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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________
Commission file number 1-10263
T/SF COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 73-1341805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2407 East Skelly Drive, Tulsa, Oklahoma 74105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (918) 747-2600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange
------------------- on which Registered
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Common Stock, $0.10 par value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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 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
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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. [_]
As of March 17, 1995, 4,864,818 shares of the registrant's voting Common
Stock were outstanding. The aggregate market value of those shares held by
nonaffiliates of the registrant on March 17, 1995, was approximately $7,487,000.
For this purpose, the Common Stock was valued at $7.50 per share, being the
closing price on March 17, 1995, on the American Stock Exchange on which the
stock is traded. For purposes of this computation, only officers and directors
of the Company, the chief operating officer of each of its material
subsidiaries, and beneficial owners of more than 10 percent of the combined
voting power of all voting securities, and affiliates of such persons, were
deemed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Form 10-K.
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PART I
Item 1. Business
General
The Company, operating through subsidiaries, is a diversified
communications and information company (unless the context otherwise requires,
references to the "Company" include T/SF Communications Corporation and its
consolidated subsidiaries). In 1993, the Company made the decision to sell its
weekly free distribution shopper-newspapers in the suburban areas of
Philadelphia, Pennsylvania, being Shopper's Guide (the "New Jersey Shopper"),
and its two weekly free distribution shopper-newspapers on Long Island, New
York, known as Pennysaver and Shopper's Guide (the "New York Shopper"). The
sale of the New York Shopper was completed on November 1, 1993 and the sale of
the New Jersey Shopper was completed on May 2, 1994 (effective April 30, 1994).
Effective March 1, 1994, the Company acquired Galaxy Registration, Inc.
("Galaxy"), which is a trade show/convention registration and exhibitor
information and marketing services company (see the description below under
"Description of Business - Exposition Services"). In August, 1994, the Company
sold its smallest trade journal, Smokeshop (See "Description of Business -
Publishing"). Thus, at December 31, 1994, the Company published five trade
journals, Convenience Store News, United States Distribution Journal, The
Journal of Petroleum Marketing, Gaming and Wagering Business, and Expo, The
Magazine for Exposition Management. The Company's exposition services business
consists of the business of Galaxy and through Atwood Convention Publishing,
Inc. ("Atwood"), the publication of various convention and trade show related
publications, such as directories and convention daily newspapers, primarily on
a contract basis, and promotion and marketing services for corporate exhibitors.
The Company also engages in the business of obtaining, processing and providing
motor vehicle reports, truck driver employment information and other pre-
employment screening services primarily to the insurance and trucking
industries.
The Company was formed on March 17, 1989, to succeed to the publishing and
information businesses of Tribune/Swab-Fox Companies, Inc. ("Tribune/Swab-Fox").
Also on March 17, 1989, the Company entered into an Agreement for Contribution
of Assets, Assumption of Liabilities and Merger (the "Contribution Agreement")
with Tribune/Swab-Fox and Tulsa Tribune Company, now a wholly-owned subsidiary
of the Company ("Tribune"). The transactions contemplated by the Contribution
Agreement were completed on May 10, 1989, and the Company became the beneficial
owner of all of the businesses and assets, and assumed the related liabilities,
of Tribune, Transportation Information Services, Inc. ("TISI"), BMT
Communications, Inc. (formerly BMT Publications, Inc.) ("BMT"), and Shopper's
Guide, Inc. ("Shopper's Guide"), the owner of the New Jersey Shopper.
Pursuant to a Registration Statement, the Company completed its initial
public offering in June, 1989, by the issuance of 2,190,000 shares of common
stock, $0.10 par value ("Company Common Stock"), at a price to the public of
$12.00 per share. After underwriting discounts and expenses of the offering,
the Company netted approximately $24,000,000. As a result of the offering, the
3,600,000 shares of Company Common Stock issued to Tribune/Swab-Fox pursuant
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to the Contribution Agreement represented approximately 62 percent of the issued
and outstanding shares of Company Common Stock. Tribune/Swab-Fox currently owns
3,777,500 shares of the 4,864,818 shares of Company Common Stock outstanding, or
approximately 78 percent.
The proceeds of the offering were used to retire indebtedness of the
Company (approximately $6,500,000), to acquire, on January 4, 1990, Marks-
Roiland Communications, Inc. ("Marks-Roiland"), the owner, until sold, of the
New York Shopper (approximately $10,000,000), to acquire Atwood on August 3,
1990 (approximately $2,750,000), and for working capital (approximately
$4,750,000, including reduction of long-term debt of $2,222,000).
Before October 1, 1992, the Company published a daily newspaper in Tulsa,
Oklahoma. On September 30, 1992, the Company and World Publishing Company
("World"), the publisher of the morning daily newspaper in Tulsa, ended their 51
year joint operating arrangement. As a result of this transaction, the Company
received approximately $12,850,000 in 1992, plus proceeds from liquidation of
accounts receivable and inventory, will receive $450,000 per month through March
1, 1996, and The Tulsa Tribune (the Company's daily newspaper) was closed.
Recent Developments
On January 25, 1995, the Company entered into an Agreement and Plan of
Merger (as amended on March 3, 1995, the "Merger Agreement") with Tribune/Swab-
Fox whereby Tribune/Swab-Fox will be merged with and into the Company (the
"Merger"). In the Merger, Tribune/Swab-Fox stockholders (other than the
Company) will receive, with respect to each share of Tribune/Swab-Fox owned,
0.1255 of a share of Company Common Stock, or, at the election of the
stockholder and subject to certain limitations described in the Merger
Agreement, $0.88 in cash (the "Cash Alternative") (subject to appraisal rights
for dissenting Tribune/Swab-Fox stockholders). The Merger Agreement is subject
to the approval of the stockholders of both companies. A Registration Statement
on Form S-4 (File No. 33-57587) has been filed with the Securities and Exchange
Commission for use in securing stockholder approval and the Joint Proxy
Statement/Prospectus constituting a part thereof is expected to be mailed in
April, 1995, for stockholder meetings of the companies to be held in May, 1995.
On December 22, 1994, the Company announced that it had engaged Oppenheimer
& Co., Inc., to act as intermediary in the sale of three of the Company's trade
journals. See Description of Business - Publishing below for a discussion of
this action.
Description of Business
The following information describes the activities of the Company on a line
of business or industry segment basis. Information is also provided with
respect to the development of the business of each division during 1994.
Reference is made to Note 11 to the Financial Statements included in this Annual
Report on Form 10-K for summary financial information on each segment of the
Company's business. For years ended December 31, 1993 and 1992, the Publishing
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segment contributed 77 percent and 85 percent of the total revenues of the
Company with substantially all the remainder each year being generated by the
Information segment. For the year ended December 31, 1994, the Publishing
segment contributed 33 percent of total revenues of the Company, with the
Information segment contributing 27 percent and the Exhibition Services segment
generating 37 percent.
Publishing
For 1994, the Company's publishing activities included shopper-newspapers
or "shoppers" until the sale of the New Jersey Shopper on May 2, 1994, and trade
journal publishing for the full year. At September 30, 1993, the assets and
businesses of the shoppers (i.e., the New York Shopper and the New Jersey
Shopper) were reclassified to "assets held for sale" and, therefore, the results
of operations for the shoppers were not included in the operating results for
periods subsequent to September 30, 1993. The discussion in this section shall,
therefore, not describe the shoppers and reference is made to Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for a discussion of the financial impact of the New Jersey Shopper
and its sale in 1994.
Pursuant to an Asset Purchase Agreement, dated May 2, 1994 (the "Purchase
Agreement"), by and among the Company, Shopper's Guide, Inc., a wholly-owned
subsidiary of the Company which owned the New Jersey Shopper ("Seller"), and
Dickson Media, Inc. ("Buyer"), Seller sold substantially all the assets
constituting the New Jersey Shopper to Buyer. The transaction closed on May 2,
1994, effective at the close of business on April 30, 1994. In consideration
for this sale, Seller received $1,750,000 in cash. Buyer also assumed
liabilities of the Seller totaling $930,000 (Seller retained approximately
$205,000 in liabilities). Seller has received an additional $1,100,000 since
closing based on post-closing adjustments for current assets sold. The Company
also received a right to receive future payments from Buyer equal to 50 percent
of the "cash flow" of Buyer derived from the New Jersey Shopper for the five
years succeeding closing, after Buyer has received $1,500,000 from the first
cash flow. The Company can receive a maximum of $3,450,000 from this provision.
The consideration paid in connection with the sale of the New Jersey Shopper was
determined through arm's-length negotiations between Buyer and the Company. In
addition to the above, in connection with this sale, the Company agreed not to
compete with the Buyer or the New Jersey Shopper. In consideration for this
five year covenant-not-to-compete, the Company received $750,000 in cash. This
sale did not result in any gain or loss to the Company as the assets sold were
written down in the third quarter of 1993 to expected liquidation value.
All of the trade journals, other than Expo, are managed by BMT; therefore,
the discussion below of "trade journals" will exclude Expo. Expo is managed by
Atwood, part of the exposition services division, and is included in the
discussion of Atwood's results.
BMT is primarily a trade journal publisher and, as such, generates most of
its revenues from "business-to-business" advertising directed to the targeted
readers of each journal. BMT's trade journals, through "controlled" circulation
(i.e., the journal is delivered free to persons in the targeted industry who
"qualify"), provide an industry specific reader audience for advertisers
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interested in reaching such industry. As part of its business, BMT also owns or
operates several related trade shows.
BMT's trade journal publishing enjoyed significant growth in its operating
results from its publishing and trade shows activities in 1994. The trade shows
had an increase in revenues in 1994 of $1,358,000 over 1993, with gross profit
(revenues minus only direct expenses) from trade shows increasing from
$1,641,000 in 1993 to $2,501,000 in 1994. The trade journal directed to the
gaming industry increased its total advertising pages to 493 pages, as compared
to 352 pages in 1993, but the increase in operating income from its publishing
activities resulted primarily from the increase of 71 pages, from 840 pages in
1993 to 911 pages in 1994, of advertising in Convenience Store News, BMT's
largest trade journal. For the year, BMT's publishing activities recorded
revenue of $14,069,000, as compared with $12,373,000 for 1993.
Each of the Company's trade journals have many competing journals or other
print products targeted to the same readers. Additionally, the money allocated
for "trade" advertising has not grown as fast in recent years because competing
media/marketing techniques have competed more effectively for advertising
budgets. However, the good performance of the U.S. economy contributed to
1994's growth of BMT.
All of the Company's publishing activities benefited by a continued
softness in 1994 in newsprint and coated paper prices, the primary raw material
used in the Company's publishing activities (ink being the only other
significant raw material). However, these prices firmed and began rising in the
second half of 1994, and very large (over 50 percent cost increases are expected
in 1995). These increases in advertisement costs together with the 14 percent
postage increase effective in 1995 will have a significant effect on 1995
earnings for BMT.
In 1994, BMT sold its smallest trade magazine, Smokeshop. In 1993,
Smokeshop's revenues were $198,000 and it had been shrinking for a number of
years. The Company was successful in selling this magazine, effective September
1, 1994, for $118,000. This resulted in a book loss of $239,000, on a pre-tax
basis.
On December 22, 1994, the Company announced its intention to sell
Convenience Store News, United States Distribution Journal and The Journal of
Petroleum Marketing, and their related activities. To this end, the Company
engaged Oppenheimer & Co., Inc., to act as agent for the sale of these journals
and active selling efforts were begun in March, 1995. In 1994, these three
titles contributed $12,125,000 in revenues. The Company will use the proceeds
of any such sale to invest in its other businesses, including, in particular,
BMT's then remaining journal and trade shows directed to the growing legalized
gaming industry, and for general corporate purposes.
In connection with the decision to sell these journals, the Company entered
into employment/severance agreements with three senior executives of BMT,
including Hedy Halpert. See Item 11. Executive Compensation below for a
description of the arrangements entered into with Ms. Halpert and the other two
senior executives so affected.
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Exposition Services
The Company's exposition services division consists of the activities
conducted through Atwood and Galaxy. Atwood's base business consists of
publishing daily newspapers and other freely delivered published products to
audiences attending the trade shows and conventions with which Atwood contracts
to provide such services. Thus, the majority of Atwood's revenue is generated
from advertisers -- who are usually also exhibitors at the trade show or
otherwise have a presence there -- who utilize Atwood's products to gain
attention and booth traffic at the show or convention.
Many trade show managers or other publishers are involved in this kind of
publishing activity, but there are rarely more than two or three at any one show
and Atwood only publishes when it contracts directly with the owner or manager
of the show. This approach to the business allows Atwood to always have the
"official" publications at the show or convention.
Atwood showed significant growth in 1994, with pre-tax income improving
from $425,000 in 1993 to $1,073,000 in 1994. This increase came partly from the
fact that final incentive payments to the former owners of Atwood were completed
in 1993. However, Atwood also had growth in its operating business primarily
because of the continued success of its efforts to replace lower margin jobs
with higher margin work and significant growth in its Exhibitor Marketing
Services division. Atwood's growth has also come from expansion of its core
business of daily newspapers for conventions and trade shows, where it is the
dominant independent publisher for large exhibitions. Expo, a small controlled
circulation trade journal acquired in 1992, has been successfully integrated and
generated significant increases in advertising pages and income in 1994. Expo
is dedicated to serving the exposition management industry, and in 1993 became
the official publication of the International Association for Exposition
Management.
In March, 1994, the Company completed the acquisition of Galaxy, located in
Frederick, Maryland, by purchasing 100 percent of the outstanding stock of
Galaxy. Galaxy serves the convention and trade show management and corporate
exhibitor markets with registration, information and marketing services on a
national basis. One of Galaxy's primary services involves the use of the so-
called "smart card" technology in the Galaxy Expocard. Through Expocard,
exhibitors and trade show managers gather information on registrants and,
through the use of software and other technologies, better manage their results
from a trade show or convention, thereby aiding show managers in the marketing
of their shows and exhibitors in their sales and marketing efforts.
The Company acquired Galaxy with the payment of $1,200,000 in cash at
closing for the 30 percent of Galaxy's capital stock owned by the Galaxy
Employee Stock Ownership Plan, plus a note for $900,000 to John Laughlin
("Laughlin"), Galaxy's founder and owner of the remaining 70 percent of the
outstanding capital stock of Galaxy. In addition, the Company agreed to pay
Laughlin a so-called "earnout" based on the net earnings performance of Galaxy
over 1994, 1995 and 1996. If the required earnings targets are achieved, up to
an additional $2,900,000 could be paid to Laughlin. Also, Laughlin was employed
for an initial term of three years as the President and Chief Operating Officer
of Galaxy, and he entered into a noncompetition agreement with the
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Company which provides for the payment of $400,000 to him over four years. In
connection with this acquisition, Laughlin purchased 75,000 shares of common
stock of the Company at $4.625 per share, for a total purchase price of $346,875
(the per share purchase price being the average closing price of the Company
stock on the American Stock Exchange for the preceding 20 trading days).
For the ten months which the Company owned Galaxy in 1994, Galaxy generated
revenues of $8,003,000 and pre-tax income of $418,000. This entitled Laughlin
to a payment on his "earnout" of $200,000 (the cost of which was not included in
the determination of pre-tax income). Galaxy's biggest year in its history was
1994. The effect of this rapid growth was to put a significant strain on
Galaxy's organization and the Company has spent much of the last half of 1994
and the early part of 1995 assisting Galaxy in dealing with this growth.
Galaxy and Atwood both serve substantially the same markets -- trade show
management and corporate exhibitors. The Company believes that there is
significant synergy in owning both of these operations and the Company will
continue to work with these two companies to best exploit their position as
leading providers of information, marketing and promotional services to the
trade show industry. In 1995, Atwood will introduce digital publishing and
information services to its trade show industry customers, primarily through CD-
ROM products and electronic publishing on the Internet.
Information Services
TISI is the Company's information division. This division provides motor
vehicle reports, credit reports, worker compensation information, criminal
reports and truck driver employment histories primarily to trucking companies
(for pre-employment screening purposes) and the insurance industry (for
underwriting purposes). Many of this division's information services are
competitive with those provided by other companies, many of which are
significantly larger than the Company. Thus, many of such services are
effectively commodities with the Company competing primarily with price. The
Company's truck driver employment history data base is proprietary to the
Company.
TISI enjoyed significant growth in 1994, with pre-tax income increasing to
$3,250,000 as compared to $2,767,000 in 1993. This increase in pre-tax income
in 1994 came despite pre-tax losses of $408,000 incurred in 1994 as part of a
major new business thrust by TISI. This new business is called National
Employment Screening Services or NESS. The effort is designed to provide pre-
employment screening services to other industries by exploiting the information
resources of TISI and its pre-employment screening experience in the trucking
industry. This is a major thrust for the Company and TISI and significant
losses are expected to be incurred in 1995 for NESS as this operation gears up
for the future.
