated to participants, and (ii) the effect of stock options.
The computations of basic and diluted earnings per share from continuing
operations were as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1998 1997 1996
======================================================================================================
<S> <C> <C> <C>
BASIC
Income from continuing operations $414,272 $393,625 $282,750
Preferred dividends, net of tax (18,782) (18,798) (18,786)
- ------------------------------------------------------------------------------------------------------
Net income from continuing operations
attributable to common shares $395,490 $374,827 $263,964
Weighted average common shares outstanding 121,214 122,879 122,842
- ------------------------------------------------------------------------------------------------------
Basic earnings per share from continuing operations $ 3.26 $ 3.05 $ 2.15
- ------------------------------------------------------------------------------------------------------
DILUTED
Income from continuing operations $414,272 $393,625 $282,750
Additional ESOP contribution required assuming
all preferred shares were converted, net of tax (12,720) (13,141) (13,498)
- ------------------------------------------------------------------------------------------------------
Adjusted income from continuing operations $401,552 $380,484 $269,252
- ------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 121,214 122,879 122,842
Assumed conversion of preferred shares into
common shares 10,692 11,093 11,407
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 1,556 1,491 1,816
- ------------------------------------------------------------------------------------------------------
Adjusted weighted average common shares outstanding 133,462 135,463 136,065
- ------------------------------------------------------------------------------------------------------
Diluted earnings per share from continuing operations $ 3.01 $ 2.81 $ 1.98
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
| NOTE 2: CHANGES IN OPERATIONS AND NON-RECURRING ITEMS |
- --------------------------------------------------------------------------------
Acquisitions -- The Company completed acquisitions for cash totaling
approximately $155 million in 1998, $1.2 billion in 1997 and $501 million in
1996. These acquisitions were accounted for as purchases. Accordingly, the
results of these operations are included in the consolidated statements of
income since their respective dates of acquisition.
In January 1998, the Company acquired ownership of the North American
Sunshine line of educational materials. In June 1998, the Company acquired the
assets of television stations KTZZ-Seattle and WXMI-Grand Rapids, with a fair
value of approximately $179 million, in exchange for its WQCD radio station in
New York and cash. In September 1998, the Company purchased South Florida
Newspaper Network Inc., which published 33 weekly newspapers in south Florida.
46
<PAGE>
In March 1997, the Company acquired Renaissance Communications Corp., a
publicly traded company that owned six television stations, for $1.1 billion in
cash. The stations acquired were KDAF-Dallas, WBZL-Miami (formerly WDZL),
KTXL-Sacramento, WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The FCC
order granting the Company's application to acquire the Renaissance stations
scontained 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 such duopoly
waivers unnecessary. Second, the FCC granted a 12-month waiver of its rule
prohibiting television/newspaper cross-ownership in the same market, which
relates to the Miami television station and the Fort Lauderdale Sun-Sentinel
newspaper. The FCC subsequently issued a rule review to consider modifying its
cross-ownership rule. In March 1998, the FCC granted the Company a waiver
extension to allow continued ownership of both the Miami television station and
the Sun-Sentinel newspaper until the rule review was concluded. The Company
cannot predict the outcome of the FCC duopoly rulemaking or cross-ownership rule
review.
Also in 1997, the Company acquired Shortland Publications Limited, a New
Zealand-based company that publishes reading, language arts, science and social
studies materials for several international elementary school markets (in
September for $32 million), and approximately 80% of Landoll, Inc., a publisher
of children's books for the mass market (in December for $77 million).
Acquisitions in 1996 were all completed for cash and included Houston
television station KHTV (in January for $102 million); the remaining minority
interest in Philadelphia television station WPHL (in February for $23 million);
Educational Publishing Corporation, a publisher of supplemental and core
curriculum education materials through its Creative Publications and
Ideal/Instructional Fair divisions (in March for $205 million); NTC Publishing
Group, a publisher of trade books and educational products (in March for $83
million); and San Diego television station KSWB (in April for $72 million).
Supplemental cash flow information for the 1998, 1997 and 1996 acquisitions
is summarized in the table below:
Acquisitions (in thousands) 1998 1997 1996
===============================================================================
Fair value of assets acquired (1) $184,506 $1,396,753 $547,044
Liabilities assumed (29,795) (157,141) (45,669)
- -------------------------------------------------------------------------------
Net cash paid $154,711 $1,239,612 $501,375
- -------------------------------------------------------------------------------
(1) Includes intangible assets, net of acquisition-related deferred taxes.
In August 1998, the Company reached an agreement with Meredith Corporation
to acquire the assets of television station KCPQ-Seattle in exchange for the
assets of the Company's WGNX-Atlanta television station and cash. On March 1,
1999 and in a three-way transaction, Meredith purchased KCPQ from Kelly
Television Co. and then exchanged the station for WGNX. The divestiture of WGNX
will be accounted for as a sale and the acquisition of KCPQ will be recorded as
a purchase. The Company will record the assets of KCPQ at fair market value,
which will result in an estimated pretax gain of $350 million in the first
quarter of 1999. Current FCC regulations preclude the Company from owning both
KCPQ and the Company's KTZZ-Seattle television station. As part of the
transaction, the Company transferred the assets of KTZZ into a disposition
trust. Pursuant to the terms of the disposition trust, an independent trustee is
charged with finding a buyer for KTZZ by September 1, 1999.
47
<PAGE>
Non-Recurring Items -- In 1998, the Company sold its WQCD radio station
subsidiary, sold a portion of its investment portfolio and wrote down certain
investments. In the aggregate, the sales of the subsidiary and investments, net
of write-downs, resulted in a pretax gain of $119.1 million and increased
diluted earnings per share by $.48. These non-recurring items are summarized as
follows:
<TABLE>
<CAPTION>
Shares Pretax Diluted
1998 (in thousands, except per share data) Sold Proceeds Gain EPS
=======================================================================================================
<S> <C> <C> <C> <C>
Sale of WQCD subsidiary - $ - $ 85,168 $.32
Sales of common stock
America Online 150 13,949 13,902 .06
The Learning Company 611 16,552 11,128 .05
Other sales of investments, net of write-downs 21,084 8,921 .05
- -----------------------------------------------------------------------------------------------------
Sales of subsidiary and investments,
net of write-downs $51,585 $119,119 $.48
- -----------------------------------------------------------------------------------------------------
</TABLE>
In December 1997, the Company signed an agreement with Emmis Broadcasting
Corporation to exchange substantially all of the assets of the Company's WQCD
radio station in New York and cash for the assets of television stations
KTZZ-Seattle and WXMI-Grand Rapids. Emmis agreed to acquire these television
stations as part of its acquisition of Dudley Communications Corporation. The
exchange was completed in June 1998. The divestiture of WQCD was accounted for
as a sale and the acquisition of the television stations was recorded as a
purchase. The transaction resulted in a pretax gain of $85.2 million, or $.32
per diluted share.
In 1997, the Company sold a portion of its investment portfolio and wrote
down certain investments. In the aggregate, these sales of investments, net of
write-downs, resulted in a pretax gain of $111.8 million and increased diluted
earnings per share by $.51. These non-recurring items are summarized as follows:
<TABLE>
<CAPTION>
Shares Pretax Diluted
1997 (in thousands, except per share data) Sold Proceeds Gain (Loss) EPS
=======================================================================================================
<S> <C> <C> <C> <C>
Sales of common stock
America Online 2,560 $134,259 $131,107 $.60
CheckFree 2,158 46,161 35,294 .16
Open Market 1,010 13,825 11,313 .05
Gemstar International 680 16,478 10,027 .05
The Learning Company
Sale of convertible notes 123,000 6,641 .03
Write-down of stock - (77,266) (.35)
Other sales of investments, net of write-downs 9,000 (5,292) (.03)
- -------------------------------------------------------------------------------------------------------
Sales of investments, net of write-downs $342,723 $111,824 $.51
- -------------------------------------------------------------------------------------------------------
</TABLE>
In June 1997, the Company concluded that the decline in the value of its
$123.5 million investment in The Learning Company common stock was other than
temporary and wrote down the investment to fair market value in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." As shown in the above table, the write-down resulted in a non-cash,
pretax loss of $77 million, or $.35 per diluted share. In December 1997, the
Company completed the sale of The Learning Company convertible notes for $123
million in cash.
In March 1997, 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. In June 1997, the Company completed the sale of a
building in Fort Lauderdale, which is approximately 35% occupied by the
Company's Sun-Sentinel newspaper subsidiary. The Company received proceeds of
approximately $43 million and deferred, under sale and leaseback accounting
rules, the pretax gain of approximately $11 million, which is being amortized
over the Sun-Sentinel's 14-year lease term.
48
<PAGE>
In December 1996, the Company recorded non-recurring equity income of $10
million, representing the Company's equity interest in a gain recorded by Qwest
Broadcasting for the cancellation of an option to purchase a television station.
This income increased diluted earnings per share by $.04.
In October 1996, the Company received $83 million as prepayment of a
mortgage note receivable from an affiliate. The Company held the mortgage note
on a building in which the Company had an equity interest. The note had an
interest rate of 13% plus contingent interest based upon the building's cash
flow and appreciation.
Pro Forma Information -- Unaudited 1998 and 1997 pro forma results of operations
are shown below. The pro forma information was prepared assuming the 1998 and
1997 acquisitions, investments and dispositions of subsidiaries discussed above
had occurred as of the beginning of each year. 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 year presented, or of results that
may be attained in the future. Unaudited pro forma results do not reflect any
synergies anticipated by the Company as a result of the acquisitions.
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
(In thousands, except per share data) As Reported Pro Forma As Reported Pro Forma
==========================================================================================================
<S> <C> <C> <C> <C>
Operating revenues $2,980,889 $3,010,606 $2,719,780 $2,872,290
Net income $414,272 $411,379 $393,625 $379,187
Diluted earnings per share $3.01 $2.99 $2.81 $2.70
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
| NOTE 3: INVENTORIES |
- --------------------------------------------------------------------------------
(In thousands) Dec. 27, 1998 Dec. 28, 1997
===================================================================
Finished goods $74,631 $78,058
Newsprint (at LIFO) 12,207 11,653
Supplies and other 12,167 9,780
- -------------------------------------------------------------------
Total inventories $99,005 $99,491
- -------------------------------------------------------------------
Newsprint inventories are valued under the LIFO method and were less than
current cost by approximately $9.9 million at December 27, 1998 and $10.5
million at December 28, 1997. Finished goods primarily include books and
supplemental educational materials.
- --------------------------------------------------------------------------------
| NOTE 4: INTANGIBLE ASSETS |
- --------------------------------------------------------------------------------
Intangible assets consisted of the following:
(In thousands) Dec. 27, 1998 Dec. 28, 1997
===========================================================================
Goodwill $1,818,592 $1,720,622
FCC licenses 542,803 450,024
Other 716,418 626,602
- ---------------------------------------------------------------------------
Total intangible assets 3,077,813 2,797,248
Less accumulated amortization (373,820) (294,179)
- ---------------------------------------------------------------------------
Net intangible assets $2,703,993 $2,503,069
- ---------------------------------------------------------------------------
49
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 5: INVESTMENTS |
- --------------------------------------------------------------------------------
Investments consisted of the following:
(In thousands) Dec. 27, 1998 Dec. 28, 1997
============================================================================
Cost method investments $1,058,580 $283,826
Equity method investments 48,597 58,153
Debt securities 142,802 139,565
- ----------------------------------------------------------------------------
Total investments $1,249,979 $481,544
- ----------------------------------------------------------------------------
At December 27, 1998, the Company's investments included primarily cost
method investments in public companies and equity method investments in private
companies as shown below.
COST METHOD INVESTMENTS EQUITY METHOD INVESTMENTS
- ------------------------------------- ------------------------------------
Public % Private %
Companies Owned Companies Owned
================================================================================
America Online, Inc. 1.1% CareerPath.com LLC 17%
Excite, Inc. 2.6% Central Florida News 13 50%
The Learning Company, Inc. 3.7% Classified Ventures LLC 17%
Peapod, Inc. 9.3% Digital City, Inc. 20%
ImageBuilder Software, Inc. 22%
Qwest Broadcasting LLC 33%
TV Food Network 29%
The WB Television Network 25%
- --------------------------------------------------------------------------------
The Company's current investment in Qwest Broadcasting is comprised of a
33% equity interest and $75 million in convertible notes and accrued interest.
The notes bear interest at 6%, are convertible into an additional 47% equity
interest and may only be converted when and if FCC regulations permit such
conversion.
Accounts receivable included advances to an investee which totaled $53.8
million at December 27, 1998 and $1.5 million at December 28, 1997. The
Company's advances were fully repaid in January 1999.
For investments recorded at fair value under SFAS No. 115, the aggregate
cost basis, net unrealized gain and fair value were as follows:
<TABLE>
<CAPTION>
December 27, 1998 December 28, 1997
----------------------------------- -----------------------------------
Cost Unrealized Fair Cost Unrealized Fair
(In thousands) Basis Gain Value Basis Gain Value
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Marketable equity securities $58,345 $971,374 $1,029,719 $64,465 $198,862 $263,327
Debt securities 76,425 66,377 142,802 72,460 67,105 139,565
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
In June 1997, the Company concluded that the decline in the value of its
$123.5 million investment in The Learning Company ("TLC") common stock was other
than temporary and wrote down the investment to the then fair market value of
$46.2 million in accordance with SFAS No. 115. The write-down resulted in a
non-cash, pretax loss of $77.3 million and is included in "Sales of subsidiary
and investments, net of write-downs" in the 1997 consolidated statement of
income (see Note 2). In 1998, the Company sold .6 million shares of TLC stock
(see Note 2). The remaining TLC investment is related to the Company's Debt
Exchangeable for Common Stock securities (see Note 6) and had a fair value of
$118.5 million at December 27, 1998.
The difference between cost and fair value, net of related tax effects, is
recorded in the accumulated other comprehensive income component of
shareholders' equity and amounted to a net gain of $630.7 million at December
27, 1998 and $161.6 million at December 28, 1997.
50
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 6: LONG-TERM DEBT |
- --------------------------------------------------------------------------------
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
(In thousands) Dec. 27, 1998 Dec. 28, 1997
===============================================================================================
<S> <C> <C>
Promissory notes, weighted average
interest rates of 5.1% and 5.9% $ 150,643 $ 476,375
Medium-term notes, weighted average
interest rates of 6.2% and 6.6%, due 1998-2008 1,118,115 786,300
6.25% notes due 2026, putable to the Company
at par in 2001 100,000 100,000
6.25% Debt Exchangeable for Common Stock securities,
due 2001 118,450 -
8.4% guaranteed ESOP notes, due 1998-2003 156,495 184,187
8.19% guaranteed ESOP note, due 1998 - 4,193
Other notes and obligations 2,458 3,746
- -----------------------------------------------------------------------------------------------
Total debt 1,646,161 1,554,801
Less portions due within one year (29,905) (33,348)
- -----------------------------------------------------------------------------------------------
Long-term debt $1,616,256 $1,521,453
- -----------------------------------------------------------------------------------------------
</TABLE>
Medium-Term Notes -- The Company has issued all of its $200 million Series B,
$500 million Series C and $500 million Series D medium-term notes. Notes issued
under this program generally have maturities from 3 to 30 years and may not be
redeemed by the Company prior to maturity. As part of the Series D medium-term
note program, the Company sold $100 million of 6.25% notes in 1996 that mature
in 2026. These notes may be put back to the Company in 2001 at 100% of the
principal amount, plus accrued interest. The proceeds from the sale of the notes
have been used for general corporate purposes. In 1998, the Company began
offering up to $500 million of its Series E medium-term notes, of which $464
million were issued and outstanding as of December 27, 1998. These notes have
maturities from 3 to 10 years and may not be redeemed by the Company prior to
maturity. As part of the Series E medium-term note program, the Company issued
$128.5 million of Debt Exchangeable for Common Stock securities ("DECS").
In 1998, the Company's registration statement for $500 million of Series F
medium-term notes was declared effective by the Securities and Exchange
Commission. No Series F medium-term notes were issued during 1998.
Debt Exchangeable for Common Stock Securities -- In 1998, the Company issued 4.6
million of DECS with a principal amount of approximately $128.5 million related
to its investment in The Learning Company ("TLC") common stock. At maturity, the
DECS will be repaid using shares of TLC common stock or, at the Company's
option, the cash equivalent thereof. The number of TLC shares due at maturity,
or the cash equivalent thereof, is based on the fair market value of the TLC
common stock, adjusted using a predetermined formula that allocates a portion of
the appreciation, if any, to the Company. Holders of the DECS bear the full risk
of a decline in the value of TLC common stock. The DECS are recorded at maturity
value in the consolidated financial statements. The maturity value of the DECS
obligation will move in accordance with changes in the fair market value of TLC
common stock, except for the appreciation that is allocated to the Company. At
December 27, 1998, the maturity value of the DECS, based on the fair market
value of TLC common stock of $25.75 per share, was $118.5 million. The
difference between the DECS face value and maturity value, net of related tax
effects, is recorded in the accumulated other comprehensive income component of
shareholders' equity and amounted to a net gain of $6.1 million at December 27,
1998. In December 1998, TLC announced a merger with Mattel, Inc. Upon completion
of the merger, shares of TLC common stock will be exchanged for shares of Mattel
at an agreed upon exchange ratio. This transaction will not affect the terms of
the DECS and the DECS will be repaid at maturity with Mattel shares, or the cash
equivalent thereof.