TISI's core information service of selling motor vehicle reports ("MVR's")
was up somewhat in 1994. The number of MVR's sold increased from 8,818,000 in
1993 to 9,011,000 in 1994, and the revenues from this activity were $6,289,000
in 1994, compared with $5,577,000 in 1993. Margins continue to be pressured by
competition, but revenue growth was helped by a
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new service introduced in 1993, "MVR Express," which produces MVR's more quickly
for a premium price.
Most of the rest of this division's products showed improvement in 1994.
In addition to continued growth in sales from its proprietary data base of truck
driver employment histories, gains were registered in this division's smaller,
but profitable lines of worker's compensation claims reports and credit
histories. A new service, criminal records checking, began in 1993, became
profitable in 1994 and shows promise of continued growth.
In 1993, this division's long distance resale business produced revenues of
$3,500,000. However, because of competitive and regulatory pressures and the
fact that this business is not central to this division's strategy, the Company
terminated this business in the first quarter of 1994, retaining an override
interest and the ability to continue to market the purchaser's services. See
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations for a description of the financial impact of this action.
Seasonal Factors
The Company's trade journal business is affected by the timing and nature
of the trade shows (normally the second and third quarters) related to the
industries to which the Company's journals are directed. The exposition
services business is affected by the timing of conventions and trade shows, with
most such shows operating in the February-May and September-November time
frames.
Employees
As of March 17, 1995, the Company employed 480 persons on a full-time
basis, none of whom is subject to a collective bargaining agreement. Of these,
the following were employed in the various segments of the Company's business:
<TABLE>
<CAPTION>
Number of Full
Time Employees
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General and administrative 13
BMT 67
TISI 142
Atwood 95
Galaxy 163
</TABLE>
Most employees are salaried, with sales personnel receiving commissions on
sales.
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Regulation
The providing of motor vehicle reports and much of the other information
provided by TISI on individuals is subject to various state and federal
regulations concerning fair credit reporting. Generally, such laws regulate
maintenance of records and responses to inquiries regarding possible errors in
information provided. In addition, recent legislation, including the Americans
With Disabilities Act, limits the salability of this division's worker's
compensation information.
Item 2. Properties
Except as noted, the following description of properties is as of December
31, 1994. The Company leases all of its offices except the main executive and
administrative offices of the Company, located at 2407 East Skelly Drive, Tulsa,
Oklahoma, totaling approximately 5,400 square feet. The Company also leases
approximately 25,000 square feet of space in Tulsa for TISI.
BMT leases approximately 10,400 square feet in New York City, as well as
small sales offices in Chicago and Tampa, Florida.
In March, 1995, Atwood began occupying new leased space (18,000 square
feet) in Overland Park, Kansas.
Galaxy leases approximately 26,000 square feet of office and warehouse
space from Laughlin pursuant to a lease entered into in connection with the
acquisition of Galaxy (see Item 13. Certain Relationships and Related
Transactions for a description of this lease), as well as 15,000 square feet
from an independent lessor.
The above leases expire at various times from 1996 through 2000, required
rental payments of $778,000 in 1994 (including rental on Atwood's former leased
space) and will require rental payments of approximately $850,000 in 1995
(assuming a full year of BMT's lease). If the Company is successful in selling
BMT's activities other than the publishing and trade shows directed to the
gaming industry, it will have substantially fewer employees and, thus, will
require less space. It is unknown at this time whether or not and at what cost
BMT's existing lease could be terminated (it runs through 2000) or the cost of
any new space then to be occupied. See Note 8 to the Financial Statements
included in this Annual Report on Form 10-K for more information on the
Company's lease obligations.
The Company believes that its facilities are suitable and adequate for its
immediate needs and that additional or substitute space is available if needed
to accommodate expansion.
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Item 3. Legal Proceedings
Until September 30, 1992, the Company published a daily newspaper, The
Tulsa Tribune. The Tulsa Tribune and its personnel, like other newspapers and
their reporters, are sued from time to time for articles that were published.
Even though The Tulsa Tribune has been discontinued, the Company or its
subsidiary, Tribune, remains liable for any such actions. The shopper-
newspapers formerly published by the Company are also subject to this type of
litigation. Typically, the suit is based on libel or defamation and includes a
claim for punitive damages. While the Company believes it has substantial and
meritorious defenses to each of the actions cited below in which the Company is
a named defendant, should any of the various defenses of the Company not be
available to it, and if any of the plaintiffs' claims for damages were upheld
against the Company, it could have a substantial adverse impact. Tribune and
the shopper-newspapers carry publisher's liability insurance covering libel and
defamation. In addition, the Company is subject to certain claims for indemnity
from World by reason of certain employment discrimination claims filed after
September 30, 1992, but which relate in part to the time World and Tribune
jointly employed the plaintiffs through Newspaper Printing Corporation ("NPC")
(pursuant to a Joint Operating Agreement which was terminated on September 30,
1992, World and Tribune employed NPC as their joint agent to conduct their
various publishing activities).
The following material cases were pending against the Company (or relate to
the Company's indemnity obligation to World) as of March 17, 1995:
1. Robert E. Cotner v. The Tulsa Tribune, Steve Ward and Newspaper
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Printing Corporation; Case No. CT 81-531; District Court of Tulsa County,
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Oklahoma. This is a defamation action in which Cotner seeks damages of $50,000
against Steve Ward, $300,000 from The Tulsa Tribune, and $300,000 from NPC. The
action was filed June 22, 1981. Cotner obtained service on Ward, but his
service on an agent of NPC, which was intended to be service on Tribune, was
quashed on motion by Tribune. Ward's motion for summary judgment was granted
and Cotner appealed that ruling, which was affirmed by the Oklahoma Court of
Appeals, and the Oklahoma Supreme Court. Cotner has obtained service of process
on Tribune and, arguably, NPC, on whose behalf a claim has been made that the
actions are barred by the statute of limitations. In September, 1992, the
Company moved the Court to dismiss for failure to prosecute. Cotner responded
and the Court has not ruled on the motion.
If the action is not deemed barred by the statute of limitations, the
case could result in substantial legal fees and costs, but legal counsel
considers the possibility of Cotner recovering damages in excess of $100,000 to
be remote.
2. Brenda George, Juli L. Andersen, Nancy Hill, Ira Jean Love, Anna L.
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Devers, Shantel Johnson and Niesha Byers v. World Publishing Company and
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Newspaper Printing Corporation; United States District Court for the Northern
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District of Oklahoma; Case No. 93-C-755-E.
This action was filed on August 23, 1993. Pursuant to the terms of the
Amendment and Termination Agreement of July 31, 1992 (the "Termination
Agreement"), which terminated
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the joint operating arrangement ("JOA") between World, Tribune and NPC, Tribune
may be responsible for indemnification with respect to a portion of any
liability established for conduct occurring prior to the termination date of the
JOA -- September 30, 1992. The original Complaint asserted claims of race
discrimination under 42 U.S.C. (S) 1981 and sought actual damages of $500,000
and punitive damages of $500,000 for each Plaintiff. On September 3, 1993, an
Amended Complaint was filed which added Ebony Nash, Connie Williams and Kia
Taylor as Plaintiffs. On March 1, 1994, a Second Amended Complaint was filed,
pursuant to the Court's order, which provided a more definite statement of the
factual allegations underlying each of the Plaintiffs' claims. On July 27, 1994,
this case was consolidated with the next case described below (Anna L. Devers v.
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World Publishing Company) for discovery purposes only. Currently, this case is
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in the discovery phase and it is not possible to determine its ultimate outcome
or whether Tribune will be liable for any amount.
3. Anna L. Devers v. World Publishing Company; United States District
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Court for the Northern District of Oklahoma; Case No. 94-C-84-K
This action was filed on January 31, 1994. Pursuant to the terms of the
Termination Agreement described above, Tribune may be responsible for
indemnification with respect to a portion of any liability established for
conduct occurring prior to the termination date of the JOA --September 30,
1992. The original Complaint asserted a claim of race discrimination under
Title VII, U.S.C. (S) 2000e, et seq. and sought actual and punitive damages in
the amount of $500,000. On March 9, 1994, Plaintiff filed an Amended Complaint
which clarified the factual allegations underlying her Title VII claim. On July
27, 1994, this case was consolidated with the previously described case (Brenda
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George, et al. v. World Publishing Company, et al.) for discovery purposes only.
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Currently, this case is in the discovery phase and it is not possible to
determine its ultimate outcome or whether Tribune will be liable for any amount.
4. Dale Reed v. Tulsa World Publishing Company and Newspaper Printing
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Corporation; United States District Court for the Northern District of Oklahoma;
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Case No. 94-C-61-B.
This action was originally filed in State Court on December 16, 1993.
Pursuant to the terms of the previously described Termination Agreement, Tribune
may be responsible for indemnification with respect to a portion of any
liability established for conduct occurring prior to the termination date of the
JOA -- September 30, 1992. In the original petition, the Plaintiff asserted
three claims: (1) a claim of race discrimination under Title VI, 42 U.S.C. (S)
2000e et seq.; (2) a state law, tort claim for violation of Oklahoma public
policy; and (3) a state law, tort claim for intentional infliction of emotional
distress. Pursuant to Oklahoma law, the amount of actual damages sought on each
claim was stated as being in excess of $10,000. Likewise, the amount of
punitive damages sought was stated as being in excess of $10,000. On January
20, 1994, the action was removed to Federal Court on the basis of federal
question jurisdiction. On January 24, 1994, the Defendants filed their Answer
and Counterclaims. In the counterclaims, the Defendants asserted a claim for
breach of contract, a claim for abuse of process, and a claim for malicious
prosecution. These counterclaims were based on an earlier settlement agreement
with the Plaintiff arising out of a charge of discrimination that he had filed
with the Oklahoma Human Rights
12
<PAGE>
Commission. On February 22, 1994, Plaintiff moved to dismiss Defendants' claims
for breach of contract and malicious prosecution. Also on February 22, 1994,
Plaintiff moved for partial summary judgment on Defendants' abuse of process
claim. On June 20, 1994, the Defendants moved to dismiss their malicious
prosecution claim without prejudice and the Court granted said motion on July 8,
1994. On July 12, 1994, Plaintiff was granted leave to amend and/or supplement
his complaint to add a separate claim for discrimination under 42 U.S.C. (S)
1981. On July 20, 1994, the Court denied Plaintiff's motion to dismiss
Defendants' breach of contract claim and Plaintiff's motion for partial summary
judgment on Defendants' abuse of process claim. The end result of the foregoing
is that Plaintiff now has four claims against the Defendants: (1) a claim of
race discrimination under Title VII, 42 U.S.C (S) 2000e et seq.; (2) a state
law, tort claim for violation of Oklahoma public policy; (3) a state law, tort
claim for intentional infliction of emotional distress; and (4) a claim of race
discrimination under 42 U.S.C (S) 1981. The Defendants have two remaining
counterclaims against the Plaintiff: (1) a claim for breach of contract; and (2)
a claim for abuse of process. Currently, this case is in the discovery phase and
it is not possible to determine its ultimate outcome or whether Tribune will be
liable for any amount.
5. Kenneth Reynolds v. Marks-Roiland Communications, U.S. District
------------------------------------------------
Court for the Eastern District of New York, Case No. CV 93 5875.
Kenneth Reynolds, Sr. had been employed by Marks-Roiland Communications
("Marks-Roiland") as a salesman. Following his discharge from Marks-Roiland, he
filed a charge of discrimination with the Equal Employment Opportunity
Commission ("EEOC") which was docketed as Charge No. ###-##-####. By letter
dated September 28, 1993, the EEOC District Director issued a Determination in
which it concluded that Marks-Roiland did not violate the discrimination
statutes, as had been alleged by the Plaintiff. On December 29, 1993, Reynolds
filed a civil action against Marks-Roiland alleging race discrimination.
Plaintiff apparently attempted to serve the Complaint on Marks-Roiland, but the
attempted service was defective. On February 27, 1995, Plaintiff filed a Notice
of Intent to Prosecute, and the matter remains on the docket. Counsel is unable
at this time to express an opinion as to the outcome of this matter.
6. The Company is subject to several audits by the Internal Revenue
Service, including an audit of the manner in which income from the JOA was
treated for tax purposes. In connection with this latter audit, the Company has
filed a request for technical advice with the Internal Revenue Service and no
action will be taken until such technical advice is received. See Note 8 to the
Financial Statements included in this Annual Report on Form 10-K for a further
discussion of these tax audits.
7. The Company is also a named defendant in other lawsuits and is a
party in governmental proceedings from time to time in the ordinary course of
business. While the outcome of such other lawsuits or proceedings against the
Company cannot be predicted with certainty, management does not expect these
matters to have a material adverse effect on the financial position of the
Company.
13
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the Company during
the fourth quarter of 1994.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company Common Stock became publicly held as a result of the Company's
initial public offering effective June 15, 1989. Most of the Company's shares
are held of record in "nominee" or "street" names. As of March 17, 1995, there
were only approximately 29 holders of record of Company Common Stock. However,
at the completion of the public offering, the Company was informed that there
were at that time in excess of 750 beneficial owners of Company Common Stock.
The following table sets forth the highest and lowest closing prices of the
Company's Common Stock for each quarter of 1993 and 1994, as reported by the
American Stock Exchange on which such stock is traded:
<TABLE>
<CAPTION>
High Closing Price Low Closing Price
------------------ -----------------
<S> <C> <C>
1993
1st Quarter $6-1/4 $4-3/4
2nd Quarter 5-5/8 4
3rd Quarter 6-1/4 4
4th Quarter 5-1/2 4
1994
1st Quarter 5 4-1/8
2nd Quarter 5 4-3/8
3rd Quarter 6 4-1/2
4th Quarter 6-1/4 5-3/8
</TABLE>
Since inception, the Company has not paid any cash or other dividends on
Company Common Stock. The Company, however, will reevaluate from time to time
its dividend payment policy based on its judgment as to the best interests of
the Company and its stockholders. The determination of the amount of future
cash dividends, if any, to be declared and paid, however, will depend upon,
among other things, the Company's financial condition, funds received from
operations, the level of its capital expenditures and its future business
prospects. The Company's current policy of not paying dividends is based on
belief of the Company's Board of Directors that, at this time, reinvestment of
the Company's earnings into its businesses to foster future growth is in the
best interest of the Company's stockholders.
14
<PAGE>
Item 6. Selected Financial Data
The general corporate overhead is allocated as set forth in a Management
Agreement entered into between the Company and Tribune/Swab-Fox, effective
January 1, 1989. For a description of this Management Agreement, see Item 13.
Certain Relationships and Related Transactions, below.
<TABLE>
<CAPTION>
Year Ended December 31,*
--------------------------------------------------------
1992 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Summary Operating Data:
Revenues................... $56,289 $67,977 $94,831 $93,583 $92,815
Operating costs........... 46,150 73,207 84,932 86,961 86,905
Depreciation and
amortization............. 3,141 3,794 7,387 4,899 5,266
Restructuring costs....... -- -- -- -- 2,441
Operating income (loss)
before interest, unusual
gain, and income taxes.... 6,998 (8,995) 2,585 1,789 (1,770)
Interest................... 559 1,620 2,388 2,886 2,643
Unusual gain............... -- -- 24,412 -- --
Income (loss) before
extraordinary loss........ 3,850 (6,518) 14,040 (1,319) (3,869)
Net income (loss).......... 3,850 (7,078) 14,040 (1,319) (3,869)
Earnings (loss) per
share of common stock:
Before extraordinary
loss.................... .75 (1.23) 2.66 (.25) (.67)
Extraordinary loss....... -- (.11) -- -- --
Common shares outstanding.. 5,135 5,274 5,274 5,274 5,790
Summary Balance Sheet Data
(at period end):
Total assets............... 49,137 $47,061 $69,818 $57,870 $62,111
Total liabilities other
than long-term debt....... 15,496 14,863 21,314 18,598 18,443
Long-term debt, net of
current installments..... 3,674 4,005 13,233 18,041 21,118
Stockholders' equity....... 29,967 28,193 35,271 21,231 22,550
__________________________
</TABLE>
* The Company was a party to several events/transactions which affect the
comparability of the historical information presented above. On April 30,
1994, the Company sold the assets of the New Jersey Shopper. Effective March
1, 1994, the Company acquired the stock of Galaxy. During the third quarter
of 1993, the Company's Board made the decision to offer for sale its
shopper-newspaper operations. On November 1, 1993, the Company sold the
operating assets of the New York Shopper. On September 30, 1992, the Company
ceased publishing The Tulsa Tribune as a result of the termination of a
joint operating agreement. In August 1990, the Company acquired all of the
outstanding stock of Atwood. See the Company's Notes to Financial Statements
included in this Annual Report on Form 10-K for additional information on
these transactions/events.