51
<PAGE>
ESOP Notes -- The notes issued by the Company's ESOP are unconditionally
guaranteed by the Company as to payment of principal and interest (see Note 15).
Therefore, the unpaid balance of these borrowings is reflected in the
accompanying consolidated balance sheets as long-term debt. An amount equivalent
to the unpaid balance of these borrowings, representing unearned employee
compensation, is recorded as a reduction of shareholders' equity.
Other -- In 1999, the Company intends to refinance $150.6 million of promissory
notes and $32.0 million of Series C medium-term notes scheduled to mature in
1999 and has the ability to do so on a long-term basis through existing
revolving credit agreements. Accordingly, these notes were classified as
long-term and treated as maturing in fiscal year 2001. The Company has revolving
credit agreements with a number of banks in an aggregate amount of $1.2 billion,
extending to December 31, 2001, which are fully available to support the
issuance of promissory notes. These agreements contain various interest rate
options and provide for annual fees based on a percentage of the commitment.
Such fees totaled approximately $1.0 million in 1998 and 1997 and $.5 million in
1996.
Certain debt agreements limit the amount of secured debt the Company can
incur without equally and ratably securing additional borrowings under those
agreements.
Maturities -- Debt at December 27, 1998 matures as shown below:
Maturities (in thousands)
============================
1999 $ 29,905
2000 80,222
2001 437,284
2002 92,809
2003 92,762
Thereafter 913,179
- ----------------------------
Total $1,646,161
- ----------------------------
- --------------------------------------------------------------------------------
| NOTE 7: CONTRACTS PAYABLE FOR BROADCAST RIGHTS |
- --------------------------------------------------------------------------------
Contracts payable for broadcast rights are classified as current or long-term
liabilities in accordance with the payment terms of the contracts. Required
payments under contractual agreements for broadcast rights recorded at
December 27, 1998 are shown in the table below:
(In thousands)
============================
1999 $260,264
2000 153,212
2001 90,897
2002 19,588
2003 3,449
Thereafter 953
- ----------------------------
Total $528,363
- ----------------------------
- --------------------------------------------------------------------------------
| NOTE 8: CONTINGENCIES AND LEGAL PROCEEDINGS |
- --------------------------------------------------------------------------------
The Company and its subsidiaries are defendants from time to time in actions for
matters arising out of their business operations. In addition, the Company and
its subsidiaries are involved from time to time as parties in various
regulatory, environmental and other proceedings with governmental authorities
and administrative agencies. The Company does not believe that any of the
matters or proceedings presently pending will have a material adverse effect on
its consolidated financial position or results of operations.
52
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS |
- --------------------------------------------------------------------------------
Estimated fair values and carrying amounts of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
December 27, 1998 December 28, 1997
------------------------- ------------------------
Fair Carrying Fair Carrying
(In thousands) Value Amount Value Amount
==============================================================================================================
<S> <C> <C> <C> <C>
Cost method investments $1,061,495 $1,058,580 $ 282,081 $ 283,826
Debt securities 142,802 142,802 139,565 139,565
Debt 1,684,260 1,646,161 1,575,421 1,554,801
Contracts payable for broadcast rights 502,999 528,363 403,588 441,397
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each category of financial instruments.
Cost Method Investments and Debt Securities -- Cost method investments in public
companies and debt securities were recorded at fair value in the consolidated
balance sheets (see Notes 1 and 5). Cost method investments in private companies
were recorded at cost, and fair value was generally estimated based on prices
recently paid for shares in those companies.
Debt -- Fair value was determined based on quoted market prices for similar
issues or on current rates available to the Company for debt of the same
remaining maturities and similar terms.
Contracts Payable for Broadcast Rights -- Fair value was estimated using the
discounted cash flow method.
- --------------------------------------------------------------------------------
| NOTE 10 COMMITMENTS |
- --------------------------------------------------------------------------------
The Company has entered into commitments for broadcast rights that are not
currently available for broadcast and are therefore not included in the
financial statements. These commitments totaled $431 million at December 27,
1998. Payments for broadcast rights generally commence when the programs become
available for broadcast.
The Company had commitments totaling $93 million at December 27, 1998
related to the purchase of inventory, property, plant and equipment and talent
contracts.
The Company leases certain equipment and office and production space under
various operating leases. Rental expense totaled $32.0 million in 1998, $31.3
million in 1997 and $28.1 million in 1996. Future minimum rental commitments
under non-cancelable operating leases are shown in the table below:
Lease Commitments (in thousands)
===============================
1999 $ 30,985
2000 25,062
2001 23,715
2002 21,442
2003 17,732
Thereafter 63,507
- -------------------------------
Total $182,443
- -------------------------------
The Company has guaranteed certain obligations of affiliates totaling $23.9
million at December 27, 1998.
53
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 11: INCOME TAXES |
- --------------------------------------------------------------------------------
The following is a reconciliation of income taxes computed at the U.S. federal
statutory rate to income taxes from continuing operations reported in the
consolidated statements of income:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
=======================================================================================================
<S> <C> <C> <C>
Income from continuing operations before income taxes $705,089 $659,000 $474,413
- -------------------------------------------------------------------------------------------------------
Federal income taxes at 35% $246,781 $230,650 $166,045
State and local income taxes, net of federal tax benefit 39,951 34,653 27,747
Other 4,085 72 (2,129)
- -------------------------------------------------------------------------------------------------------
Income taxes reported $290,817 $265,375 $191,663
Effective tax rate 41.2% 40.3% 40.4%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Components of income tax expense charged to income from continuing
operations were as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
=======================================================================================================
<S> <C> <C> <C>
Currently payable: U.S. federal $204,296 $233,640 $165,169
State and local 56,650 57,060 47,491
- -------------------------------------------------------------------------------------------------------
260,946 290,700 212,660
- -------------------------------------------------------------------------------------------------------
Deferred: U.S. federal 24,237 (21,577) (18,360)
State and local 5,634 (3,748) (2,637)
- -------------------------------------------------------------------------------------------------------
29,871 (25,325) (20,997)
- -------------------------------------------------------------------------------------------------------
Total $290,817 $265,375 $191,663
- -------------------------------------------------------------------------------------------------------
</TABLE>
Significant components of the Company's net deferred tax liabilities were
as follows:
<TABLE>
<CAPTION>
(In thousands) Dec. 27, 1998 Dec. 28, 1997
=======================================================================================================
<S> <C> <C>
Net properties $ 71,057 $ 75,832
Net intangible assets 293,756 280,123
Pensions 8,960 7,824
Unrealized gain on investments 411,005 104,326
Other future taxable items 789 2,020
- -------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 785,567 470,125
- -------------------------------------------------------------------------------------------------------
Broadcast rights (15,937) (24,690)
Postretirement and postemployment benefits other than pensions (16,073) (15,770)
Deferred compensation (21,577) (18,985)
Other accrued liabilities (21,312) (24,097)
Accrued employee compensation and benefits (22,448) (23,960)
Accounts receivable (16,890) (17,417)
Other investments (10,665) (16,113)
Other future deductible items (32,222) (19,809)
- -------------------------------------------------------------------------------------------------------
Total deferred tax assets (157,124) (160,841)
- -------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 628,443 $ 309,284
- -------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 12: EMPLOYEE PENSION PLANS |
- --------------------------------------------------------------------------------
In connection with the establishment of the ESOP, the Company amended, effective
January 1989, its Company-sponsored pension plan for employees not covered by a
collective bargaining agreement. The pension plan continued to provide
substantially the same pension benefits as under the pre-amended plan until
December 1998. After that date, the plan provides that the pension benefit
credits be frozen in terms of pay and service. The Company also maintains
several small plans for other employees.
In 1998, the Company adopted the provisions of SFAS No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits." The adoption had
no effect on the financial position or the results of operations of the Company.
Following is a reconciliation of the change in the plans' prepaid benefit
cost:
<TABLE>
<CAPTION>
(In thousands) Dec. 27, 1998 Dec. 28, 1997
=======================================================================================
<S> <C> <C>
Change in benefit obligation:
Benefit obligation, beginning of year $334,487 $305,792
Service cost 10,033 9,149
Interest cost 24,173 22,656
Plan amendments 1,340 227
Actuarial loss 32,099 14,329
Benefits paid (18,201) (17,666)
- ---------------------------------------------------------------------------------------
Benefit obligation, end of year 383,931 334,487
- ---------------------------------------------------------------------------------------
Change in plans' assets:
Fair value of plans' assets, beginning of year 418,856 365,740
Actual return on plans' assets 69,973 70,240
Employer contributions 450 542
Benefits paid (18,201) (17,666)
- ---------------------------------------------------------------------------------------
Fair value of plans' assets, end of year 471,078 418,856
- ---------------------------------------------------------------------------------------
Funded status of the plans 87,147 84,369
Unrecognized net actuarial gain (45,440) (41,703)
Unrecognized prior service cost 1,545 213
Unrecognized transition asset (7,409) (8,979)
- ---------------------------------------------------------------------------------------
Prepaid benefit cost $ 35,843 $ 33,900
- ---------------------------------------------------------------------------------------
</TABLE>
The components of net periodic benefit cost (credit) were as follows:
(In thousands) 1998 1997 1996
==============================================================================
Service cost $ 10,033 $ 9,149 $ 10,093
Interest cost 24,173 22,656 21,783
Expected return on plans' assets (34,128) (31,299) (29,199)
Recognized actuarial gain (9) (22) 465
Amortization of prior service costs 8 (11) 135
Amortization of transition asset (1,570) (1,571) (1,571)
- ------------------------------------------------------------------------------
Net periodic benefit cost (credit) $ (1,493) $ (1,098) $ 1,706
- ------------------------------------------------------------------------------
55
<PAGE>
The plans' assets consist primarily of listed common stocks and bonds. In
determining the plans' benefit obligation, the weighted average assumed discount
rate used was 6.75% in 1998 and 7.25% in 1997, while the assumed average rate of
increase in future salary levels was 4.0% in 1998 and 5.0% in 1997. The weighted
average expected long-term rate of return on assets used in determining net
pension expense or credit was 9.5% in 1998 and 1997. Total pension expense for
union-sponsored pension plans was $6.0 million in 1998, $6.1 million in 1997 and
$5.7 million in 1996. The Company's portion of assets and liabilities for
multi-employer union pension plans is not determinable.
- --------------------------------------------------------------------------------
| NOTE 13: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |
- --------------------------------------------------------------------------------
The Company provides postretirement health care and life insurance benefits to
eligible employees under a variety of plans. Employees become eligible for these
benefits if they meet age and service requirements. Effective January 1991, the
Company provides a fixed medical contribution to participants who retire between
the age of 55 to 65 and have 10 or more years of service. Medical coverage for
these participants ends when they reach age 65. Retirees are also eligible for
life insurance benefits, which are primarily a function of both the years of
service and the level of compensation at retirement. The cost of postretirement
medical and life benefits is accrued over the active service periods of
employees to the date they attain full eligibility for such benefits. It is the
Company's policy to fund postretirement benefits as claims are incurred.
Following is a reconciliation of the plans' accrued benefit cost:
(In thousands) Dec. 27, 1998 Dec. 28, 1997
===============================================================================
Change in benefit obligation:
Benefit obligation, beginning of year $46,063 $44,449
Service cost 278 309
Interest cost 3,201 3,302
Actuarial loss 670 520
Benefits paid (2,713) (2,517)
- -------------------------------------------------------------------------------
Benefit obligation, end of year 47,499 46,063
- -------------------------------------------------------------------------------
Unrecognized net loss (781) (111)
Unrecognized prior service cost (79) (85)
- -------------------------------------------------------------------------------
Accrued benefit cost $46,639 $45,867
- -------------------------------------------------------------------------------
The components of net periodic benefit cost were as follows:
(In thousands) 1998 1997 1996
===============================================================================
Service cost $ 278 $ 309 $ 259
Interest cost 3,201 3,302 3,244
Amortization of prior service cost 6 7 6
- -------------------------------------------------------------------------------
Net periodic benefit cost $3,485 $3,618 $3,509
- -------------------------------------------------------------------------------
56
<PAGE>
In determining the plans' benefit obligation, the weighted average assumed
discount rate used was 6.75% in 1998 and 7.25% in 1997. For measurement
purposes, an 8.5% annual rate of increase in the per capita cost of covered
health care benefits was assumed for 1999. The rate was assumed to decrease
gradually to 7.0% for 2002 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
(In thousands) 1% Increase 1% Decrease
=======================================================================
Service cost and interest cost $ 266 $ (245)
Benefit obligation $3,424 $(3,143)
- -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
| NOTE 14: CAPITAL STOCK |
- --------------------------------------------------------------------------------
Preferred Stock -- Under the Company's Restated Certificate of Incorporation, 5
million shares of preferred stock are authorized. In 1989, the Company
established a series of 1.6 million shares of Series B Convertible Preferred
Stock of which 1.59 million shares were issued to the Company's ESOP. Each share
of such preferred stock pays a cumulative dividend of 7.75% annually, has a
liquidation value of $220 per share, is convertible into eight shares of the
Company's common stock and is voted with the common stock with an entitlement to
9.16 votes per preferred share.
Common Stock -- In December 1996, the Board of Directors declared a two-for-one
common stock split effective January 15, 1997, to holders of record on December
27, 1996. All share and per share data have been restated to reflect the stock
split.
At February 9, 1999, there were approximately 5,800 holders of record of
the Company's common stock.
Treasury Stock -- The Board from time to time has authorized the repurchase of
shares of the Company's common stock in the open market or through private
transactions to be used for employee benefit programs and other purposes. At
December 27, 1998, the Company had authorization to repurchase 1.6 million
shares and an additional $500 million of its common stock in the open market.
Treasury Stock Held by Tribune Stock Compensation Fund -- In July 1998, the
Company established the Tribune Stock Compensation Fund ("TSCF") to purchase
common stock of the Company for the purpose of funding certain existing
stock-based compensation plans. In 1998 and as part of the treasury stock
repurchase authorization, the TSCF purchased 1.1 million shares of the Company's
common stock for $69 million. At December 27, 1998, .4 million shares were
available for future funding. Any shares acquired by the TSCF that are not
utilized must be disposed of by July 2002.
Share Purchase Rights Plan -- In December 1997, the Company adopted a Share
Purchase Rights Plan that replaced a similar agreement. The plan provides for a
dividend of one right on each outstanding share of the Company's common stock.
Each right will entitle stockholders to buy one one-hundredth of a share of
Series A Junior Participating preferred stock at an exercise price of $250.
These rights expire January 5, 2008. The rights have no voting rights and are
not exercisable until 10 days after the occurrence of certain triggering events,
upon which the holders of the rights are entitled to purchase either the common
stock of an acquiror or additional common stock of the Company at a discounted
price. The rights are redeemable at the option of the Company for $.01 per
right. The Company has established a series of 2 million shares of Series A
Junior Participating Preferred Stock in connection with the plan, none of which
have been issued.
57
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 15: INCENTIVE COMPENSATION AND STOCK PLANS |
- --------------------------------------------------------------------------------
Employee Stock Ownership Plan (ESOP) -- In 1988, the Company established an ESOP
as a long-term employee benefit plan. In connection therewith, the ESOP
purchased, in 1988 and 1989, approximately 1.6 million common shares and 1.59
million Series B convertible preferred shares for an aggregate of $375 million.
The ESOP provides for the awarding of shares of the Company's preferred and
common stock on a noncontributory basis to eligible employees of the Company not
covered by a collective bargaining agreement. At December 27, 1998, 10.7 million
shares of common stock were reserved for issuance in connection with this plan.
Shares of stock held by the ESOP have been placed with the ESOP Trustee and
are allocated to eligible employees annually. These common and preferred shares
are allocated in the same proportion that the current year's principal and
interest payments bear to the total principal and interest to be paid over the
lives of the related borrowings. Each preferred share is convertible into eight
shares of the Company's common stock. The ESOP Trustee must convert the
preferred shares when making distributions to participants upon their withdrawal
from the ESOP. If at the time of such conversion the price of the Company's
common stock is below $27.50 per share, the Company must, at its option, either
pay the difference in cash or issue additional common stock. At December 27,
1998, preferred shares allocated and committed to be released were 723,893 and
110,380, respectively, and common shares allocated and committed to be released
were 1,106,494 and 154,036.
The Company recognizes expense for this plan based upon cash contributions
it makes to the ESOP. The ESOP services its debt requirements with amounts
received from preferred dividends, a portion of the common dividends and Company
contributions. The table below summarizes ESOP debt service activity for the
three years ended December 27, 1998.
ESOP Debt (in thousands) 1998 1997 1996
=============================================================================
Debt Requirements
Principal $31,885 $30,288 $28,613
Interest 15,731 18,274 20,676
- -----------------------------------------------------------------------------
Total $47,616 $48,562 $49,289
- -----------------------------------------------------------------------------
Debt Service
Dividends $23,673 $24,460 $24,589
Company cash contributions 23,943 24,102 24,700
- -----------------------------------------------------------------------------
Total $47,616 $48,562 $49,289
- -----------------------------------------------------------------------------
Savings Incentive Plan -- The Company maintains various qualified 401(k) savings
plans, which permit eligible employees to make voluntary contributions on a
pretax basis. The Savings Incentive Plan provides for uniform employer
contributions to eligible employees of $.25 for each $1.00 contributed by
participants up to 4% of the participants' eligible compensation. This plan
allows participants to invest their savings in various investments including the
Company's common stock. Company contributions to this plan were $3.3 million in
1998 and 1997 and $3.0 million in 1996. The Company had 800,000 shares of common
stock reserved for possible issuance under this plan at December 27, 1998.