15
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The information provided in this discussion and analysis relates to the
Company as the successor to the publishing and information services businesses
of Tribune/Swab-Fox since formation of the Company in May, 1989. Such
businesses were conducted by Tribune/Swab-Fox through its direct and indirect
subsidiaries, Tribune, BMT, TISI, Shopper's Guide and South Jersey Shopper, Inc.
(the latter two together composed the "New Jersey Shopper"). In May, 1989, the
Company acquired a Pennsylvania shopper operation to be part of the New Jersey
Shopper (which operation was closed in 1993) and Marks-Roiland (i.e., the owner
of the New York Shopper) and Atwood were acquired by the Company in January and
August, 1990, respectively, and Galaxy was acquired in March, 1994. Each of
these acquisitions and the previous acquisitions of BMT, TISI and the New Jersey
Shopper have been accounted for as a purchase. The results of operations of the
acquired companies for periods prior to the effective date of their acquisition
by the Company are not included in the Company's historical results of
operations. Segment operating data is set forth in Note 11 to the Financial
Statements included in this Annual Report on Form 10-K. Effective September 30,
1992, Tribune ceased operations. (See Item 1. Description of Business).
Tribune's 1992 operating results are included through September 30, 1992.
In the third quarter of 1993, the Company made the decision to offer for
sale all of the Company's shopper-newspapers. Effective September 30, 1993,
these operations were written-down to net realizable value and a pre-tax loss of
$9,224,000 recognized. No operations of the shopper-newspapers are included for
the periods subsequent to September 30, 1993. On November 1, 1993, the assets,
except cash, of the New York shopper-newspaper operation were sold for
$4,675,000 cash and assumption of approximately $1,560,000 of liabilities. On
May 2, 1994, the operations of the New Jersey Shopper were sold for $3,600,000
in cash (including certain post-closing adjustments), the assumption of
approximately $930,000 in liabilities and the right to receive a portion of
future "cash flow" from the New Jersey Shopper during the next five years after
the buyer recovers $1,500,000 from future cash flow.
Year Ended December 31, 1994, Versus Year Ended December 31, 1993
Operations for the year ended December 31, 1994, have four major variations
from the same period ended December 31, 1993. First, the 1994 period did not
include any shopper-newspaper operations because these operations were sold
during the past year. Second, Galaxy, which is a provider of registration and
information services to the exposition industry, was acquired effective March 1,
1994, and its operations are included for the ten months ended December 31,
1994, in exposition services along with the operations of Atwood. Third,
indebtedness has been reduced by over $11,000,000 during the past eighteen
months. Fourth, during the third quarter of 1993, a $9,224,000 loss on assets
held for sale was recognized related to the intended disposition of the shopper-
newspapers.
16
<PAGE>
Revenues of $56,289,000 for 1994 were $11,688,000 lower than for 1993. The
revenue decrease consisted of $26,212,000 which related to the shopper-
newspapers. Partially offsetting this decrease is the revenue increase in 1994
of $2,571,000 in the convention publishing component of the exposition services
(which is Atwood's activities) plus Galaxy's revenues of $8,003,000 from March
1, 1994. Convention publishing revenue increased as a result of additional
conventions, including specialty publications, and higher revenues from a trade
journal which published more issues in 1994. Convention publishing revenues for
1993 and 1992 were reclassified from publishing to exposition services.
Publishing revenues for 1994, disregarding the shopper-newspapers, were
$2,148,000 higher than the prior year. An increase in advertising pages in
Gaming and Wagering Business and Convenience Store News in 1994 represents the
major increases. The information services revenue increase of $592,000 for 1994
consists mainly of an increase in employment histories revenue, resulting from
both higher volume and an increase in the price of employment histories, a new
product introduced in 1993 (criminal records), and an increase in motor vehicle
report revenues, offset by a $2,613,000 decrease in 1994 in long distance
telephone resale revenue, resulting from the Company's termination of this
business during the first quarter of 1994 due to competitive and regulatory
considerations. In terminating this business, the Company maintained an
override interest and the ability to continue marketing services of the
purchaser.
Other revenue for 1994 and 1993, is substantially all related to the World
Gaming Congress conference and trade show sponsored by Communications' Gaming
and Wagering Business trade publication. Also included in other income is
interest income related to the contract receivable from World, income from a co-
sponsored trade show and covenant-not-to-compete income related to the New York
Shopper sale in November 1993.
Publishing costs and expenses were $19,579,000 lower for 1994, as compared
with 1993. The decrease in costs related to the shopper-newspapers was
$21,600,000 for 1994. The increase in 1994 related to the growth of the World
Gaming Congress conference and trade show, as noted in other revenue above,
partially offsets the shopper-newspapers decrease. Trade journal costs
increased in 1994 related to the increase in pages as compared with 1993.
Information services costs and expenses were $516,000 lower for 1994, as
compared with 1993. The increase in costs related to the criminal records
product introduced in 1993 and higher volumes, including additional personnel
and related costs, was more than offset by the decrease of $2,394,000 in 1994,
related to long distance telephone resale costs because of the termination of
this business in early 1994.
Exposition services costs and expenses consist of Atwood for 1994 and 1993
and Galaxy for ten months in 1994. The increase of $5,506,000 for 1994,
includes increases of $1,557,000 related to the convention publishing business
as noted above and Galaxy's 1994 operating costs for the ten months of
$3,949,000.
General and administrative expenses were $3,244,000 lower in 1994, as
compared with 1993. The decrease in 1994 related to the shopper-newspapers was
$5,422,000. Galaxy's general and administrative expenses of $2,700,000 in 1994
and increases in each of the other divisions
17
<PAGE>
related to continued growth, mainly personnel costs, partially offset the
decrease from the shopper-newspapers. In addition, retirement and deferred
compensation expense of approximately $1,800,000 was included in 1993,
attributable to the retirement of the then chairman and chief executive officer
of the Company.
Interest expense decreased $1,061,000 for 1994, as compared with 1993, which
is related to the payoff of the 10.32% Senior Notes in November 1993, and other
principal payments on debt and reductions in deferred contract liabilities
during the past year. The interest rate increase on current outstanding debt
reduced the amount interest expense declined in 1994 from debt reductions.
Depreciation and amortization decreased $653,000 in 1994, as compared with
1993, substantially all related to disposition of the depreciable and
amortizable assets of the shopper-newspapers. Galaxy's depreciation and
amortization of $823,000 is included for ten months in 1994 and partially offset
the decrease from the shopper-newspapers.
The loss on assets held for sale in 1993 represented the reduction from book
value to estimated net value of the shopper-newspaper assets which were being
held for sale and were subsequently sold in November, 1993, and May, 1994, with
no additional loss. No loss was recognized on the assets of the three trade
journals held for sale at December 31, 1994.
Provision for income taxes as a percent of income before income taxes is
higher than the statutory federal income tax rate because goodwill amortization
related to certain acquisitions is not deductible for income tax purposes.
Year Ended December 31, 1993, Compared to Year Ended December 31, 1992.
Revenues for 1993 decreased $26,854,000 from 1992. $19,900,000 of the
decrease was due to newspaper publishing revenues for 1992 through September 30,
1992, when The Tulsa Tribune ceased publication after the agreement with World
which terminated the joint operating arrangement. Revenues from the shopper-
newspapers were $11,500,000 lower in 1993 as compared with 1992. Fourth quarter
1992 revenues from shopper-newspapers were $9,500,000, whereas no fourth quarter
revenue was recognized from shopper-newspapers in 1993 due to the operations
being held for sale. The New Jersey Shopper revenues were $2,000,000 lower for
1993 as compared with 1992 mainly attributable to the effect on operations of
moving to a new location over a three month period in early 1993. This resulted
in the commercial printing operations being shut-down for approximately one
month. The other major reason New Jersey Shopper revenues were lower in 1993
was lower volume and prices in the preprint insert business caused by the
competitive environment.
Revenues from convention/trade show publishing increased approximately
$1,500,000, most of which was attributable to continued growth of this
operation, including a $300,000 increase from a small trade publication acquired
in mid-1992.
18
<PAGE>
Information services revenues increased $1,800,000 in 1993 as compared with
1992, consisting mainly of revenue from a new product, criminal record reports,
of $640,000; higher revenue from employment history information of $700,000, a
result of both higher volume and an increase in price; and an increase in
revenue from motor vehicle reports of $300,000 as a result of higher volume and
a new service, "MVR Express," which provides a motor vehicle report faster for a
premium price.
Other revenue and interest increased $850,000 which consisted of a $730,000
increase in interest income attributable to the contract receivable from World
that was a part of the termination of the JOA and an $800,000 increase in
revenue from conferences sponsored by the Company's trade journal group, as a
result of an increase in existing conference exhibitors and attendees and a new
conference. Included in 1992 other income was a $950,000 lawsuit settlement
from MCI.
Costs and expenses were $16,000,000 lower in 1993 as compared with 1992.
Newspaper publishing costs were $15,000,000 lower in 1993 (the costs incurred in
the nine months of operations of The Tulsa Tribune in 1992), and shopper-
newspaper costs were $10,500,000 lower in 1993, a result of only nine months'
costs being included in 1993. Partially offsetting the above cost decreases,
the Company recognized a loss of $9,224,000 to reduce the shopper-newspapers
assets to net realizable value as a result of the decision to sell the shopper-
newspapers. Convention/trade show publishing costs and expenses increased
$1,300,000 in 1993 as a result of continued growth of this operation.
Information services costs and expenses increased $1,250,000 consisting of the
direct cost of criminal record reports, which is a new product, and an increase
in personnel costs due to an increase in the number of employees for new
products and growth in existing products.
General and administrative expenses in 1993 include $1,800,000 for
retirement expenses related to the resignation of the former chairman and chief
executive officer of the Company.
Interest expense decreased $770,000 in 1993, attributable to a reduction in
debt of $11,750,000 as a result of scheduled debt payments and the early payoff
of the 10.32% Senior Notes in November 1993. This payoff was required by the
holder of the 10.32% Senior Notes in connection with the sale of the assets of
the New York Shopper. The early termination penalty ("yield maintenance
premium") required by the 10.32% Senior Notes was reduced through negotiations
with the holder of the 10.32% Senior Notes. This premium is accounted for as an
extraordinary loss in the financial statements.
Depreciation and amortization decreased $3,600,000 in 1993 attributable to
the sale of the newspaper publishing assets on September 30, 1992, the reduction
in shopper-newspaper assets to net realizable value at September 30, 1993, and
higher depreciation and amortization of approximately $2,400,000 in 1992 related
to a change in estimated lives used to depreciate and amortize certain assets.
19
<PAGE>
The Company's adoption of the change in accounting for income taxes as
required by Financial Accounting Standards Statement No. 109 did not have a
material effect on the Company's financial position or results of operations.
Year Ended December 31, 1992, Compared to Year Ended December 31, 1991.
The Company's revenues for 1992 increased $1,248,000 over revenues for 1991.
A $3,121,000 increase in information services revenues consisted of a $950,000
lawsuit settlement with MCI, a $1,100,000 increase in resale of long distance
telephone services, and $1,100,000 increase from all other services. An overall
revenue decrease of $1,915,000 from publishing activities is a net result of a
decrease in newspaper publishing revenues in 1992 of $6,050,000 attributable to
The Tulsa Tribune ceasing publication on September 30, 1992 (thus having only
nine months of operations), substantially offset by increased revenues from
trade journals of $1,500,000 due mainly to higher number of advertising pages,
shopper-newspapers of $750,000, most of which was higher volume of print and
mail advertising products and commercial printing, and convention/trade show
publishing of $2,000,000 because of both continued growth of this operation and
new products and services.
The early termination of the JOA between the Company's newspaper publishing
division and World, the publisher of the morning newspaper in Tulsa, resulted in
an "Unusual Gain" before income taxes of $24,412,000, consisting of payments of
$12,850,000 received in 1992, and the present value of future payments of
$450,000 per month through March 1996 reduced by severance costs of $2,200,000.
Although a substantial portion of the total payments is to be received in the
future, the gain on this transaction was required to be recognized currently for
financial reporting purposes.
Costs and expenses were $2,150,000 lower in 1992, composed of decreased
costs in newspaper publishing of $6,500,000, attributable to only nine months'
operations of the newspaper publishing operations and $500,000 lower newsprint
costs during the nine months in 1992; decreased costs in shopper-newspaper
operation of $380,000, which is mostly lower newsprint costs; and increased
costs in trade journals of $930,000, convention/trade show publishing of
$2,000,000 and information services of $1,800,000 (most of which in each
division is related to increased volume and additional personnel costs).
General and administrative expenses decreased $369,000 in 1992 attributable
to lower newspaper publishing expenses partially offset by an increase in
corporate costs, mainly personnel costs and professional fees, and an increase
at the convention/trade show publishing division and information services
division due to growth in operations.
Interest expense decreased $500,000 in 1992 related to a decrease in debt of
$8,000,000, as a result of both the early payoff of bank lines of credit and a
term loan and scheduled debt payments. Depreciation and amortization increased
$2,488,000 in 1992, substantially all related to the effect of a change in the
estimated lives used to depreciate and amortize certain machinery and equipment,
advertising lists and covenants-not-to-compete at the shopper-newspapers.
20
<PAGE>
Liquidity and Capital Resources
The Company's available cash reserves, lines of credit and cash flow have
been sufficient to service debt, provide working capital and finance necessary
capital expenditures in the ordinary course of operations. Because of the cash
to be received ($450,000 per month through March 1996) from the transaction with
World, it is anticipated that the Company's cash flow and current lines of
credit will be sufficient to meet its scheduled debt and other payment
requirements, including the prepayment (if desired) of the indebtedness of
Tribune/Swab-Fox to be assumed in the Merger, the anticipated capital
expenditures for 1995 and the funding of the Cash Alternative (though, as noted
below, if the full Cash Alternative were taken up (i.e., 10,000,000 shares of
Tribune/Swab-Fox's Common Stock are purchased by the Company for cash at $0.88
per share pursuant to the Cash Alternative in the Merger), substantially all of
the Company's cash and available credit would likely be needed. Significant
additional cash would be needed during 1995 only if a substantial acquisition
for cash were undertaken. To provide cash for the possibility of an acquisition
and to keep current borrowing to a minimum, the Company is offering three of its
trade publications for sale, as described herein. The Company may also pursue
other sources of financing, including private or public placements of debt or
common stock or other equity securities of the Company. The utilization of
equity securities of the Company may have the effect of diluting or reducing the
market price for the Company Common Stock.
In 1993, the Company utilized available cash and the proceeds from the sale
of the New York Shopper to prepay its 10.32% Senior Notes owned by The
Prudential Insurance Company of America. The total amount prepaid was
$8,889,000 in remaining principal, plus accrued interest and a prepayment
penalty of $802,000. This prepayment penalty was a negotiated reduction from
the $1,300,000 prepayment penalty which would have been required under the terms
of the notes.
Also in 1993, the Company prepaid all of its indebtedness to Bank of
Oklahoma, N.A. and entered into four, separate revolving credit agreements with
BancFirst. These agreements provide for different types of collateral and
borrowing arrangements, but together comprised revolving credit arrangements
allowing the Company to borrow up to $6,000,000. During the quarter ended
September 30, 1994, the Company and its subsidiaries renewed two credit
agreements and decreased their one-year bank lines of credit to $3,750,000. No
funds are currently drawn on these lines of credit. It is possible that, if the
full Cash Alternative is taken up, the Company could utilize substantially all
of its cash and lines of credit. The Company has held informal discussions with
BancFirst and management is confident that, in such circumstances, additional
lines of credit could be arranged, if needed.
The Company anticipates that capital expenditures in 1995 will be
approximately $2,600,000, excluding the Cash Alternative and any acquisitions.
Other than the Company's information division, the primary capital expenditures
will be for computers, software, furniture and office equipment and to acquire
additional "reader boxes" at Galaxy. The Company's information division
continues to offer its customers in the trucking industry credits for providing
employment information to be utilized in its data base, which credits can be
used against charges for future services from such division. All of the credits
earned are considered capital
21
<PAGE>
expenditures for the acquisition of such data. At December 31, 1994, the
Company's current assets exceeded current liabilities by $16,176,000.
Inflation
Except for the costs of newsprint and postage at BMT, the Company
anticipates the effect of inflation on its operations during 1995 will be
primarily limited to the effects which general inflation will have on costs in
most areas in which the Company operates. The price of coated paper used in the
Company's publishing segment is expected to increase in price more than 50
percent in 1995. Also, postage increased 10 percent to 18 percent in 1995
(depending on postal class) which will have a particularly significant impact on
the Company's journals.
Item 8. Financial Statements and Supplementary Data
See Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company has not changed accountants since its inception nor had any
reported disagreement on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure since the
Company's inception.
22
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information with respect to each
Director and executive officer of the Company, as well as with respect to
certain other key employees of the Company. All Directors of the Company hold
office until the next Annual Meeting of Stockholders and until the election and
qualification of their successors. Except as noted, each officer was elected in
1994 at the annual meeting of the Board of Directors to serve for one year or,
if earlier or later, until the next Annual Meeting of the Board of Directors.
<TABLE>
<CAPTION>
Director or Officer of
the Company or
Tribune/Swab-Fox or Position with the Company
Name Age Employee Since (1) and Tribune/Swab-Fox
---- --- ---------------------- -----------------------
<S> <C> <C> <C>
Howard G. Barnett, Jr. 44 1984 Chairman, President, Chief Executive
Officer and Director of the Company and
Director, President and Chief Executive
Officer of Tribune/Swab-Fox
Robert E. Craine, Jr. 47 1985 Executive Vice President and Director of
the Company and Senior Vice President of
Tribune/Swab-Fox
J. Gary Mourton 48 1980 Senior Vice President-Finance, Chief
Financial Officer and Treasurer of both the
Company and Tribune/Swab-Fox and
Director of the Company
William N. Griggs 63 1989 Director of the Company
Mark A. Leavitt 36 1989 Director of the Company
David Lloyd Jones 56 1991 Director of the Company
Martin F. Beck 77 1989 Director of the Company
Richard A. Wimbish 51 1987 President of TISI
Stuart P. Honeybone 53 1986 Vice President of both the Company and
Tribune/Swab-Fox and President of BMT
Wayne Atwood 43 1990 President of Atwood
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
John R. Laughlin 51 1994 President and Chief Operating Officer of
Galaxy
Donna J. Peters 65 1984 Secretary of both the Company and
Tribune/Swab-Fox
Jimmy C. Strong 60 1990 Vice President-Human Resources of the
Company
______________________
</TABLE>
(1) As the Company was not formed until 1989, if the date indicated is prior to
1989, this represents the date that the individual was first employed or
became an officer or director of Tribune/Swab-Fox.
Howard G. Barnett, Jr. -- Became Executive Vice President of Tribune/Swab-
Fox on January 1, 1985, and was elected President in March 1991, and Chief
Executive Officer on August 1, 1993. He was elected President of the Company on
its formation in 1989, and was elected Chairman and Chief Executive Officer on
August 1, 1993. For approximately ten years prior to joining Tribune/Swab-Fox,
Mr. Barnett was a member of the law firm of Sneed, Lang, Adams & Barnett, Tulsa,
Oklahoma. Mr. Barnett is the cousin of David Lloyd Jones and Jenkin Lloyd Jones
Jr., the son of Florence Lloyd Jones Barnett and the nephew of Jenkin Lloyd
Jones (the latter three being significant stockholders and directors of
Tribune/Swab-Fox).
Robert E. Craine, Jr. -- Joined Tribune/Swab-Fox in November, 1985, as
President of TSF Capital Corp., a wholly-owned subsidiary of Tribune/Swab-Fox.
He became Vice President of Tribune/Swab-Fox in May, 1986, and Senior Vice
President in August, 1988. For the 11 years preceding his joining Tribune/Swab-
Fox, Mr. Craine was a member of the law firm of Gable & Gotwals, Inc., Tulsa,
Oklahoma. Mr. Craine became Senior Vice President of the Company upon its
formation in 1989 and became Executive Vice President and a Director in March,
1994.
J. Gary Mourton -- Joined Tribune/Swab-Fox as Chief Financial Officer in
1980 and became Vice President-Finance and Treasurer in 1984. For the 11 years
prior to that time, Mr. Mourton was with the accounting firm of Arthur Andersen
& Co. Mr. Mourton is a certified public accountant. Mr. Mourton became Senior
Vice President-Finance, Chief Financial Officer and Treasurer of the Company
upon its formation in 1989.
William N. Griggs -- Has been a Managing Director of Griggs & Santow
Incorporated, a financial and economic consulting firm, since 1983. Dr. Griggs
previously served as Financial Economist at the Federal Reserve Bank of Dallas
and Deputy to the Assistant Secretary of the Treasury responsible for economic
policy. He currently serves on the Board of Directors of Massachusetts Mutual
Life Insurance Company, and its Investment Policy Committee. Dr. Griggs
received his Ph.D from Ohio State University.
24
<PAGE>
Mark A. Leavitt -- Joined Oppenheimer & Co., Inc., an investment banking
firm, as a Vice President in the Corporate Finance Department in 1987, and
became Senior Vice President in 1989 and Managing Director on May 1, 1992. For
the seven years prior to that time, Mr. Leavitt was with Continental Illinois
National Bank, and was a Senior Director in the Capital Markets Group when he
left to join Oppenheimer & Co., Inc.
David Lloyd Jones -- Served as Vice President and Director of Tulsa Tribune
Company, wholly-owned subsidiary of the Company, from 1984 until 1992. Mr.
Jones was elected as a Director of the Company in 1991. Mr. Jones is the cousin
of Howard G. Barnett, Jr., and is the son of Jenkin Lloyd Jones and the brother
of Jenkin Lloyd Jones Jr. (directors of Tribune/Swab-Fox).
Martin F. Beck -- Is Chairman of Beck-Ross Communications, Inc., Rockville
Centre, New York, a company which he founded in 1968 and which owns and operates
several radio stations. Mr. Beck has been involved most of his life in the
media business, primarily in radio. He is a past president of the New York
State Broadcasters Association, Past Chairman of the Radio Board of the National
Association of Broadcasters, and currently a member of the Executive Committee
of that organization, and is a member of the Board of the Radio Advertising
Committee.
Richard A. Wimbish -- Joined TISI, a wholly-owned subsidiary of the Company,
as Controller in 1987 and became Executive Vice President in 1990. Mr. Wimbish
was made President of TISI in 1991. Prior to joining TISI, Mr. Wimbish was
Controller and Chief Financial Officer of Carlson Reserve Corporation from 1981
through 1986.
Stuart P. Honeybone -- Joined Tribune/Swab-Fox in June, 1986, as Vice
President of TSF Capital Corp., a wholly-owned subsidiary of Tribune/Swab-Fox,
and became Vice President of Tribune/Swab-Fox in 1988. Mr. Honeybone became
Vice President of the Company upon its formation in 1989. Mr. Honeybone became
President of BMT in December, 1994. From September, 1985, until joining
Tribune/Swab-Fox, Mr. Honeybone was the owner and chief executive officer of HB
Management, a consulting firm specializing in problem or troubled businesses.
For the six years preceding this, Mr. Honeybone was with Hinderliter Industries,
Inc. and was Group Vice President, Energy Group, at the time of his leaving the
employ of such company.
John R. Laughlin -- Founded Galaxy, which was acquired by the Company as of
March 1, 1994, in 1982, and has been continuously employed by such company since
such time.
Wayne Atwood -- Founded Atwood, a wholly-owned subsidiary of the Company,
with his wife, Linette Atwood, and Tom Bodine, in 1983 and has been continuously
employed by such company since such time.
Donna J. Peters -- Has been Secretary of Tribune/Swab-Fox since 1984 and
became Secretary of the Company upon its formation in 1989.
25
<PAGE>
Jimmy C. Strong -- Became Vice President-Human Resources of the Company in
1990. For the year before joining the Company, Mr. Strong was with Hinderliter
Heat Treating, Inc., as Vice President of Human Resources, and was with
Hinderliter Industries, Inc., a diversified manufacturing company, for the
preceding 16 years.
Forms 3, 4 and 5 Filings. To the Company's knowledge, based solely on
review of the copies of Forms 3, 4 and 5 furnished to the Company and written
representations that no other forms were required, all persons required to file
Forms 3, 4 and 5 during and with respect to 1994 timely made all required
filings, except that Wayne Atwood reported on his Form 5 for 1994, the ownership
of a previously unreported option to acquire 8,000 shares of the Company's
Common stock granted to him in connection with the Company's acquisition of
Atwood in 1990.
Item 11. Executive Compensation
Compensation.
Set forth below is certain information with respect to the compensation of
the Company's Chief Executive Officer and each of the Company's and its
subsidiaries' four other most highly compensated executive officers, based on
salary and bonus earned during 1994, for services in all capacities to the
Company and its subsidiaries during each of the Company's last three fiscal
years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------------
Awards Payouts
------------------------ -------
Annual Compensation (1)
-----------------------------------
Other Securities All
Annual Restricted Underlying Other
Name and Compen- Stock Options/ LTIP Compensa-
Principal Position Year Salary($) Bonus($)(2) sation($) Award(s)($)(3) SARs(#)(4) Payouts($) tion($)(5)
--------------------------- ---- --------- ----------- --------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Howard G. Barnett, Jr.(6) 1994 207,704 77,889 -- 77,889 75,000 -- 5,544
Chairman, President and 1993 207,704 -0- -- -- -- -- 4,261
Chief Executive Officer 1992 207,704 46,657 -- -- -- -- 5,589
Wayne Atwood 1994 128,670 15,938 -- 31,875 10,000 -- 3,292
President, Atwood 1993 138,915 91,668 -- -- -- -- 2,656
1992 132,300 126,662 -- -- -- -- 2,646
J. Gary Mourton 1994 151,410 34,067 -- 34,067 37,500 -- 4,620
Senior Vice President and 1993 151,410 -0- -- -- -- -- 3,475
Chief Financial Officer 1992 151,410 30,973 -- -- -- -- 3,465
Robert E. Craine, Jr. 1994 133,900 30,127 -- 30,127 37,500 -- 4,107
Executive Vice President 1993 133,900 7,500 -- -- -- -- 2,884
1992 133,900 27,386 -- -- -- -- 3,412
Richard A. Wimbish 1994 125,000 36,192 -- -- 22,500 -- 3,960
President, TISI 1993 100,000 26,500 -- -- -- -- 2,593
1992 90,900 18,000 -- -- -- -- 2,138
Hedy Halpert(7) 1994 248,218 154,827 -- -- -- -- 5,544
formerly President and 1993 227,570 72,809 -- -- -- -- 4,497
Chief Operating 1992 205,000 75,851 -- -- -- -- 4,364
Officer of BMT
___________________
</TABLE>
26
<PAGE>
(1) No cash compensation other than the annual amounts described was paid to any
of the named executives during the period shown. Certain executives are
also entitled to car allowances or are provided cars, and club dues are paid
for certain executives. The value of such perquisites is not required to be
disclosed because the aggregate amount of such compensation does not exceed
the lesser of $50,000 or 10 percent of the total amount of annual salary and
bonus for any named executive.
(2) Includes bonuses earned for the year, even if paid in another year.
(3) Under the T/SF Communications Corporation 1994 Incentive Stock Plan (the
"Incentive Stock Plan"), approved by the stockholders of the Company at the
1994 Annual Meeting of Stockholders, one-half of the bonus paid to Howard G.
Barnett, Jr., J. Gary Mourton and Robert E. Craine, Jr., was to be paid in
the form of restricted stock grants. The amount shown here represents the
dollar amount of such stock grants, which were granted at a rate of $6.25
per share, being the closing price on the American Stock Exchange for
Company Common Stock on December 30, 1994 (the last trading day of 1994).
Each such stock grant vests 100 percent after three years, assuming the
employee is then employed by the Company (subject to earlier vesting in the
case of death or disability of employee). Dividends are payable on the
restricted stock to the same extent as would be paid on Company Common
Stock. Two-thirds of Wayne Atwood's 1994 bonus, or $31,874, is to be paid
by such a restricted stock grant with the price of the stock to be
determined based on the average of the 20 trading days preceding April 30,
1995. There are no other outstanding restricted stock grants.
(4) Consists solely of options to acquire shares of Company Common Stock.
(5) These amounts represent the total value of the Company's contributions made
or accrued to the Company's 401(k) plan and, as to Mr. Barnett only, by NPC
under its 401(k) plan for 1992 when Mr. Barnett was also employed by this
agency of a wholly-owned subsidiary of the Company. All such persons are
100 percent vested in their accounts under the Company's plan, and Mr.
Barnett was 100 percent vested in his accrued benefits under the NPC plan.
Mr. Barnett's vested interest in the NPC plan was distributed to him in 1992
as he terminated his employment with NPC as part of the termination of the
JOA with World.
(6) The cash compensation shown for Howard G. Barnett, Jr., in the table does
not include amounts paid to him as a director of Tribune/Swab-Fox.
Employees who are Directors of the Company do not receive fees from the
Company as Directors.
(7) Hedy Halpert, formerly President and Chief Operating Officer of BMT, and two
other officers of BMT (together, the "BMT Senior Executives"), were removed
as officers of BMT in December, 1994. The payments in the table above to
Ms. Halpert were pursuant to an Employment Agreement with her which expired
December 31, 1994. The formal severance of full-time employment with BMT by
the BMT Senior Executives occurred pursuant to agreements entered into in
January, 1995 (the "Employment/Severance Agreements"). Pursuant to the
Employment/Severance Agreements, the BMT Senior Executives are required to
provide varying amounts of services during 1995 and will be compensated
therefor as provided in such agreements. In particular, each agreement with
the BMT Senior Executives provides for a significant bonus to be paid upon
the sale of Convenience Store News, The Journal of Petroleum Marketing and
United States Distribution Journal, if accomplished in 1995. If such sale
is not accomplished, bonuses will be paid based on an agreed-to amount.
Thus, the primary function of the BMT Senior Executives in 1995 will be to
assist in the sale of the three journals being held for sale.
27
<PAGE>
Options.
The following table sets forth certain information with respect to
options exercised by the named executive officers of the Company and its
subsidiaries during 1994, and the number and value of unexercised options held
by such persons at the end of the year. The Company has never granted any stock
appreciation rights.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
-------------------------------------
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-the-Money
Securities Under- Options/SARs
lying Unexercised at Fiscal
Options/SARs at Year-End ($)
Fiscal Year-End (1)(2)
Value
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($)(1) Unexercisable Unexercisable
---- --------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Howard G. Barnett, Jr. -0- -0- 0/75,000 0/150,000
Wayne Atwood -0- -0- 5,336/12,664 0/20,000
J. Gary Mourton (3) -0- -0- 20,833/37,500 0/75,000
Robert E. Craine, Jr. (3) -0- -0- 12,500/37,500 0/75,000
Richard Wimbish (3) -0- -0- 1,166/22,500 0/45,000
Hedy Halpert -0- -0- 0/0 0/0
_______________________
</TABLE>
(1) Market value of the underlying securities at exercise date or fiscal year-
end, as the case may be, minus the option exercise price.
(2) The closing price for Company Common Stock on the American Stock Exchange on
December 30, 1994, the last trading day of the fiscal year, was $6.25.
(3) In March, 1995, Messers, Mourton, Craine and Wimbish allowed options to
acquire 20,833, 12,500 and 1,166 shares, respectively, of Company Common
Stock at $12.00 per share, to lapse.
28
<PAGE>
The following table sets forth certain information with respect to options
granted to the named executive officers of the Company and its subsidiaries
during 1994. The Company has never granted any stock appreciation rights.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
-------------------------------------------------------------------------
Individual Grants
------------------------------------------------------------------------------------- Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options/SARs of Stock Price Appreciation
Underlying Granted to Exercise for Option Term (2)
Options/SARs Employees in or Base Expiration ---------------------------
Name Granted(#)(1) Fiscal Year Price($/sh) Date 5%($) 10%($)
---- ------------- ------------ ------------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Barnett, Jr. 75,000 37.0 4.25 1/25/04 200,460 508,005
Wayne Atwood 10,000 4.0 4.25 1/25/04 26,728 67,734
J. Gary Mourton 37,500 18.5 4.25 1/25/04 100,230 254,003
Robert E. Craine, Jr. 37,500 18.5 4.25 1/25/04 100,230 254,003
Richard Wimbish 22,500 11.1 4.25 1/25/04 60,138 152,402
Hedy Halpert -- -- -- -- -- --
__________________
</TABLE>
(1) Consists solely of options to acquire shares of Company Common Stock. The
options were granted for a term of ten years, subject to earlier
termination in certain events related to the termination of employment.