Employee Stock Purchase Plan -- This plan permits eligible employees to purchase
up to 8 million shares of the Company's common stock at 85% of market price. The
Company's only expense relating to this plan is for its administration. During
1998, 1997 and 1996, 215,823, 215,424 and 230,688 shares, respectively, were
sold to employees under this plan. As of December 27, 1998, a total of 3.7
million shares were available for sale. The weighted average fair value of
shares sold in 1998 was $63.07.
58
<PAGE>
1997 Incentive Compensation Plan -- In 1997, the 1992 Long-Term Incentive Plan
was terminated and replaced with the 1997 Incentive Compensation Plan. At
December 27, 1998, remaining options outstanding under the 1992 plan totaled 4.6
million shares, of which 3.1 million shares were exercisable. No further awards
were made under the 1992 plan and remaining options vested in 1998. The 1997
plan provides for the granting of awards to eligible employees in any one or
combination of stock options, performance equity program awards and annual
management incentive program bonuses. At December 27, 1998, options outstanding
under the 1997 plan totaled 4.4 million shares, of which .4 million shares were
exercisable. At December 27, 1998, a total of 13.6 million shares were available
for award under the 1997 plan.
Under the stock option portion of the 1997 plan, the option price may not
be less than the market value of the Company's common stock at the time the
option is granted. Options are exercisable not less than six months or more than
10 years after the date the option is granted. General awards under the 1997
plan vest in annual 25% increments beginning one year from the date of the
grant. Replacement options may be granted under the 1997 plan in connection with
a participant's payment of part or all of the exercise price of a stock option
and related tax withholding obligations with previously acquired shares of
common stock.
The performance equity portion of the 1997 plan provides for the awarding
of common stock to key employees if certain financial goals are met over a
period not less than two years. The Company recorded $4.5 million and $4.2
million of expense in 1998 and 1997, respectively, related to this portion of
the plan.
A combined summary of stock option activity and weighted average prices
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- ----------------------
Weighted Avg. Weighted Avg. Weighted Avg.
(Shares in thousands) Shares Exercise Price Shares Exercise Price Shares Exercise Price
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 8,188 $40.50 8,406 $30.68 8,906 $27.30
Granted 4,131 $67.33 3,902 $51.89 2,965 $36.46
Exercised (3,209) $35.92 (3,973) $31.12 (3,370) $26.88
Canceled (128) $52.33 (147) $37.67 (95) $31.12
- -----------------------------------------------------------------------------------------------------------------
Outstanding, end of year 8,982 $54.36 8,188 $40.50 8,406 $30.68
- -----------------------------------------------------------------------------------------------------------------
Exercisable, end of year 3,492 $39.30 2,930 $27.74 4,017 $26.05
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding
and options exercisable at December 27, 1998 (shares in thousands).
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- ----------------------------
Range of Number Weighted Avg. Weighted Avg. Number Weighted Avg.
Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
========================================================================================================
<S> <C> <C> <C> <C> <C>
$19.31-$34.81 2,148 6.29 $30.77 2,148 $30.77
$35.06-$66.50 3,306 6.58 $54.39 1,324 $53.61
$66.56-$73.50 3,528 8.01 $68.43 20 $68.13
- --------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
Stock Plans Pro Forma Disclosure -- The Company's 1997 Compensation Plan, 1992
Long-Term Incentive Plan and Employee Stock Purchase Plan are accounted for
under APB Opinion No. 25. Accordingly, no compensation cost related to options
has been recognized in the consolidated statements of income. Under SFAS No.
123, compensation cost is measured at the grant date based on the fair value of
the award and is recognized as compensation expense over the vesting or service
period. Had compensation cost for these plans been determined consistent with
SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands, except ----------------------- ----------------------- ------------------------
per share data) As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net income $414,272 $391,715 $393,625 $377,262 $372,067 $361,116
Net income attributable
to common shares $395,490 $372,933 $374,827 $358,464 $353,281 $342,330
Diluted earnings per share $3.01 $2.84 $2.81 $2.69 $2.64 $2.55
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to 1995, the pro forma compensation cost in 1996 is not
representative of such cost in future years.
In determining the pro forma compensation cost, the weighted average fair
value of options granted at date of grant was estimated to be $14.95 in 1998,
$11.70 in 1997 and $8.06 in 1996, using the Black-Scholes option pricing model.
The following weighted-average assumptions were used for general awards and
replacement options:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ---------------------- ----------------------
General Replacement General Replacement General Replacement
Awards Options Awards Options Awards Options
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Risk-free interest rate 5.6% 5.5% 6.1% 5.8% 6.7% 6.5%
Expected dividend yield 1.5% 1.5% 1.6% 1.6% 1.7% 1.7%
Expected stock price volatility 21.4% 23.5% 22.5% 21.3% 22.2% 18.9%
Expected life (in years) 6 2 6 2 5 3
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
| NOTE 16: DISCONTINUED OPERATIONS (QUNO CORPORATION) |
- --------------------------------------------------------------------------------
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 Company owned approximately 34% of QUNO's common stock plus $138.8
million in convertible debt. The sale resulted in a 1996 after-tax gain of $89.3
million, or $.66 per diluted share. 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.
The Company's consolidated financial statements reflect the 1996 gain on
the sale of QUNO stock, equity earnings from QUNO and interest income from the
QUNO convertible debenture, net of income tax, as discontinued operations.
Income tax expense related to discontinued operations was $82.7 million in 1996.
60
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 17: COMPREHENSIVE INCOME |
- --------------------------------------------------------------------------------
In 1998, the Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income." The statement requires companies to report, by major
component and in total, the change in net assets from non-owner sources. The
adoption had no effect on the financial position or results of operations of the
Company.
Other comprehensive income includes foreign currency translation
adjustments and unrealized gains and losses on marketable securities, net of the
change in the current maturity value of the Company's Debt Exchangeable for
Common Stock securities ("DECS"). The Company's other comprehensive income and
related tax effects were as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
=================================================================================================
<S> <C> <C> <C>
Foreign currency translation adjustments:
Foreign currency translation adjustments, before tax $ (8,620) $ - $ 29,520
Income tax benefit (expense) 3,017 - (10,332)
- -------------------------------------------------------------------------------------------------
Net foreign currency translation adjustments (5,603) - 19,188
- -------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities,
net of the change in DECS maturity value:
Unrealized holding gains (losses) arising
during the period, before tax 823,298 187,586 (10,522)
Income tax expense (322,575) (72,556) (5,903)
- -------------------------------------------------------------------------------------------------
Net unrealized holding gains (losses) 500,723 115,030 (16,425)
Less: reclassification adjustment for gains
realized in net income, before tax (41,451) (117,116) (104,588)
Income taxes 15,896 44,914 50,354
- -------------------------------------------------------------------------------------------------
Net reclassification adjustment (25,555) (72,202) (54,234)
- -------------------------------------------------------------------------------------------------
Net unrealized gains (losses) on securities 475,168 42,828 (70,659)
- -------------------------------------------------------------------------------------------------
Other comprehensive income $469,565 $ 42,828 $(51,471)
- -------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the components of accumulated other comprehensive income
is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
=================================================================================================
<S> <C> <C> <C>
Foreign currency translation adjustments:
Balance, beginning of year $ - $ - $(19,188)
Current year change (5,603) - 19,188
- -------------------------------------------------------------------------------------------------
Balance, end of year (5,603) - -
- -------------------------------------------------------------------------------------------------
Unrealized gains on marketable securities,
net of the change in DECS maturity value:
Balance, beginning of year 161,641 118,813 189,472
Current year change 475,168 42,828 (70,659)
- -------------------------------------------------------------------------------------------------
Balance, end of year 636,809 161,641 118,813
- -------------------------------------------------------------------------------------------------
Accumulated other comprehensive income $631,206 $161,641 $118,813
- -------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
- --------------------------------------------------------------------------------
| NOTE 18: SEGMENT INFORMATION |
- --------------------------------------------------------------------------------
In 1998, the Company adopted the provisions of SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which require the Company to
report certain financial and other descriptive information about its reportable
operating segments. The adoption had no effect on the financial position or the
results of operations of the Company.
Tribune Company is a media company comprising three business segments as of
December 27, 1998. The segments were identified according to product.
Publishing -- The Company's publishing segment consists of four daily
newspapers, Internet and other online publishing businesses, cable news
programming and related publications and services. The newspapers are the
Chicago Tribune, the South Florida-based Sun-Sentinel, The Orlando Sentinel and
the Hampton Roads (Va.)-based Daily Press.