The exercise price of the options is equal to the fair market value of
Company Common Stock on the date of grant. The options become exercisable
in full on January 25, 1997. The option exercise price may be paid in
cash, by delivery of already-owned shares, by offset of the underlying
shares, or by a combination of such methods. Tax withholding obligations
related to exercise may be paid by offset of the underlying shares, subject
to certain conditions.
(2) Potential realizable value illustrates the value that might be realized upon
exercise of the options immediately prior to the expiration of their term
(ten years from the date of grant), assuming that Company Common Stock
appreciates in value from the date of grant to the end of the option term at
rates of 5 percent and 10 percent, respectively, compounded annually.
Compensation of Directors. Employee Directors receive no additional
compensation for service on the Board of Directors or any committee thereof.
Nonemployee Directors are paid a fee of $5,000 per year, plus an attendance fee
of $350 per meeting. Nonemployee Directors receive an additional fee of $1,000
per year for each committee of the Board of Directors on which they serve, plus
an attendance fee of $350 per committee meeting. While Mr. Barnett will not
receive Director's fees from the Company, he will receive Director's fees from
Tribune/Swab-Fox in an amount comparable to the Company's payments to its
nonemployee Directors. All Directors are reimbursed by the Company for out-of-
pocket expenses incurred by them in connection with their service on the Board
of Directors and any committee thereof. In addition to the fees paid to Dr.
Griggs for serving as a Director of the Company, the Company has agreed to pay
the firm of Griggs & Santow Incorporated, economists and consultants, $5,000
annually for periodic consulting services.
Employment Agreements. As of March 17, 1995, the Company was subject to
employment agreements with certain directors, officers or key employees, as
follows:
29
<PAGE>
Jenkin Lloyd Jones -- By agreement effective January 1, 1991, the
Company agreed to cause NPC to pay (or, in the alternative, the Company, which
is the case) compensation to Jenkin Lloyd Jones of approximately $100,000
annually, plus a cost of living adjustment, through December 31, 1995. In
recognition of Mr. Jones' past contributions to the Company, these payments
were agreed to be made regardless of the number of hours worked by Mr. Jones.
David Lloyd Jones -- As part of the termination of the JOA with World,
Director David Lloyd Jones' employment with NPC was terminated and he was no
longer needed as an employee of Tribune. A severance arrangement was entered
into by the Company whereby Mr. Jones is employed by the Company for special
projects and is paid $50,000 per year through March, 1999. This severance
payment is in lieu of severance to which Mr. Jones would have been entitled
under the Company's package for other Tribune newsroom employees of NPC.
Wayne Atwood -- Effective January 1, 1994, the Company entered into a
new three-year Employment Agreement with Mr. Atwood providing for his continued
service as President of Atwood at a base salary of $145,860 per year, with
salary increases in subsequent years subject to the discretion of the Company.
For 1995, due to a reduced work schedule caused by an illness related
disability, Mr. Atwood's base salary has been reduced to $100,000. Mr. Atwood's
Employment Agreement has an incentive compensation provision. This provision
for 1994 provided that he could earn additional amounts for 1994 up to a maximum
of $30,625 plus nine percent of the amount by which Atwood's 1994 pre-tax income
exceeded Atwood's 1993 pre-tax income plus $200,000. All incentive compensation
is to be paid through issuance of restricted stock of the Company which will
provide for vesting three years after issuance (January 1, 1997, for bonus
shares earned for 1994), unless Mr. Atwood elects, prior to July 1, 1994, to
receive one-third of the incentive compensation in cash. As noted in the above
table, Mr. Atwood made such election for 1994. For 1995, Mr. Atwood's
compensation package is in the process of being negotiated.
Linette Atwood -- Effective January 1, 1994, the Company entered into a
new three-year Employment Agreement with Mrs. Atwood providing for her continued
service as Executive Vice President of Atwood at a base salary of $107,311 per
year, with salary increases in subsequent years subject to the discretion of the
Company. For 1995, Mrs. Atwood's base salary will be $110,531. Mrs. Atwood's
Employment Agreement includes an incentive compensation provision whereby, for
1994, she could earn additional amounts up to a maximum of $20,625 plus 9
percent of Atwood's 1994 pre-tax income over Atwood's 1993 pre-tax income plus
$200,000. All incentive compensation will be paid through issuance of
restricted stock of the Company, unless Mrs. Atwood elects, prior to July 1,
1994, to receive one-third of the incentive compensation in cash. Mrs. Atwood
made such election for 1994. Mrs. Atwood's compensation package for 1995 is in
the process of being negotiated.
John R. Laughlin -- On the date the Company acquired Galaxy, March 17,
1994, the Company entered into an Employment Agreement with Mr. Laughlin
extending through December 31, 1996. Mr. Laughlin is to serve as President and
Chief Operating Officer of Galaxy at a salary of $90,000 per year. If Galaxy's
pre-tax income exceeded $800,000 in 1994, Mr. Laughlin's compensation would
increase to $100,000 in 1995, and if Galaxy's pre-tax income
30
<PAGE>
exceeds $1,100,000 in 1995, Mr. Laughlin will receive a salary of $120,000 in
1996. The 1994 pre-tax income (as computed for purposes of Mr. Laughlin's
contract) exceeded $800,000 and, thus, his salary for 1995 will be $100,000.
The Employment Agreement provides normal provisions for expense reimbursement,
vacations, ownership of intellectual property, confidentiality of information
and normal termination provisions. The Agreement also provided for the grant
of an option to Mr. Laughlin to purchase 20,000 shares of Company Common Stock
at a price of $5.50 per share under the T/SF Communications Incentive Stock
Option Plan (this is a qualified stock option plan originally adopted in 1989
and is different from the 1994 Incentive Stock Plan). The option term is for
five years and provides that he will acquire the right to exercise the options
ratably over a three-year period from the date of grant at the rate of one-
third after the end of each year of service with the Company.
Hedy Halpert -- As noted above, in December, 1994, Hedy Halpert, along
with two other executives (together, the "BMT Senior Executives"), were removed
as officers of BMT. Hedy Halpert was employed under an Employment Agreement
which ended on December 31, 1994. The decision to remove such officers and
enter into the following described employment agreement with Hedy Halpert (as
well as employment agreements with the other two BMT Senior Executives) was
based on the Company's determination that, after completion of the intended sale
of three of BMT's trade journals, the services of the BMT Senior Executives
would no longer be needed. Accordingly, on January 31, 1995, BMT entered into
an Employment Agreement with Ms. Halpert. The Employment Agreement provides for
her employment through January 12, 1996. Ms. Halpert is required to provide
one-half of a normal work week to BMT during the first four months of the
agreement and one-fourth of her normal work week for the remaining term thereof.
Ms. Halpert will be paid $14,000 per month and will be entitled to a bonus equal
to 0.85 of one percent of the net sales price of the three trade journals. If
the trade journals do not sell during 1995, a bonus will be payable at December
31, 1995, equal to $75,250. In addition, Ms. Halpert is subject to certain
covenants-not-to-compete which can be extended through 1996 by the additional
payment in such year of $94,000. The other two BMT Senior Executives were
subject to similar employment agreements which provide for lower salary payments
and bonuses of 0.5 of one percent of the net sales price of the three trade
journals for each such BMT Senior Executive, or a minimum bonus of $42,500 each.
Payments under the agreements with the BMT Senior Executives encompass all
severance obligations of the Company to them.
31
<PAGE>
Performance Graph
The following graph compares the cumulative total stockholder return on
Company Common Stock for the period from December 31, 1989, through December 31,
1994, with the cumulative total return of two indices during such period.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG T/SF COMMUNICATIONS CORPORATION, AMERICAN STOCK EXCHANGE
MARKET VALUE INDEX AND S&P PUBLISHING GROUP INDEX
<CAPTION>
Measurement period T/SF Communications American Stock Exchange S&P Publishing
(Fiscal year Covered) Corporation Market Value Index Group Index
--------------------- ------------------- ----------------------- --------------
<S> <C> <C> <C>
Measurement PT --
12/31/89 $100 $100 $100
FYE 12/31/90 $ 29 $ 81 $ 82
FYE 12/31/91 $ 19 $104 $ 98
FYE 12/31/92 $ 63 $106 $111
FYE 12/31/93 $ 56 $126 $137
FYE 12/31/94 $ 74 $115 $124
</TABLE>
-------------------------
* The total return set forth above assumes $100 was invested in Company Common
Stock and each of the indices set forth above on December 31, 1989, and that
all dividends were reinvested. The S&P Publishing Group Index is compiled by
Standard & Poor's Corporation and is composed of Dun & Bradstreet
Corporation, McGraw Hill Publishing Company and Meredith Corporation.
32
<PAGE>
Report of Compensation Committee on Executive Compensation.
The following report from the Compensation Committee of the Board of
Directors (the "Compensation Committee") is intended to describe the factors
considered by the Compensation Committee and the Board in determining
compensation packages for certain key employees of the Company.
Compensation Committee Interlocks and Insider Participation.
The Compensation Committee is composed of three outside directors,
Messrs. Leavitt, Griggs and Jones. Mr. Jones is technically an employee of the
Company (see the discussion of Mr. Jones' arrangement above). However, his
employment contract relates primarily to the severance of his employment
relationship with Tulsa Tribune Company and, therefore, the Board of Directors
considers Mr. Jones to be an outside director for purposes of the Compensation
Committee.
The Compensation Committee has oversight responsibility for the
Company's executive compensation programs. Because two of the five highest paid
executives in the Company are managers of specific subsidiaries, the
Compensation Committee has acted primarily with respect to the compensation of
the executive management of the Company's headquarters operation and as the
granting committee for all employees under the Incentive Stock Option Plan and
1994 Incentive Stock Plan. The Compensation Committee recommends action with
respect to compensation issues and the full Board of Directors is responsible
for acting on the recommendations of the Compensation Committee.
Subsidiary Manager Compensation.
One of the five highest paid executives in the Company for 1994, Wayne
Atwood, and Hedy Halpert (one of the BMT Senior Executives) were subject to
employment agreements for 1994. Mr. Atwood's contract extends through 1996 and
is described elsewhere herein. Prior to 1994, Mr. Atwood was employed under an
incentive arrangement which related to the original acquisition of Atwood in
1990. In renegotiating Mr. Atwood's employment contract in 1994, his
compensation package was negotiated by management of the Company based on Mr.
Atwood's former base salary and the need to have future incentive bonuses
somewhat less generous than those agreed to when the Company acquired Atwood
and was approved by the Board of Directors as a whole, rather than the
Compensation Committee. No attempt was made to compare Mr. Atwood's salary to
any industry norms.
33
<PAGE>
With respect to Ms. Halpert, her compensation was based on an employment
agreement which, to a large extent, was historical in nature. Ms. Halpert's
original employment agreement arose in connection with the acquisition by the
Company of BMT on December 1, 1986, at which time Ms. Halpert was elevated to
the job of President of BMT. The original employment agreement had a three year
term and it has been renegotiated twice. The employment agreement applicable in
1994 was entered into in 1992, and it ended December 31, 1994. When such
agreement was renegotiated for the term ended December 31, 1994, Ms. Halpert's
base salary was frozen and her ability to earn increases in compensation was
tied totally to the performance of BMT, specifically to increasing targets of
operating income. As Ms. Halpert was the head of a subsidiary and, thus,
reported and was subject to the direction of the Chief Executive Officer of the
Company, Ms. Halpert's agreement was negotiated by Mr. G. Douglas Fox (then CEO)
and was approved by the Board of Directors as a whole, rather than the
Compensation Committee. There was no attempt at the time to compare Ms.
Halpert's salary to industry norms as her base salary was being frozen.
The Compensation Committee and the Board of Directors view the
negotiation of salaries and incentive plans with managers of divisions or
subsidiaries as being the function of the Chief Executive Officer, subject to
the approval of the Board of Directors. Thus, Mr. Barnett separately negotiated
and agreed to Mr. Wimbish's compensation plan and the Board of Directors
approved such compensation without modification.
Compensation of Executive Officers.
Before 1994, while industry data has been looked at from time to time, the
Compensation Committee had relied primarily on the individual experiences of the
members of the Compensation Committee in determining the reasonableness of
compensation of the Company's executives. Prior to 1994, salaries and
compensation had been based primarily on the historical salary trend of the
particular employee. In other words, the salary level at which an employee was
hired and then modest increases after that date were the basis for salaries.
Bonuses were, until 1990, subjective. For 1991 and 1992, there was an Executive
Incentive Bonus Plan in place which tied executive bonuses to improvement in
operating income of the Company. No bonus plan existed for 1993 and no bonuses
were paid to headquarters executive personnel.
In 1993, the Company hired a national executive compensation consulting
firm to provide assistance to the Compensation Committee in devising an
appropriate executive compensation plan. In January, 1994, the Compensation
Committee received the report of the consultant. The consultant was asked to
provide information on two basic matters. First, to compare the levels of
compensation of the Company's key executives to employees in comparable
positions in comparable companies. As a result of this, the Compensation
Committee determined that the base salaries for Messrs. Barnett, Mourton and
Craine were within the 50th to 75th percentile range of comparable salaries. No
increases in base salary for 1994 were awarded. This same data indicated to the
Compensation Committee that the Company was not providing a comparable level of
compensation in terms of short-term and long-term incentive payments/awards.
34
<PAGE>
The second matter addressed by the consultant was this lack of incentive
compensation. In particular, the consultant had been asked to provide
information on plans in comparable companies, both from the perspective of the
amounts which would be appropriate for Messrs. Barnett, Craine and Mourton, and
in the mix and type of various compensation components. In doing this, the
consultant was instructed to look to plans which closely tie the executives'
bonuses to stock appreciation.
As a result of this, in 1994, the Compensation Committee recommended and
the Board adopted the 1994 Incentive Stock Plan and a related target bonus plan.
There are two basic features of this incentive plan:
(i) Based on a target set by the Board of Directors each year for earnings
of the Company, bonuses can be earned on an annual basis beginning at
80 percent of the targeted net income for the Company. This target is
intended to be set by the Board of Directors at a level which reflects
the Board's view of necessary earnings growth and return on
investment. As this plan is new, the method by which each year's
target will be set in the future has not been determined and the 1994
target was set based on the Board of Directors' view of an appropriate
earnings target. An important feature of this part of the plan is
that 50 percent of the bonus earned each year by Messrs. Barnett,
Mourton and Craine will be paid in the form of a restricted stock
grant under the Incentive Stock Plan. This grant is to be based on
the market value of the Company Common Stock at the time of the grant
and will provide for vesting in the employee three years from the date
of issuance; and
(ii) A nonqualified stock option plan under which stock options can be
granted to key employees of the Company. In 1994, the Compensation
Committee granted options under the Incentive Stock Plan to Messrs.
Barnett, Mourton, Craine, Atwood and Wimbish.
In making the grants under the Incentive Stock Plan, the Compensation
Committee determined to make relatively large grants initially with vesting to
occur 100 percent in three years. The Compensation Committee believed that the
stock price for the Company Common Stock has been depressed for a number of
years and that stock price appreciation was the most important goal of the
Company in the next three years. By providing relatively large options in the
first year, it was felt that the executives of the Company would be
appropriately focused on this goal. The number of options granted were
consistent with the recommendation and report of the compensation consultant.
35
<PAGE>
In the future, the Compensation Committee and the Board of Directors intend
to maintain an annual incentive plan by appropriately adjusting the target net
income which must be achieved before bonuses are paid to reflect the Board's
goal of having net income increases be the primary method for driving stock
appreciation. It is the belief of the Compensation Committee that the
combination of short-term incentives based on targets which are set by the Board
of Directors and significant stock options in the hands of Messrs. Barnett,
Mourton and Craine, together with the stock options granted under the Incentive
Stock Plan to certain other key employees of the Company, will have the desired
effect of focusing management on stock value.
No target for 1995 has been set. Because of the many changes that occurred
to the Company in 1994 and are anticipated in 1995 (e.g., the proposed sale of
certain trade journals and the proposed merger with Tribune/Swab-Fox, to name
the two most significant) the Compensation Committee is studying the possibility
of utilizing a different approach to short-term executive bonuses in 1995.
Economic value added models are being studied and evaluated for their ability to
take major structural changes, such as those contemplated for 1995, into
account. While the Compensation Committee believes that certainty in the
methodology of determining executive bonuses is important so that the executives
understand what they are expected to accomplish to achieve the bonuses, the
materiality of the changes occurring or expected to occur in 1995 may result in
some greater subjectivity being applied by the Compensation Committee and the
Board of Directors with respect to bonuses for 1995. A final determination of
this issue is not anticipated for several months.
The Compensation Committee has not set particular targets for executive
compensation. However, the Compensation Committee recognizes the need for the
Company's compensation package to remain competitive to ensure the retention of
key employees and the ability to recruit additional key employees as needed.
The use of the outside compensation consultant marks the beginning of the
Compensation Committee's efforts to monitor the compensation of key employees
more closely and to ensure that compensation issues are being appropriately
addressed.
A 1993 amendment to the Internal Revenue Code of 1986, as amended, provides
that no publicly held company shall be permitted to deduct from its income taxes
compensation exceeding $1 million paid to its chief executive officer or any of
its four other highest paid executive officers unless (a) the compensation is
payable solely on account of the attainment of performance goals, (b) the
performance goals are determined by a compensation committee of two or more
outside directors, (c) the material terms under which the compensation is paid
are disclosed to and approved by the stockholders, and (d) the compensation
committee certifies that the performance goals were met. Neither the
Compensation Committee nor the Board of Directors expects such restrictions to
have an impact, or result in the loss of a deduction, with respect to
compensation paid by the Company to such persons (including stock option and
restricted stock grants under the Incentive Stock Plan) because the compensation
paid by the Company to such persons is substantially below the $1 million
threshold.
36
<PAGE>
Benefits.
Benefits offered to key executives are largely those that are offered to
the general employee population, though the amount of certain benefits varies
based on salary levels. Other variances include either automobiles or
automobile allowances and, in certain cases, club dues. In the case of Mr.
Atwood, these benefits are provided for in his employment agreement.
Mark A. Leavitt
William N. Griggs
David Lloyd Jones
37
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
At the close of business on March 17, 1995, there were issued and
outstanding 4,864,818 shares of Company Common Stock. 3,777,500 shares of
Company Common Stock (or approximately 78 percent of the outstanding shares) are
owned by Tribune/Swab-Fox, 2407 East Skelly Drive, Tulsa, Oklahoma 74105.
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 17, 1995, for each beneficial owner of
more than five percent of Common Stock, other than Tribune/Swab-Fox. Except as
noted in the footnotes, each of the persons listed below owns shares of common
stock in Tribune/Swab-Fox and his or her beneficial ownership of Company Common
Stock is based on the percentage of the common stock of Tribune/Swab-Fox
("Tribune/Swab-Fox Common Stock") owned by him or her multiplied by the
3,777,500 shares of Company Common Stock owned by Tribune/Swab-Fox:
<TABLE>
<CAPTION>
Approximate
Number of Shares Number of Shares Percentage of
of Tribune/Swab-Fox of Company Company
Common Stock Common Stock Common Stock
Name and Address of Beneficially Beneficially Beneficially
Beneficial Owner Owned Owned (1) Owned
------------------------------------- ------------------- ----------------- --------------
<S> <C> <C> <C>
Jenkin Lloyd Jones (2)(6)
6683 South Jamestown Place
Tulsa, Oklahoma 74136 3,650,431 451,381 9.3%
Florence Lloyd Jones Barnett (3)(6)
2619 East 37th Street
Tulsa, Oklahoma 74105 6,901,377 853,366 17.5%
Howard G. Barnett, Jr. (4)(6)
6742 South Evanston
Tulsa, Oklahoma 74136 8,573,865 1,060,171 21.8%
Georgia Lloyd Jones Snoke (5)
and Kenneth Palmer Snoke
4502 East 85th Street
Tulsa, Oklahoma 74137 2,160,295 267,124 5.5%
Hayden Ann Barnett Kiser (7)
1616 East 31st Place
Tulsa, Oklahoma 74105 1,613,409 199,500 4.1%
The Prudential Insurance
Company of America
c/o Prudential Capital Group
1201 Elm Street, Suite 4900
Dallas, Texas 75270 3,703,704 457,969 9.4%
___________________________
</TABLE>
38
<PAGE>
(1) Each beneficial owner has sole voting and investment power with respect to
the shares of Tribune/Swab-Fox Common Stock from which the ownership of
Company Common Stock is derived, except as noted otherwise.
(2) Of the 3,650,431 shares of Tribune/Swab-Fox Common Stock beneficially owned
by Mr. Jones, 1,593,490 are shares owned by Tulsa Tribune Foundation, which
shares are also included in the total shown for Florence Lloyd Jones
Barnett and Howard G. Barnett, Jr., as all of them are Trustees of such
Foundation. The remaining 2,056,941 shares of Tribune/Swab-Fox Common Stock
which are beneficially owned by Jenkin Lloyd Jones are owned by him as
Trustee of the Revocable Inter Vivos Trust of Jenkin Lloyd Jones.
(3) The 6,901,377 shares of Tribune/Swab-Fox Common Stock beneficially owned by
Mrs. Barnett include 1,593,490 shares owned by Tulsa Tribune Foundation
which shares are also included in the beneficial ownership of Jenkin Lloyd
Jones and Howard G. Barnett, Jr., and 5,307,887 shares held by her and
Howard G. Barnett, Jr., as Co-Trustees of the Revocable Inter Vivos Trust
of Florence Lloyd Jones Barnett, which shares are also included in the
beneficial ownership of Howard G. Barnett, Jr. Mrs. Barnett's ownership
does not include 20,000 shares beneficially owned by her husband, Howard G.
Barnett, which shares are included in the ownership of Howard G. Barnett,
Jr. Mrs. Barnett disclaims beneficial ownership of the shares held by her
husband.
(4) Of the 8,573,865 shares of Tribune/Swab-Fox Common Stock beneficially owned
by Mr. Barnett, 1,265,389 shares are beneficially owned directly for his
own account, and 1,593,490 shares are owned by Tulsa Tribune Foundation
(which shares are also included in the ownership of Florence Lloyd Jones
Barnett and Jenkin Lloyd Jones). In addition, Mr. Barnett is the
beneficial owner of 5,307,887 shares of Tribune/Swab-Fox Common Stock owned
by Florence Lloyd Jones Barnett (Mr. Barnett's mother) and Mr. Barnett, as
Co-Trustees of the Revocable Inter Vivos Trust of Florence Lloyd Jones
Barnett, 387,099 shares of Tribune/Swab-Fox Common Stock held by Howard G.
Barnett, Jr., as Trustee of the Katherine Ann Kiser 1980 Trust and 20,000
shares held by Howard G. Barnett and Howard G. Barnett, Jr., as Co-Trustees
of the Revocable Inter Vivos Trust of Howard G. Barnett. The stock
ownership of Mr. Barnett does not include shares held as follows: Billie
T. Barnett (211,971 shares of Tribune/Swab-Fox Common Stock); Billie T.
Barnett, as trustee under the Howard G. Barnett, Jr., Trust for Adrienne
Lee Barnett (the beneficial owner of 387,099, shares of Tribune/Swab-Fox
Common Stock); and Billie T. Barnett, as trustee under the Howard G.
Barnett, Jr., Trust for Allison Michelle Barnett (the beneficial owner of
387,099 shares of Tribune/Swab-Fox Common Stock). Mr. Barnett has also
been granted certain option awards under the Incentive Stock Plan, but such
shares are not included in Mr. Barnett's ownership because none have vested
as yet. Billie T. Barnett is the wife of Howard G. Barnett, Jr., and
Adrienne Lee Barnett and Allison Michelle Barnett are their children. Mr.
Barnett disclaims beneficial ownership of the shares held by his wife,
individually, and as trustee under such trusts for his children.
(5) The 2,160,295 shares of Tribune/Swab-Fox Common Stock beneficially owned by
Georgia Lloyd Jones Snoke and Kenneth Palmer Snoke are shares held by them
as Co-
39
<PAGE>
Trustees of the Georgia Lloyd Jones Snoke Revocable Inter Vivos Trust.
142,360 shares held by certain trusts for their minor daughter are not
included, and Mr. and Mrs. Snoke disclaim beneficial ownership of such
shares.
(6) The Tulsa Tribune Foundation also owns $831,000 of 11 percent debentures of
Tribune/Swab-Fox, due August, 1998, which are convertible into shares of
Tribune/Swab-Fox Common Stock at a conversion rate of $2.39 per share.
Because such conversion price is so much above the current market price and
such foundation has indicated a present intention to require cash repayment
of the debenture when due, the shares of Tribune/Swab-Fox Common Stock
which could be acquired by conversion of such debenture are not included in
the ownership for the Tulsa Tribune Foundation.
(7) The stock ownership shown for Hayden Ann Barnett Kiser excludes 387,099
shares of Tribune/Swab-Fox Common Stock owned by Howard G. Barnett, Jr., as
Trustee of the Katherine Ann Kiser 1980 Trust. Katherine Ann Kiser is the
daughter of Hayden Ann Barnett Kiser. The shares owned by such Trust are
included in the beneficial ownership of Howard G. Barnett, Jr. and Hayden
Ann Barnett Kiser disclaims beneficial ownership of such shares.
The following table sets forth the beneficial ownership of Company Common
Stock held by each Director of the Company, each of the executive officers of
the Company or its subsidiaries named in the Summary Compensation table under
Item 11 above and all executive officers and Directors, as a group, as of March
17, 1995.
<TABLE>
<CAPTION>
Number of Shares of
Company Common Approximate Percentage
Stock Beneficially of Company Common
Name and Position Owned (1) Stock Beneficially Owned
----------------- ------------------- ------------------------
<S> <C> <C>
Howard G. Barnett, Jr. (2)
Chairman, President and Chief
Executive Office, Director 1,060,171 21.8%
David Lloyd Jones, Director (3) 134,314 2.8%
J. Gary Mourton (4)
Senior Vice President-Finance, Director 37,425 0.8%
Martin F. Beck, Director 1,000 0.0%
Mark A. Leavitt, Director 1,000 0.0%
William N. Griggs, Director -0- --
Robert E. Craine, Jr. (5)
Executive Vice President, Director 31,023 0.6%
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of
Company Common Approximate Percentage
Stock Beneficially of Company Common
Name and Position Owned (1) Stock Beneficially Owned
----------------- ------------------- ------------------------
<S> <C> <C>
Wayne Atwood, President, Atwood (6) 5,336 0.1%
Richard A. Wimbish, President, TISI(7) 1,318 0.0%
Hedy Halpert, Former President and
Chief Operating Officer of BMT(7) 116 0.0%
All Executive Officers and Directors as a
group, 13 persons (8) 1,356,346 27.8%
___________________________
</TABLE>
(1) Each of the beneficial owners has sole voting and investment power with
respect to the securities specified, except as noted in the footnotes
below. Included are vested options held by each person under the Company's
Incentive Stock Option Plan. Any options awarded to any listed persons
under the Incentive Stock Plan are not included because none are vested.
(2) The beneficial ownership for Mr. Barnett is determined as described in
footnote 5 of the preceding table.
(3) Mr. Jones' ownership is based on his beneficial ownership of 1,086,121
shares of Tribune/Swab-Fox Common Stock, 1,023,621 shares of which are
owned directly by him, 50,000 shares of which are owned by trusts for his
children, and 12,500 shares of which are owned by him as trustee for his
nieces.
(4) Mr. Mourton's ownership is based on his direct ownership of 1,800 shares of
Company Common Stock, plus his beneficial ownership of 288,081 shares of
Tribune/Swab-Fox Common Stock.
(5) Mr. Craine's ownership includes 10,000 shares of Company Common Stock owned
directly plus 21,023 shares of Company Common Stock derived from 170,000
shares of Tribune/Swab-Fox Common Stock.
(6) Mr. Atwood's shares are based on his vested options.
(7) Mr. Wimbish's and Ms. Halpert's shares are derived from shares owned of
Tribune/Swab-Fox Common Stock.
(8) Includes 89,000 shares of Company Common Stock owned directly and 1,255,343
shares of Company Common Stock beneficially owned as a result of
beneficially owning 10,152,111 shares of Tribune/Swab-Fox Common Stock, and
12,003 shares of Company Common Stock related to vested options.
41
<PAGE>
Item 13. Certain Relationships and Related Transactions
Management Services for Tribune/Swab-Fox. Pursuant to that certain
Agreement for Contribution of Assets, Assumption of Liabilities and Merger (the
"Contribution Agreement"), by and among the Company, Tulsa Tribune Company and
Tribune/Swab-Fox, under which Tribune/Swab-Fox caused the Company to be formed,
the Company entered into an Agreement for Management Services (the "Management
Agreement") to provide all of the necessary management and administrative
services for Tribune/Swab-Fox and its various separate businesses and
subsidiaries, other than the Company. The Management Agreement was effective as
of January 1, 1989, for three years through December 31, 1991, unless extended
by the mutual agreement of the parties. The agreement was extended for 1992,
1993 and 1994, and, pending the completion of the Merger, has been extended for
1995. However, the Management Agreement is subject to termination if the
independent members of the Board of Directors of each of the Company and
Tribune/Swab-Fox do not annually reach an agreement on the payments to be made
by Tribune/Swab-Fox for the services to be rendered by the Company thereunder,
and on the percent of time which certain key employees of the Company may be
required to devote to the businesses of Tribune/Swab-Fox, as described below.
Tribune/Swab-Fox continues to separately pay certain direct expenses of its
operation, such as legal fees and taxes.
In 1994, the Company was paid $23,333 per month under the Management
Agreement. The Company has agreed to accept a flat fee of $45,000 in 1995
pending completion of the merger of the two companies, which is expected to
occur in May, 1995. Should the merger not be consummated, the parties have
agreed to renegotiate this fee. The Company believes that this is a fair payment
for the services to be rendered and is believed to be not less than what the
Company could receive for the rendering of similar services to an unrelated
third party.
Under the Management Agreement, the following officers of the Company
cannot be called upon by Tribune/Swab-Fox to perform services under the
Management Agreement in excess of 20 percent of their aggregate time: Howard G.
Barnett, Jr., J. Gary Mourton, Robert E. Craine, Jr. and Stuart P. Honeybone.
Howard G. Barnett, Jr., as Chairman and Chief Executive Officer of the Company,
in consultation with the Board of Directors of Tribune/Swab-Fox, allocates the
time these individuals spend on the business of Tribune/Swab-Fox.
The Management Agreement provides that the independent members of the
Boards of Directors of the Company and Tribune/Swab-Fox will annually review the
time allocation set forth above and may terminate the Company's obligations
under the Management Agreement if Tribune/Swab-Fox does not agree to any changes
which such independent directors may require in such allocations or in the
amount of time that specific officers may be called upon by Tribune/Swab-Fox.
One of the principal functions of the Company's senior management under the
Management Agreement is to assist Tribune/Swab-Fox in effecting an orderly
liquidation of a significant portion of its remaining assets, other than its
stock holdings in the Company. As this liquidation occurs, it was anticipated
that the amount of time which management of the Company
42
<PAGE>
will be required to devote to the business of Tribune/Swab-Fox will diminish
and the amounts paid to the Company under the Management Agreement will be
reduced commensurably. The Management Agreement is intended to allocate costs
and overhead and not serve as a source of profit to the Company. Significantly
accelerated sales activity in 1994 plus reduced overhead by the Company allowed
for the significant reduction for 1995.
If the Management Agreement is terminated, the termination will be
effective six months following notice thereof.
Other transactions. In connection with the Agreement for Purchase and
Sale of Stock whereby the Company acquired 100 percent of the issued and
outstanding common stock of Galaxy, the Company, as tenant through Galaxy,
entered into (and guaranteed) a Lease Agreement with John R. Laughlin, as
landlord. The Lease covers the principal office and warehouse building occupied
by Galaxy in connection with its business, comprising approximately 25,000
square feet of space, extends for an initial term of five years and provides for
a rental amount of $14,565 per month during the initial term. The Lease also
contains an option to renew for five additional years at a rate of $15,621 per
month. As part of the Lease the tenant also pays certain tax, insurance,
maintenance and operating costs. The terms of the Lease were negotiated with
Mr. Laughlin on an arm's-length basis prior to the closing of the acquisition
and are comparable to those to which the Company would have agreed with an
unrelated third party.
See Item 11. Executive Compensation -- Employment Agreements, for
additional disclosures with respect to transactions with related parties.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The Financial Statements listed in the accompanying Index to
Financial Statements are filed as a part of this Annual Report on
Form 10-K.
2. Financial Statement Schedules
The Financial Statement Schedules are not submitted as the required
information is immaterial, inapplicable or is included in the
financial statements or notes thereto filed as a part of this Annual
Report on Form 10-K.
3. Exhibits and Reports on Form 8-K
43
<PAGE>
The following exhibits are included as a part of or incorporated into
this Annual Report on Form 10-K:
Exhibit Number
2.1 Agreement and Plan of Merger, dated January 25, 1995, between the
Company and Tribune/Swab-Fox and Amendment No. 1 to Agreement and
Plan of Merger, dated March 3, 1995, between the Company and
Tribune/Swab-Fox (Appendix A to the Joint Proxy Statement and
Prospectus forming a part of the Company's Registration Statement
on Form S-4, No. 33-57587).