Broadcasting and Entertainment -- The Company's broadcasting operations consist
of WB television affiliates in New York, Los Angeles, Chicago, Philadelphia,
Boston, Dallas, Houston, Seattle, Miami, Denver and San Diego; Fox television
affiliates in Sacramento, Indianapolis, Hartford, Grand Rapids and Harrisburg;
an ABC television affiliate in New Orleans; a CBS television affiliate in
Atlanta; and four radio stations. In entertainment, the Company owns the Chicago
Cubs baseball team and produces and syndicates television programming.
Education -- The Company's education segment consists of The Wright Group,
Everyday Learning/Creative Publications, NTC/Contemporary Publishing, Landoll
and Ideal/Instructional Fair Publishing.
Financial data for each of the Company's business segments is presented on
page 63. No single customer provides more than 10% of the Company's revenue. The
Company derives less than 10% of its revenues from markets outside the U.S. In
determining operating profit for each segment, none of the following items have
been added or deducted: interest income and expense, equity earnings and losses,
non-recurring items or income taxes. Assets represent those tangible and
intangible assets used in the operations of each segment.
The Company's cost of sales by business segment was as follows:
(In thousands) 1998 1997 1996
==============================================================================
Publishing $ 724,363 $ 692,390 $ 679,963
Broadcasting and Entertainment 540,933 490,269 454,828
Education 125,733 72,322 60,370
- ------------------------------------------------------------------------------
Total cost of sales $1,391,029 $1,254,981 $1,195,161
- ------------------------------------------------------------------------------
62
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
Business Segments
(In thousands of dollars) 1998 1997 1996
============================================================================================================
<S> <C> <C> <C> <C>
Operating Publishing $1,498,573 $1,436,718 $1,336,639
Revenues Broadcasting and Entertainment 1,153,006 1,057,529 876,750
Education 329,310 225,533 192,316
-----------------------------------------------------------------------------------------
Total operating revenues $2,980,889 $2,719,780 $2,405,705
- ------------------------------------------------------------------------------------------------------------
Operating Publishing $ 377,137 $ 354,585 $ 291,257
Profit Broadcasting and Entertainment 317,355 285,896 203,531
Education 43,232 35,976 39,504
Corporate expenses (35,435) (34,426) (30,935)
-----------------------------------------------------------------------------------------
Total operating profit $ 702,289 $ 642,031 $ 503,357
- ------------------------------------------------------------------------------------------------------------
Depreciation Publishing $ 74,519 $ 70,417 $ 73,379
Broadcasting and Entertainment 33,362 32,034 24,873
Education 7,450 4,153 2,693
Corporate 2,761 2,410 2,265
-----------------------------------------------------------------------------------------
Total depreciation $ 118,092 $ 109,014 $ 103,210
- ------------------------------------------------------------------------------------------------------------
Amortization Publishing $ 5,175 $ 4,647 $ 7,564
of Intangible Broadcasting and Entertainment 54,357 44,922 20,567
Assets Education 17,944 13,930 11,552
-----------------------------------------------------------------------------------------
Total amortization of intangible assets $ 77,476 $ 63,499 $ 39,683
- ------------------------------------------------------------------------------------------------------------
Capital Publishing $ 65,577 $ 60,494 $ 58,686
Expenditures Broadcasting and Entertainment 44,055 23,747 27,233
Education 10,910 5,526 6,153
Corporate 19,168 14,078 1,252
-----------------------------------------------------------------------------------------
Total capital expenditures $ 139,710 $ 103,845 $ 93,324
- ------------------------------------------------------------------------------------------------------------
Business Publishing $ 47,000 $ - $ 1,627
Acquisitions and Broadcasting and Entertainment 387,363 1,358,120 408,810
Other Additions Education 77,933 136,048 304,096
to Long-Lived -----------------------------------------------------------------------------------------
Assets (1) Total acquisitions and other additions $ 512,296 $1,494,168 $ 714,533
- ------------------------------------------------------------------------------------------------------------
Assets Publishing $ 800,853 $ 668,532 $ 686,730
Broadcasting and Entertainment 3,148,814 2,923,663 1,616,797
Education 782,438 717,301 544,226
Corporate 1,203,465 468,058 853,147
-----------------------------------------------------------------------------------------
Total assets $5,935,570 $4,777,554 $3,700,900
- ------------------------------------------------------------------------------------------------------------
(1) Other additions to long-lived assets include broadcast rights payments for broadcasting and entertainment
and prepublication payments for education. For education, prepublication payments exceeded prepublication
amortization by $9.5 million, $12.5 million, and $9.4 million in 1998, 1997 and 1996 respectively.
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
Quarterly Results (Unaudited)
Quarters
--------------------------------------------
1998 (In thousands of dollars, except per share data) First Second Third Fourth Total
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Operating Publishing $372,508 $377,311 $353,614 $395,140 $1,498,573
Revenues Broadcasting and Entertainment 240,358 322,633 291,144 298,871 1,153,006
Education 59,827 85,640 112,390 71,453 329,310
--------------------------------------------------------------------------------------------------------
Total operating revenues $672,693 $785,584 $757,148 $765,464 $2,980,889
- ---------------------------------------------------------------------------------------------------------------------------
Operating Publishing $ 99,020 $100,440 $ 78,120 $ 99,557 $ 377,137
Profit Broadcasting and Entertainment 54,472 97,814 69,240 95,829 317,355
Education (696) 13,321 28,844 1,763 43,232
Corporate expenses (8,744) (8,912) (8,640) (9,139) (35,435)
--------------------------------------------------------------------------------------------------------
Total operating profit 144,052 202,663 167,564 188,010 702,289
- ---------------------------------------------------------------------------------------------------------------------------
Net loss on equity investments (14,325) (7,540) (7,212) (4,903) (33,980)
Sales of subsidiary and investments, net of write-downs (1) 7,299 85,800 - 26,020 119,119
Net interest expense (19,699) (19,551) (20,647) (22,442) (82,339)
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 117,327 261,372 139,705 186,685 705,089
Income taxes (47,250) (113,724) (56,399) (73,444) (290,817)
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 70,077 147,648 83,306 113,241 414,272
Preferred dividends, net of tax (4,695) (4,696) (4,696) (4,695) (18,782)
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Attributable to Common Shares $ 65,382 $142,952 $ 78,610 $108,546 $ 395,490
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Per Share (2)
Basic $ .53 $ 1.17 $ .65 $ .91 $ 3.26
--------------------------------------------------------------------------------------------------------
Diluted $ .49 $ 1.07 $ .60 $ .84 $ 3.01
- ---------------------------------------------------------------------------------------------------------------------------
Common Dividends Per Share $ .17 $ .17 $ .17 $ .17 $ .68
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Price (High-Low) $68 3/4- $72 3/8- $75 1/16- $67 1/2-
58 5/16 62 13/16 50 44 3/4
- ---------------------------------------------------------------------------------------------------------------------------
Notes to Quarterly Results:
(1) During 1998, the Company sold its WQCD radio station subsidiary, sold investments and recorded certain investment
write-downs. In the aggregate, these non-recurring items increased full year 1998 net income by $63.5 million and diluted
earnings per share by $.48. By quarter, they increased net income and diluted earnings per share as follows: $4.5 million
and $.03 in the first quarter; $42.9 million and $.32 in the second quarter; and $16.1 million and $.12 in the fourth quarter.
(2) Quarterly and full year earnings per share amounts are calculated independently based on the weighted average number of
common shares outstanding for each period.
(3) During 1997, the Company sold a portion of its investment portfolio and wrote down certain investments. In the aggregate,
these non-recurring items increased full year 1997 net income by $68.9 million and diluted earnings per share by $.51. By
quarter, they increased net income and diluted earnings per share as follows: $17.6 million and $.13 in the second quarter;
$25.5 million and $.19 in the third quarter; and $25.8 million and $.19 in the fourth quarter.