3.1 Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement
on Form S-1, No. 33-27811, effective June 8, 1989 (the "S-1
Registration Statement")).
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to
the S-1 Registration Statement).
10.1 Agreement for Purchase and Sale of Stock, dated March 17, 1994,
between the Company, T/SF Investment Co., John R. Laughlin and the
Galaxy Registration, Inc., Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 2 to the Company's report on
Form 8-K dated March 17, 1994).
10.2 Asset Purchase Agreement, dated November 1, 1993, by and among the
Company, Marks-Roiland Communications, Inc., and Dickson Media,
Inc., together with the material closing documents executed and
delivered therewith (incorporated by reference to Exhibit 10.1 to
the Company's report on Form 8-K dated November 1, 1993).
10.3 Asset Purchase Agreement, dated May 2, 1994, by and among the
Company, Shopper's Guide, Inc., and Dickson Media, Inc.
(incorporated by reference to Exhibit 10.1 to the Company's report
on Form 8-K dated May 2, 1994).
10.4 Management Agreement, effective January 1, 1989, between the
Company and Tribune/Swab-Fox (incorporated by reference to Exhibit
10.11 to the S-1 Registration Statement).
10.5 Retirement Agreement, effective August 1, 1993, by and among G.
Douglas Fox, the Company and Tribune/Swab-Fox (incorporated by
reference to the Company's report on Form 10-Q for the quarter
ended June 30, 1993).
44
<PAGE>
10.6 Retirement Agreement, dated December 14, 1994, by and among Robert
J. Swab, the Company and Tribune/Swab-Fox (incorporated by
reference to Exhibit 10.19 of the Tribune/Swab-Fox's Report on
Form 10-K for the year ended December 31, 1994).
10.7 Amendment and Termination Agreement, dated July 31, 1992, and
exhibits, by and among Tulsa Tribune Company, World Publishing
Company and NPC (incorporated by reference to Exhibit 1 to the
Company's report on Form 8-K dated September 30, 1992).
10.8 Covenant for Continued Payments, dated September 30, 1992, by
World Publishing Company in favor of Tulsa Tribune Company
(incorporated by reference to Exhibit 2(vi) to the Company's
report on Form 8-K dated September 30, 1992).
10.9 Revolving Credit Loan Agreement, dated as of July 14, 1993,
between BMT Publications, Inc., and BancFirst, together with
exhibits, including forms of various closing documents executed
in connection therewith (incorporated by reference to Exhibit
10.24 to the Company's report on Form 10-Q for the quarter ended
September 30, 1993).
10.10 Revolving Credit Loan Agreement, dated as of July 14, 1993,
between Transportation Information Services, Inc., and BancFirst,
together with exhibits, including forms of various closing
documents executed in connection therewith (incorporated by
reference to Exhibit 10.25 to the Company's report on Form 10-Q
for the quarter ended September 30, 1993).
10.11 Second Amendment to Revolving Credit Loan Agreement, effective as
of June 30, 1994, between Transportation Information Services,
Inc., and BancFirst (incorporated by reference to Exhibit 10.2 to
the Company's report on Form 10-Q for the quarter ended September
30, 1994).
10.12 Revolving Credit Loan Agreement, dated as of July 14, 1993,
between the Company and BancFirst, together with exhibits,
including forms of various closing documents executed in
connection therewith (incorporated by reference to Exhibit 10.26
to the Company's report on Form 10-Q for the quarter ended
September 30, 1993).
10.13 Revolving Credit Loan Agreement, dated as of June 30, 1994,
between the Company and BancFirst (incorporated by reference to
Exhibit 10.1 to the Company's report on Form 10-Q for the quarter
ended September 30, 1994).
45
<PAGE>
10.14 Revolving Credit Loan Agreement, dated November 30, 1993, between
Tulsa Tribune Company and BancFirst (incorporated by reference to
Exhibit 10(iii) to the Company's report on Form 10-K for the year
ended December 31, 1993).
10.15* T/SF Communications Corporation 1994 Incentive Stock Plan
(incorporated by reference to Exhibit A to the Company's Proxy
Statement for Annual Meeting of Stockholders dated May 23, 1994).
10.16* T/SF Communications Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the S-1 Registration
Statement).
10.17* T/SF Communications Corporation Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the S-1 Registration
Statement).
21. Subsidiaries of the Company (filed herewith).
27. Financial Data Schedule (filed herewith).
_________________________
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
During the quarter ended December 31, 1994, the Company did not file
any Current Reports on Form 8-K.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
T/SF COMMUNICATIONS CORPORATION
Date: March 28, 1995
By: /s/ Howard G. Barnett, Jr.
--------------------------------------
Howard G. Barnett, Jr., Chairman,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By: /s/ Howard G. Barnett, Jr. Chairman, Chief Executive March 28, 1995
-------------------------- Officer, President and Director
Howard G. Barnett, Jr.
By: /s/ Mark A. Leavitt Director March 28, 1995
--------------------------
Mark A. Leavitt
By: /s/ Martin F. Beck Director March 28, 1995
--------------------------
Martin F. Beck
By: /s/ William N. Griggs Director March 28, 1995
--------------------------
William N. Griggs
By: /s/ J. Gary Mourton Senior Vice President, Chief March 28, 1995
-------------------------- Financial Officer, Chief
J. Gary Mourton Accounting Officer and Director
By: Director March , 1995
--------------------------
David Lloyd Jones
By: /s/ Robert E. Craine, Jr. Executive Vice President and Director March 28, 1995
--------------------------
Robert E. Craine, Jr.
</TABLE>
47
<PAGE>
T/SF COMMUNICATIONS CORPORATION
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants ....................................... F-2
Consolidated Balance Sheets as of
December 31, 1994 and 1993 ................................................. F-3
Consolidated Statements of Operations for the
years ended December 31, 1994, 1993 and 1992 ............................... F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1994, 1993 and 1992 ....................... F-6
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992 ............................... F-7
Notes to Consolidated Financial Statements ..................................... F-9
</TABLE>
The required schedules are not submitted as they are immaterial or
inapplicable or because the required information is included in the Consolidated
Financial Statements or notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
T/SF Communications Corporation:
We have audited the accompanying consolidated balance sheets of T/SF
Communications Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of T/SF Communications
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 15, 1995
F-2
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,311 $ 2,633
Short-term investments 2,000 --
Accounts receivable, less reserve for doubtful accounts
of $506 in 1994 and $465 in 1993 8,535 6,300
Inventories (Note 1) 596 188
Deferred tax assets (Note 6) -- 1,444
Current contract receivable and other current assets 6,347 5,621
Refundable income taxes 167 404
Assets held for sale (Note 4) 6,287 4,350
Loan to Parent company (Note 9) 1,250 --
-------- --------
Total current assets 29,493 20,940
-------- --------
Contract Receivable and Investments (Notes 2 and 9) 2,419 6,702
-------- --------
Property, Plant and Equipment, at cost (Note 1):
Exposition equipment 2,712 --
Other 4,696 4,524
-------- --------
7,408 4,524
Less - accumulated depreciation 2,824 2,378
-------- --------
4,584 2,146
-------- --------
Deferred Tax Assets (Note 6) 732 --
-------- --------
Intangibles and Other Assets, net (Notes 1 and 3) 11,909 17,273
-------- --------
$ 49,137 $ 47,061
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 4,388 $ 3,451
Accrued liabilities (Note 10) 7,055 6,736
Deferred tax liabilities (Note 6) 823 --
Current portion of long-term debt (Note 5) 1,051 785
-------- --------
Total current liabilities 13,317 10,972
-------- --------
Long-term Debt (Note 5) 3,674 4,005
-------- --------
Deferred Contract Liabilities 2,179 2,360
-------- --------
Deferred Tax Liabilities (Note 6) -- 1,531
-------- --------
Stockholders' Equity, per accompanying statement
(Notes 1 and 7):
Preferred stock, $10 par value, 1,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.10 par value, 10,000 shares authorized,
4,865 and 5,274 shares issued and outstanding at
December 31, 1994 and 1993, respectively 486 527
Additional paid-in capital 20,242 22,277
Retained earnings 9,239 5,389
-------- --------
Total stockholders' equity 29,967 28,193
-------- --------
$ 49,137 $ 47,061
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues (Notes 1, 2, 3 and 4):
Publishing $ 14,946 $ 39,010 $ 69,849
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 12,673
Other operating income and interest 5,195 3,985 3,141
-------- -------- --------
56,289 67,977 94,831
-------- -------- --------
Costs and Expenses (Notes 1, 3, 4 and 9):
Publishing 11,988 31,567 48,621
Exposition services 14,137 8,631 7,449
Information services 8,944 9,460 8,214
General and administrative 11,081 14,325 20,648
Interest 559 1,620 2,388
Depreciation and amortization 3,141 3,794 7,387
Loss on assets held for sale -- 9,224 --
-------- -------- --------
49,850 78,621 94,707
-------- -------- --------
Income (loss) before unusual gain,
equity earnings and income taxes 6,439 (10,644) 124
Unusual gain (Note 2) -- -- 24,412
Earnings of equity investments -- 29 73
(Provision for) benefit from income taxes (Note 6) (2,589) 4,097 (10,569)
-------- -------- --------
Income (loss) before extraordinary loss 3,850 (6,518) 14,040
Extraordinary loss, net of tax of $340 (Note 5) -- (560) --
-------- -------- --------
Net income (loss) $ 3,850 $ (7,078) $ 14,040
======== ======== ========
Per Share Amounts (Note 1):
Earnings (loss) per common and
common equivalent share:
Before extraordinary loss $ 0.75 $ (1.23) $ 2.66
Extraordinary loss -- (0.11) --
-------- -------- --------
Earnings (loss) per common share $ 0.75 $ (1.34) $ 2.66
======== ======== ========
Cash dividends per common share $ -- $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year $ 527 $ 527 $ 527
Issuance of common stock (Note 3) 8 -- --
Acquisition and retirement of common stock (Note 7) (49) -- --
-------- -------- --------
Balance at end of year $ 486 $ 527 $ 527
======== ======== ========
Additional Paid-in Capital:
Balance at beginning of year $ 22,277 $ 22,277 $ 22,277
Issuance of common stock (Note 3) 339 -- --
Acquisition and retirement of common stock (Note 7) (2,562) -- --
Issuance of restricted stock (Note 7) 188 -- --
-------- -------- --------
Balance at end of year $ 20,242 $ 22,277 $ 22,277
======== ======== ========
Retained Earnings (Deficit):
Balance at beginning of year $ 5,389 $ 12,467 $ (1,573)
Net income (loss) 3,850 (7,078) 14,040
-------- -------- --------
Balance at end of year $ 9,239 $ 5,389 $ 12,467
======== ======== ========
Stockholders' Equity:
Balance at beginning of year $ 28,193 $ 35,271 $ 21,231
Issuance of common stock (Note 3) 347 -- --
Acquisition and retirement of common stock (Note 7) (2,611) -- --
Issuance of restricted stock (Note 7) 188 -- --
Net income (loss) 3,850 (7,078) 14,040
-------- -------- --------
Balance at end of year $ 29,967 $ 28,193 $ 35,271
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,850 $ (7,078) $ 14,040
-------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,141 3,794 7,387
Earnings of equity investments -- (29) (73)
Accretion of interest expense 47 170 217
Unusual gain -- -- (24,412)
Loss (gain) on sale of
property, plant and equipment 204 (25) (22)
Loss on assets held for sale -- 9,224 --
Deferred compensation 7 1,856 37
Changes in assets and liabilities:
Accounts receivable and refundable
income taxes (1,900) (845) 2,800
Inventories (213) 184 564
Current contract receivable and
other current assets (276) (333) 14
Intangibles and other assets 142 (407) (34)
Accounts payable and accrued liabilities 511 193 (728)
Deferred income taxes (343) (4,837) 4,809
-------- -------- --------
Total adjustments 1,320 8,945 (9,441)
-------- -------- --------
Net cash provided by operating activities 5,170 1,867 4,599
-------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments (2,000) -- --
Capital expenditures (3,233) (1,822) (1,323)
Collections on contract receivable 4,714 4,354 1,039
Payments on deferred contract liabilities (502) (1,013) (1,304)
Net (additions to) distributions from investments (201) (190) 34
Net proceeds from early termination
of Joint Operating Agreement -- -- 9,720
Proceeds from the sale of property,
plant and equipment 3,956 4,560 1,272
Payments for acquisitions, net of cash acquired (1,114) -- --
-------- -------- --------
Net cash provided by investing activities 1,620 5,889 9,438
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
T/SF COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Borrowings under bank lines-of-credit 3,300 -- 3,200
Payments under bank lines-of-credit (3,300) -- (5,075)
Principal payments of long-term debt (1,598) (12,182) (6,137)
Loan to parent company (1,250) -- --
Issuance of common stock 347 -- --
Acquisition of common stock retired (2,611) -- --
-------- -------- --------
Net cash used in financing activities (5,112) (12,182) (8,012)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents 1,678 (4,426) 6,025
Cash and cash equivalents at beginning of year 2,633 7,059 1,034
-------- -------- --------
Cash and cash equivalents at end of year $ 4,311 $ 2,633 $ 7,059
======== ======== ========
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest $ 690 $ 1,405 $ 2,195
Income taxes 2,783 1,485 5,344
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
1. Summary of Significant Accounting Policies:
Relationship with Tribune/Swab-Fox Companies, Inc.
T/SF Communications Corporation (together with its subsidiaries referred
to as "Communications" unless the context indicates otherwise) is a 78 percent-
owned subsidiary of Tribune/Swab-Fox Companies, Inc. (Tribune/Swab-Fox).
Communications was incorporated on March 17, 1989, as a wholly-owned subsidiary
of Tribune/Swab-Fox, and succeeded to the publishing and information businesses
of Tribune/Swab-Fox. Through a public stock offering and certain subsequent
stock transactions, Tribune/Swab-Fox's ownership interest is presently 78
percent.
On January 25, 1995, Communications entered into an Agreement and Plan
of Merger, as amended, with Tribune/Swab-Fox whereby, subject to the approval
of Communications and Tribune/Swab-Fox stockholders, Tribune/Swab-Fox will be
merged with and into Communications. Tribune/Swab-Fox stockholders (other than
Communications) will receive 0.1255 of a share of Communications Common Stock
or, if elected, and subject to certain limitations, $0.88 in cash, for each
Tribune/Swab-Fox share.
Pursuant to a management agreement between Communications and
Tribune/Swab-Fox, Communications provides certain administrative services to
Tribune/Swab-Fox and charges a management fee. The management agreement
provides that the management fee be reviewed and agreed to annually by both
Communications and Tribune/Swab-Fox. Communications also leased office space
from Tribune/Swab-Fox and received property management services related to this
leased space. (See Note 9.)
Principles of Consolidation
The consolidated financial statements include the accounts of
Communications and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Interest in Newspaper Printing Corporation (NPC)
Prior to an agreed-to dissolution and liquidation (see Note 2), NPC, a
joint operating agency, was owned 40 percent by Tulsa Tribune Company, a
wholly-owned subsidiary of Communications (Tribune), and 60 percent by Tulsa
World Company (World). Tribune, World and NPC entered into a Joint Operating
Agreement (JOA) in 1941 (amended in 1955 and 1981) which provided, among other
things, for the following:
F-9
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
(1) A common plan of operation under which NPC, as agent for
Tribune and World, sold advertising, printed, marketed and
distributed the newspapers published by Tribune and World, and
collected revenues attributable to such operations. However,
Tribune and World maintained control of their individual
news and editorial departments.
(2) Revenues and expenses of operating, selling and distributing
the two newspapers were shared 40 percent by Tribune and 60
percent by World, without regard to whether generated by or
attributable to Tribune or World, except newsroom expenses as
to which Tribune paid 100 percent of such expenses incurred on
its behalf in excess of 6/14ths of the total newsroom costs of
both newspapers.
Tribune and World reported their share of the revenues over expenses
generated through their joint operations managed by NPC in their respective tax
returns.
Prior to the termination of the JOA, Communications used agency
accounting for its 40 percent ownership of NPC, whereby its share of NPC's
individual assets, liabilities, revenues and expenses are included in these
financial statements. Printing equipment utilized by NPC, as agent, was owned
directly by Tribune and World.