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
Quarters
--------------------------------------------
1997 (In thousands of dollars, except per share data) First Second Third Fourth Total
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Operating Publishing $355,126 $360,131 $341,516 $379,945 $1,436,718
Revenues Broadcasting and Entertainment 201,390 300,267 274,020 281,852 1,057,529
Education 37,403 59,344 79,750 49,036 225,533
--------------------------------------------------------------------------------------------------------
Total operating revenues $593,919 $719,742 $695,286 $710,833 $2,719,780
- ---------------------------------------------------------------------------------------------------------------------------
Operating Publishing $ 97,185 $ 94,328 $ 73,035 $ 90,037 $ 354,585
Profit Broadcasting and Entertainment 39,399 84,839 70,958 90,700 285,896
Education (160) 11,481 24,098 557 35,976
Corporate expenses (8,312) (7,950) (8,613) (9,551) (34,426)
--------------------------------------------------------------------------------------------------------
Total operating profit 128,112 182,698 159,478 171,743 642,031
- ---------------------------------------------------------------------------------------------------------------------------
Net loss on equity investments (11,703) (5,666) (8,590) (8,737) (34,696)
Sales of investments, net of write-downs (3) - 28,529 41,496 41,799 111,824
Net interest expense (6,144) (19,303) (17,426) (17,286) (60,159)
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 110,265 186,258 174,958 187,519 659,000
Income taxes (45,760) (75,326) (70,180) (74,109) (265,375)
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 64,505 110,932 104,778 113,410 393,625
Preferred dividends, net of tax (4,699) (4,700) (4,700) (4,699) (18,798)
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Attributable to Common Shares $ 59,806 $106,232 $100,078 $108,711 $ 374,827
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Per Share (2)
Basic $ .49 $ .86 $ .81 $ .88 $ 3.05
--------------------------------------------------------------------------------------------------------
Diluted $ .45 $ .80 $ .75 $ .81 $ 2.81
- ---------------------------------------------------------------------------------------------------------------------------
Common Dividends Per Share $ .16 $ .16 $ .16 $ .16 $ .64
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Price (High-Low) $42 3/8- $50 5/16- $54 13/16- $61 1/2-
35 1/2 39 3/4 48 51 9/16
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
Eleven Year Financial Summary
(In thousands of dollars, except per share data) 1998 1997 1996 1995
==========================================================================================================================
<S> <C> <C> <C> <C>
Operating Results
Operating Revenues
Publishing excluding Daily News $1,498,573 1,436,718 1,336,639 1,312,767
New York Daily News $ - - - -
Broadcasting and Entertainment $1,153,006 1,057,529 876,750 828,806
Education $ 329,310 225,533 192,316 103,101
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $2,980,889 2,719,780 2,405,705 2,244,674
- --------------------------------------------------------------------------------------------------------------------------
Operating Profit
Publishing excluding Daily News $ 377,137 354,585 291,257 272,093
New York Daily News $ - - - -
Broadcasting and Entertainment $ 317,355 285,896 203,531 171,618
Education $ 43,232 35,976 39,504 4,608
Corporate expenses $ (35,435) (34,426) (30,935) (29,899)
- --------------------------------------------------------------------------------------------------------------------------
Total Operating Profit $ 702,289 642,031 503,357 418,420
- --------------------------------------------------------------------------------------------------------------------------
Net loss on equity investments $ (33,980) (34,696) (13,281) (13,209)
Sales of investments and subsidiaries, net of write-downs $ 119,119 111,824 - 14,672
Net interest expense $ (82,339) (60,159) (15,663) (7,349)
- --------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations
Before Income Taxes $ 705,089 659,000 474,413 412,534
Income taxes $ (290,817) (265,375) (191,663) (167,076)
- --------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations $ 414,272 393,625 282,750 245,458
Discontinued Operations of QUNO, net of tax $ - - 89,317 32,707
Cumulative effects of changes in accounting principles (1) $ - - - -
- --------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) (2) $ 414,272 393,625 372,067 278,165
- --------------------------------------------------------------------------------------------------------------------------
Share Information
Diluted earnings (loss) per share
Continuing operations
Before non-recurring items $ 2.53 2.30 1.94 1.55
Total (2) $ 3.01 2.81 1.98 1.61
Discontinued operations $ - - .66 .23
Net income $ 3.01 2.81 2.64 1.84
Common dividends per share $ .68 .64 .60 .56
Weighted average common shares outstanding (000's) 121,214 122,879 122,842 129,580
Financial Ratios
Operating profit margin 23.6% 23.6% 20.9% 18.6%
Net income margin 13.9% 14.5% 15.5% 12.4%
Net income as a percentage of average shareholders' equity 19.8% 23.4% 25.5% 20.5%
Debt to capital 35% 41% 37% 33%
Financial Position and Other Data
Total assets $5,935,570 4,777,554 3,700,900 3,288,255
Long-term debt $1,616,256 1,521,453 979,754 757,437
Shareholders' equity $2,356,617 1,826,004 1,539,506 1,379,909
Capital expenditures $ 139,710 103,845 93,324 117,863
Dividends $ 101,090 97,357 92,423 91,202
Employees (full-time equivalents) 12,700 11,600 10,700 10,500
- --------------------------------------------------------------------------------------------------------------------------
(1) The adoption of new accounting rules for retiree benefits, income taxes and postemployment benefits decreased net income by
$16.8 million, or $.12 per share in 1992.
(2) Includes non-recurring items as follows: gain on the sales of subsidiary and investments, net of write-downs, totaling $63.5
million, or $.48 per share in 1998; gain on the sales of investments, net of write-downs, totaling $68.9 million, or $.51 per
share in 1997; equity income related to Qwest Broadcasting of $6.0 million, or $.04 per share in 1996; gain on the sale of
investment and subsidiaries totaling $8.7 million, or $.06 per share in 1995; and charges relating to New York Daily News
totaling $255.0 million, or $1.93 per share in 1990.
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Tribune Company and Subsidiaries
1994 1993 1992 1991 1990 1989 1988
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1,246,377 1,163,116 1,136,619 1,122,434 1,183,177 1,197,077 1,117,487
- - - - 321,823 422,024 436,843
764,197 727,213 684,051 617,514 623,981 584,326 505,729
102,082 21,209 - - - - -
- ---------------------------------------------------------------------------------------------------------
2,112,656 1,911,538 1,820,670 1,739,948 2,128,981 2,203,427 2,060,059
- ---------------------------------------------------------------------------------------------------------
291,323 252,412 226,412 218,138 280,587 301,303 250,709
- - - - (114,468) (2,179) 15,167
138,213 127,984 121,267 100,175 107,528 96,803 77,754
2,829 2,071 - - - - -
(26,001) (24,207) (23,465) (21,499) (22,362) (21,900) (22,699)
- ---------------------------------------------------------------------------------------------------------
406,364 358,260 324,214 296,814 251,285 374,027 320,931
- ---------------------------------------------------------------------------------------------------------
(9,739) (1,857) (2,081) (1,864) (2,285) (2,221) (2,142)
- - - - (295,000) 3,133 -
(4,778) (9,545) (22,510) (30,387) (23,478) (12,040) (33,341)
- ---------------------------------------------------------------------------------------------------------
391,847 346,858 299,623 264,563 (69,478) 362,899 285,448
(158,698) (142,212) (120,089) (106,514) 22,055 (150,948) (135,135)
- ---------------------------------------------------------------------------------------------------------
233,149 204,646 179,534 158,049 (47,423) 211,951 150,313
8,898 (16,040) (42,909) (16,068) (16,110) 30,470 60,093
- - (16,800) - - - -
- ---------------------------------------------------------------------------------------------------------
242,047 188,606 119,825 141,981 (63,533) 242,421 210,406
- ---------------------------------------------------------------------------------------------------------
1.48 1.30 1.16 1.02 1.44 1.30 .99
1.48 1.30 1.16 1.02 (.49) 1.30 .99
.06 (.11) (.30) (.11) (.12) .20 .40
1.54 1.19 .74 .91 (.61) 1.50 1.39
.52 .48 .48 .48 .48 .44 .38
134,426 132,742 130,036 128,728 132,064 144,780 151,272
19.2% 18.7% 17.8% 17.1% 11.8% 17.0% 15.6%
11.5% 9.9% 6.6% 8.2% (3.0)% 11.0% 10.2%
19.9% 18.8% 13.6% 17.6% (6.9)% 21.4% 18.4%
23% 31% 46% 47% 51% 41% 32%
2,785,825 2,536,410 2,751,570 2,795,298 2,826,099 3,013,537 2,905,382
411,200 510,838 740,979 897,835 998,962 880,686 650,118
1,332,980 1,095,627 911,889 851,699 764,512 1,077,996 1,188,480
91,626 75,620 88,349 54,988 91,226 113,969 140,471
88,325 81,927 80,407 78,415 80,110 75,298 57,416
10,500 9,900 10,000 10,000 13,500 13,800 13,800
- ---------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
Tribune Company and Subsidiaries
- --------------------------------------------------------------------------------
| Management's Responsibility for Financial Statements |
- --------------------------------------------------------------------------------
Financial Statements -- Management is responsible for the preparation, integrity
and fair presentation of the Company's consolidated financial statements and
related financial information included in this annual report to shareholders.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and necessarily include certain amounts
that are based on management's best estimates and judgments.
The consolidated financial statements were audited by
PricewaterhouseCoopers LLP, independent accountants, and their report is shown
below. PricewaterhouseCoopers LLP was given unrestricted access to all financial
records and related data, including minutes of all meetings of stockholders, the
Board of Directors and committees of the Board. The Company believes that all
representations made to the independent accountants during their audits were
valid and appropriate.
Internal Control System -- Management is also responsible for establishing and
maintaining a system of internal control, designed to provide reasonable
assurance to the Company's management and Board of Directors regarding the
preparation of reliable published financial statements. The system of internal
controls is continually reviewed for its effectiveness and is augmented by
written policies and procedures, the careful selection and training of qualified
personnel and a program of internal audit. Each year, the Company's independent
accountants conduct a review of internal accounting controls to the extent
required by generally accepted auditing standards and perform such tests and
related procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements.
The Audit Committee of the Board of Directors is responsible for reviewing
and monitoring the Company's financial reporting and accounting practices. The
Audit Committee consists of five independent directors. The Committee meets with
representatives of management, the independent accountants and internal auditors
to discuss financial reporting, accounting and internal control matters.
PricewaterhouseCoopers LLP and the internal auditors have direct access to the
Audit Committee.
/s/ John W. Madigan /s/ Donald C. Grenesko
- ------------------- ----------------------
John W. Madigan Donald C. Grenesko
Chairman, President and Senior Vice President/Finance and
Chief Executive Officer Administration
- --------------------------------------------------------------------------------
| Report of Independent Accountants |
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Tribune Company -- In our opinion,
the accompanying consolidated balance sheets and the related consolidated
statements of income, of cash flows and of shareholders' equity present fairly,
in all material respects, the financial position of Tribune Company and its
subsidiaries at December 27, 1998 and December 28, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 27, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
Chicago, Illinois
February 9, 1999, except as to Note 2,
which is as of March 1, 1999
68
EXHIBIT 21
TRIBUNE COMPANY
TABLE OF SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
PUBLISHING
- ----------
Tribune Publishing Company Delaware
Chicago Tribune Company Illinois
Chicago Tribune Newspapers, Inc. Illinois Chicago Tribune; Exito!
Chicago Tribune Press Service, Inc. Illinois Tribune Newspaper Network
Newspaper Readers Agency, Inc. Illinois
Tribune Direct Marketing, Inc. Delaware Tribune Direct Marketing
RELCON, Inc. Delaware
Tribune Career Events, Inc. Delaware
Tribune Media Services, Inc. Delaware TV Log; TV Week; TV Listings;
TMS Stocks
Sun-Sentinel Company Delaware Sun-Sentinel; Gold Coast Labeling;
Signs by Sun-Sentinel;
Gold Coast Publications, Inc. Delaware Gold Coast Shopper; Vital Signs;
South Florida Parenting; City Link
New River Center Maintenance Association, Inc. Florida
Orlando Sentinel Communications Company Delaware The Orlando Sentinel; US Express;
Tribune Interactive Network Services;
Florida Journal Publications;
Black Family Today; Central Florida
Family; Central Florida Family
Guide; Sentinel Signs; O'Arts;
Orlando City Book; Relcon of Florida
Neocomm, Inc. Delaware
Sentinel Communications News Ventures, Inc. Delaware
Tribune Interactive Delaware
South Florida Interactive Delaware
Orlando Interactive Delaware
Hampton Roads Interactive Delaware
Chicago Interactive Delaware
The Daily Press, Inc. Delaware Daily Press
Tribune National Marketing Company Delaware
South Florida Newspaper Network, Inc. Delaware
JDTV, Inc. Wisconsin
UltimateTV, Inc. Wisconsin
Premier DataVision, Inc. Colorado
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
BROADCASTING AND ENTERTAINMENT
- ------------------------------
Tribune Broadcasting Company Delaware Tribune Plus; Tribune Plus Corporate
Sales; Tribune Creative Services Group
Tribune Broadcasting News Network, Inc. Delaware TribNet
ChicagoLand Television News, Inc. Delaware ChicagoLand Television/CLTV News
Oak Brook Productions, Inc. Delaware
ChicagoLand Microwave Licensee, Inc. Delaware
Tribune Regional Programming, Inc. Delaware
Tribune Denver Radio, Inc. Delaware KOSI; KEZW; KKHK
WGN Continental Broadcasting Company Delaware WGN-TV; WGN Radio;
Tribune Radio Networks
Tribune Entertainment Company Delaware
Magic T Music Publishing Company Delaware
Tribune Entertainment Production Company Delaware
Chicago River Production Company Delaware
435 Production Company Delaware
5800 Sunset Productions Inc. Delaware
North Michigan Production Company Delaware
Oak Brook Productions, Inc. Delaware
Towering T Music Publishing Company Delaware
Tribune (FN) Cable Ventures, Inc. Delaware
KWGN Inc. Delaware KWGN-TV
WGNO Inc. Delaware WGNO-TV
KCPQ Inc. Delaware KCPQ-TV
KTLA Inc. California KTLA-TV
WPIX, Inc. Delaware WPIX-TV; Tribune New York Holdings
WLVI Inc. Delaware WLVI-TV
Tribune Network Holdings Company Delaware
KSWB Inc. Delaware KSWB-TV
KHTV Inc. Delaware KHTV-TV
Tribune Television Company Delaware WPMT-TV; WXIN-TV; WTIC-TV;
KDAF-TV; WPHL-TV
Channel 20, Inc. Delaware
Channel 40, Inc. Delaware KXTL-TV
Channel 39, Inc. Delaware WBZL-TV
Tribune Television Holdings, Inc. Delaware WXMI-TV
Tribune California Properties, Inc. Delaware
Chicago National League Ball Club, Inc. Delaware Chicago Cubs
Diana-Quentin, Inc. Illinois
Rockford Professional Baseball Club, Inc. Florida
Rock River Concessions, Inc. Florida
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Other names under which
Incorporation subsidiary does business
--------------- ------------------------
<S> <C> <C>
EDUCATION
- ---------
Tribune Education Company Delaware
NTC/Contemporary Publishing Group, Inc. Illinois Contemporary Books; NTC Publishing
Group; Country Roads Press; NTC
Learning Works; National Textbook
Company; Passport Books; VGM Career
Horizons; The Quilt Digest Press; NTC
Business Books; Masters Press; RGA
Publishing Group; Lowell House;
Peter Bedrick Books; Keats Publishing
Wright Group Publishing, Inc. Delaware The Wright Group
Breakthrough to Literacy, Inc. Delaware
Mimosa Education, Inc. Delaware
Mimosa Publications Pty Limited Australia
Yarra Pty Limited Australia
Carringbush Publications Pty Limited Australia
Dragon Media International Pty Limited Australia
Everyday Learning Corporation Illinois
Educational Publishing Corporation Delaware
Ideal/Instructional Fair Publishing Group, Inc. Delaware Instructional Fair.TS Denison;
In Celebration; Ideal School Supply
Company
Creative Publications, Inc. Delaware
Tribune Education Sales, Inc. Delaware
Landoll, Inc. Ohio Landoll's
Breakthrough Acquisition Corporation Delaware
Applecross Enterprises Limited British Virgin
Islands
Shortland Publications, Inc. Delaware
Lands End Publishing, Inc. Delaware
Shortland Publications Limited New Zealand
Lands End Publishing Limited New Zealand
Shortland Publications (USA), Inc. Colorado
Tribune Education (UK) Limited United Kingdom
Living and Learning (Cambridge) Ltd. United Kingdom
Kingscourt Publishing Limited United Kingdom
Sunshine International, Inc. Delaware
Great Wave Software California
MISCELLANEOUS
- -------------
Tribune Properties, Inc. Delaware New River Center Management Co.
Riverwalk Center I Joint Venture Florida (Partnership)
Tower Acquisition Company, Inc. Delaware
</TABLE>
3
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (File Nos. 333-18921
and 333-66077) and in the Registration Statements on Form S-8 (File Nos.
2-90727, 33-21853, 33-26239, 33-47547, 33-59233, 333-00575, 333-03245 and
333-18269) of Tribune Company of our report dated February 9, 1999, except to
Note 2, which is as of March 1, 1999, appearing in the 1998 Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
March 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 1998
Consolidated Statements of Income and Consolidated Balance Sheets and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> DEC-27-1998
<CASH> 11,598
<SECURITIES> 835
<RECEIVABLES> 599,631
<ALLOWANCES> 44,402
<INVENTORY> 99,005
<CURRENT-ASSETS> 945,129
<PP&E> 1,664,526
<DEPRECIATION> 987,791
<TOTAL-ASSETS> 5,935,570
<CURRENT-LIABILITIES> 828,130
<BONDS> 0
0
293,203
<COMMON> 1,018
<OTHER-SE> 2,062,396
<TOTAL-LIABILITY-AND-EQUITY> 5,935,570
<SALES> 0
<TOTAL-REVENUES> 2,980,889
<CGS> 0
<TOTAL-COSTS> 1,391,029
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,451
<INCOME-PRETAX> 705,089
<INCOME-TAX> 290,817
<INCOME-CONTINUING> 414,272
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 414,272
<EPS-PRIMARY> 3.26
<EPS-DILUTED> 3.01
<FN>
The information reported above under "EPS-PRIMARY" represents basic earnings
per share for the year ended December 27, 1998.
</FN>
</TABLE>