Inventories
Inventories include newsprint, computers and computer-related
equipment and exposition registration supplies. Inventories are recorded at
the lower of cost or market determined on first-in, first-out and average cost
methods. Inventories of newsprint were $404,000 and $128,000 and inventories
of computers and computer-related equipment were $81,000 and $60,000 at
December 31, 1994 and 1993, respectively, and inventories of exposition
registration supplies were $111,000 at December 31, 1994.
Depreciation
Depreciation of property, plant and equipment is provided using the
straight-line method based on estimated useful lives ranging from three to 25
years.
Intangibles and Other Assets
Intangibles and other assets include advertising lists,
covenants-not-to-compete and consulting agreements, goodwill related to
acquisitions and credits granted for truck driver employment information files.
These assets are being amortized over periods of three to 30 years and consist
of the following:
F-10
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Amortization December 31,
Period 1994 1993
------------ ---- ----
(In thousands)
<S> <C> <C> <C>
Advertising lists 3 1/2-11 years $ 70 $ 3,941
Covenants-not-to-compete
and consulting agreements 3-10 years 1,731 2,190
Goodwill 30 years 11,882 17,779
Other 4-9 years 2,774 2,110
------- --------
16,457 26,020
Accumulated amortization (4,548) (8,747)
-------- --------
$ 11,909 $ 17,273
======== =========
</TABLE>
Goodwill impairment is assessed at each balance sheet date based upon a
review of the acquired entity's operations as to income, growth of income in
relation to the expected growth of income when acquired and, if the entity is
considered for sale, estimated realizable value. Valuation reserves are
provided if the carrying value of acquired goodwill is determined to be
permanently impaired.
Change in Accounting Estimates
During the third quarter of 1992, Communications revised the estimated
lives used to depreciate or amortize certain machinery and equipment,
advertising lists and covenants of Shopper's Guide, Inc. (Shopper's Guide),
Communications' then owned New Jersey free-distribution shopper-newspaper, and
equipment and advertising lists of Marks-Roiland Communications, Inc.
(Marks-Roiland), Communications' then owned Long Island free-distribution
shopper-newspaper. Management of Communications made the change in estimates
to reflect the effect of the local economies of each operation on the useful
lives of these assets. The effect of this change in accounting estimates was
to increase 1992 depreciation and amortization by approximately $2,400,000 and
to decrease 1992 net income by approximately $2,150,000 or $0.41 per share.
Revenue Recognition
Revenues from information services are net of the cost of charges from
state motor vehicle record departments which are incurred by Communications as
an agent for its customers. As provided in the agreements with customers,
Communications charges a fee for its service and is also reimbursed for state
charges.
Exposition services revenues are recognized when the services are
provided.
Advertising revenues from Communications' publishing businesses are
recognized when each publication is published and distributed.
F-11
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Commercial printing revenues are recognized when the material is printed
since the customer is generally obligated to accept printed matter when the
printing is complete. Commercial printing customers must exercise their right
of inspection, when such inspection right exists, while the printing is in
process.
Income Taxes
Effective January 1, 1993, Communications adopted SFAS No. 109,
Accounting for Income Taxes, which requires an asset and liability approach to
financial accounting and reporting for income taxes. The difference between the
financial statement and tax bases of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently enacted tax
laws and rates that apply to the periods in which they are expected to affect
taxable income.
The effect of adopting SFAS No. 109 was not material to Communications'
financial position or its results of operations.
Earnings per Common Share
Earnings per share computations are based upon the weighted average
number of shares of Common Stock and common stock equivalents outstanding during
the year. The weighted average number of common and common equivalent shares
outstanding was 5,135,000 in 1994 and 5,274,000 in 1993 and 1992.
Postretirement Benefits
Communications does not offer any postretirement medical or insurance
benefits for any employees.
Statements of Cash Flows
For purposes of the statements of cash flows, Communications considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
2. Termination of Joint Operating Agreement:
On September 30, 1992, pursuant to the terms of an Amendment and
Termination Agreement, by and among Tribune, World and NPC, the following
occurred:
(1) The JOA among Tribune, World and NPC which otherwise would not
have terminated prior to March 31, 1996, was terminated.
F-12
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
(2) Tribune ceased publication of The Tulsa Tribune effective
with the September 30, 1992, edition.
(3) At closing, World paid Tribune $1,000,000 for certain
newspaper related assets of Tribune and paid an additional
$10,500,000 in partial consideration for the early termination
of the JOA. World also executed and delivered to Tribune a
Covenant for Continued Payment pursuant to which World agreed
to pay to Tribune 41 consecutive monthly payments of $450,000
commencing November 1, 1992 (total payments of $18,450,000),
in lieu of amounts that Tribune would have otherwise been
entitled to receive under the JOA contract. At December
31, 1994, $5,996,000, representing the present value of
remaining unpaid monthly payments, is reflected in the
accompanying financial statements as a Contract Receivable.
(4) The parties agreed to dissolve and liquidate NPC.
As part of this transaction, Tribune agreed to pay termination costs for
Tribune-related newsroom and editorial employees of NPC and certain executives
of Tribune, which approximated a present value of $2,200,000. The excess
of payments received at September 30, 1992, plus the present value of future
payments, over the book basis of assets sold and Tribune's cost of termination,
is reflected in the accompanying financial statements as Unusual Gain. The
provision for income taxes for 1992 includes the income taxes related to the
Unusual Gain.
3. Acquisitions:
Atwood Convention Publishing (Atwood)
In August, 1990, Communications acquired 100 percent of the outstanding
stock of Atwood. Atwood publishes daily newspapers and other publications for
conventions and trade shows and is a part of Communications' Exposition
Services segment.
In addition to the original purchase price, Communications agreed to,
and has paid, additional purchase price adjustments of $1,250,000, based upon
Atwood's operating income exceeding certain defined levels for each of the
three years in the period ended December 31, 1993. Also, incentive
compensation payments to the former owners of $750,000 were earned and expensed
during the same period. The purchase price adjustments are included in the
accompanying financial statements as additional goodwill to be amortized over
the remaining goodwill life.
Galaxy Registration, Inc. (Galaxy)
Effective March 1, 1994, Communications completed the acquisition of
Galaxy. Galaxy provides, on a national basis, registration, information and
marketing services to the
F-13
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
convention/trade show industry and is included in Communications' Exposition
Services segment. Communications acquired Galaxy with the payment of
$1,200,000 in cash plus a note payable for $900,000. If certain earnings
targets are achieved, the principal former owner of Galaxy, who is employed
as President and Chief Operating Officer of Galaxy, may receive additional
payments not to exceed $2,900,000 by 1997. The earnings target for
1994 was achieved. Accordingly, Communications accrued $300,000 of purchase
price adjustments payable to the former owner. In addition, the former owner
earned $100,000 of incentive compensation in the period ended December 31,
1994, which Communications expensed. In connection with this transaction, the
former principal owner of Galaxy purchased 75,000 shares of Communications'
Common Stock at $4.625 per share for a total purchase price of $346,875. In
addition, a covenant-not-to-compete and an employment agreement were entered
into with the former principal owner.
Unaudited pro forma results of operations, had the Galaxy acquisition
occurred on January 1, 1994, with respect to the 1994 information and January
1, 1993,with respect to the 1993 information are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Revenues $57,839 $76,221
Income (loss) before extraordinary loss 4,012 (6,282)
Earnings (loss) per common share before
extraordinary loss 0.78 (1.19)
</TABLE>
This unaudited pro forma information is presented in response to applicable
accounting rules. It is not necessarily indicative of the actual results that
would have been achieved had the Galaxy acquisition occurred on January 1,
1994, with respect to the 1994 information and January 1, 1993, with respect to
the 1993 information.
4. Assets Held for Sale:
On December 22, 1994, the Communications' Board of Directors approved
the selling of three of Communications' trade journals. Accordingly, the net
assets related to these trade journals are reflected as "Assets held for sale"
in the accompanying balance sheet at December 31, 1994. Management's opinion is
that the book value of the three trade journals is less than their estimated net
realizable value.
On April 30, 1994, Communications sold the assets of Shopper's Guide.
Communications received $1,750,000 in cash, $1,100,000 in post-closing
adjustments and the buyer assumed certain liabilities totaling $930,000.
Communications also received the right to receive a maximum of $3,450,000 out
of future cash flow, as defined, from the business conducted with the assets
sold, over the next five years after the Buyer receives a certain sum. In
addition, Communications entered into a five year covenant-not-to-compete in
exchange for $750,000 in cash. Communications recorded no gain or loss on the
sale or in connection with
F-14
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
the covenant-not-to-compete. At December 31, 1994, the accompanying
balance sheet includes $762,000 of net assets related to the right to receive
future cash flow payments. Communications will recognize income for future cash
flow payments, if any, in excess of such amount, when received.
During the third quarter of 1993, Communications' Board of Directors
made the decision to offer for sale all of Communications' shopper-newspaper
operations. Accordingly, the book value of the shopper-newspapers was reduced
to estimated net realizable value and a pre-tax loss of $9,224,000 was
recognized. On November 1, 1993, Communications sold all of the operating
assets, except cash, of Marks-Roiland, one of the shopper-newspapers.
Communications received $4,675,000 in cash, and the buyer assumed certain
liabilities totaling approximately $1,560,000. In addition, Communications
entered into a three-year covenant-not-to-compete whereby Communications may not
compete with the buyer in the geographic area of the operations that were sold.
Communications received $1,425,000 in cash for the covenant which will be
recognized in income ratably over the term of the covenant.
5. Notes Payable and Long-Term Debt:
Long-term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Promissory notes secured by stock of a subsidiary, payable
$152,000 quarterly, plus interest, through December, 2000,
interest rate adjusts semi-annually to the base rate of Chase
Manhattan Bank (8.5% at December 31, 1994). $ 3,640 $4,247
7.5% Promissory note, unsecured, payable $100,000 annually,
plus accrued interest, each August with final payment on August,
1998. 365 465
6% Promissory note, unsecured, quarterly payments of $75,000,
plus accrued interest, through March 31, 1997. 675 --
Other 45 78
------- -------
4,725 4,790
Less portion due within one year (1,051) (785)
------- ------
$ 3,674 $4,005
======= ======
</TABLE>
F-15
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Installments due on long-term debt during each of the five years
subsequent to December 31, 1994, are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1995 $ 1,051
1996 1,007
1997 782
1998 672
1999 607
Thereafter 606
-------
$ 4,725
=======
</TABLE>
In connection with the sale of the Marks-Roiland assets (see Note 4),
Communications agreed to a prepayment of the $8,889,000 remaining principal of
the Senior Notes held by The Prudential Insurance Company of America
(Prudential). As provided by the Senior Notes, a yield maintenance premium was
required to be paid as part of the prepayment. Through negotiations with
Prudential, Communications obtained a reduction in the yield maintenance
premium to $802,000 which, along with the remaining unamortized loan fees
related to the Senior Notes, is reflected as an extraordinary loss in the
accompanying statements of operations.
At December 31, 1994, Communications has two separate revolving credit
arrangements with a bank which together allow Communications to borrow up to
$3,750,000. Interest on amounts borrowed is payable monthly at a rate (10
percent at December 31, 1994) of 1 percent above the Chase Manhattan base
rate. Certain of the facilities are secured by accounts and contract
receivables. At December 31, 1994, no balance was outstanding under these
arrangements, which require payment of a 3/8 percent per annum fee on the
unused portion of the credit facilities.
6. Income Taxes:
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal $2,600 $ 352 $ 4,948
State 332 48 1,003
------ ------- --------
2,932 400 5,951
------ ------- --------
Deferred:
Federal (339) (4,137) 3,944
State (4) (700) 674
------ ------- --------
(343) (4,837) 4,618
------ ------- --------
$2,589 $(4,437) $ 10,569
====== ======= ========
</TABLE>
F-16
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
The reconciliation of income tax computed at the federal statutory rate
(34%) to income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Income tax provision (benefit) at statutory rates $2,189 $(3,915) $ 8,367
Amortization of acquired assets not
deductible for income tax purposes 224 313 1,103
Excess of tax basis of assets sold over book
basis which was not previously tax effected (36) (369) --
State income taxes 217 (444) 1,107
Other (5) (22) (8)
------ ------- -------
$2,589 $(4,437) $10,569
------ ------- -------
</TABLE>
Significant components of Communications' deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences $ (300) $ (516)
Unusual gain recognized in different accounting period
for income tax reporting purposes (2,293) (4,136)
------- -------
Deferred tax liabilities (2,593) (4,652)
------- -------
Deferred tax assets:
Income recognized in different accounting period for
income tax purposes 1,045 508
Deferred compensation and severance benefits payable 938 993
Reserves on assets 200 2,330
Accrued expenses deductible when paid 319 553
Other, net -- 181
------- -------
Deferred tax assets 2,502 4,565
------- -------
Net deferred tax liabilities $ (91) $ (87)
------- -------
</TABLE>
F-17
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
Net deferred tax liabilities are reflected on the accompanying balance
sheets as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Long-term - Deferred tax liability $ -- $(1,531)
Current liabilities - Deferred tax liability (823) --
Long-term - Deferred tax asset 732 --
Current assets - Deferred tax asset -- 1,444
----- -------
$ (91) $ (87)
----- -------
</TABLE>
7. Capital Stock:
Communications has authorized capital consisting of 10,000,000 shares of
$0.10 par value Common Stock and 1,000,000 shares of $10.00 par value Preferred
Stock. No shares of Preferred Stock have been issued.
Communications' incentive stock option plan authorizes an aggregate of
150,000 shares of Communications' Common Stock which may be granted to key
employees. Options for 79,064 shares were outstanding and exercisable at
December 31, 1994, at option prices of $5.50, $8.00 and $12.00 per share.
During 1994, options for 20,000 shares were granted and options for 29,166
shares lapsed or were canceled. No options were exercised during 1994. Options
are granted at the discretion of the Compensation Committee of the Board of
Directors at a minimum exercise price of 100 percent of the market value of
Communications' Common Stock at the date of grant.
Communications has approved an Employee Stock Purchase Plan and 100,000
shares of Common Stock have been allocated for this plan. No shares have been
issued under this plan.
In January, 1994, Communications' Board of Directors approved the 1994
Incentive Stock Plan which permits Communications to grant stock options and
awards of restricted stock to executives and key employees. Communications'
stockholders approved this plan at the 1994 Annual Meeting. Pursuant to
various bonus plans, Communications will award 22,733 shares of restricted
stock at $6.25 per share in April, 1995, plus additional shares equal to
$31,874 based on a per share price equal to the average of the closing price on
the last 20 trading days in April, 1995, as part of 1994 incentives. These
restricted shares vest three years from the date of issuance and are reflected
as additional paid-in capital in the accompanying balance sheet.
Communications granted options for 202,500 shares in 1994 under this plan at an
option price of $4.25 which will expire in 2004 and vest 100 percent in 1997.
F-18
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
In August, 1994, Communications purchased and retired 483,900 shares of
its Common Stock from one stockholder for $5.375 per share.
8. Commitments and Contingencies:
Communications has operating lease agreements, principally for office
facilities and equipment, expiring at various dates through 2000. Rent expense
in 1994, 1993 and 1992 under operating leases was approximately $924,000,
$1,420,000 and $2,094,000, respectively.
As of December 31, 1994, Communications' future minimum lease payments
are as follows:
<TABLE>
<CAPTION>
Minimum Lease
Year Ending December 31, Payments
------------------------ -------------
(In thousands)
<S> <C>
1995 $ 887
1996 856
1997 780
1998 686
1999 511
Thereafter 189
------
$3,909
------
</TABLE>
Communications has employment agreements with three executives of
Communications and its subsidiaries. The agreements provide for individual
compensation ranging from $100,000 to $111,000 annually ($310,000 annually in
the aggregate) and expire at various dates through 1997.
Communications is a defendant in certain litigation arising out of
operations in the normal course of business. However, it is the opinion of
management that the ultimate liabilities relating thereto, if any, will not
have a material adverse effect on the financial position or results of
operations of Communications.
In February, 1993, Communications received notice of assessments of
Federal income tax for the years 1989 through 1991 of approximately $955,000,
due principally to the disallowance of certain deductions related to
amortization of intangible assets, specifically advertising lists and
covenants-not-to-compete. Communications settled the tax liability during 1994
with the Internal Revenue Service which did not materially affect
Communications' financial position or results of operations. Currently,
examination of Communications' federal income tax returns for the years 1993 and
1992 are in progress. Management of Communications believes that any tax
liability which ultimately may result will not have a material adverse effect on
the financial position or results of operations of Communications.
F-19
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
9. Related Party Transactions:
Effective August 1, 1993, the Chairman and Chief Executive Officer of
Communications resigned. Included in general and administrative expenses for
1993 in the accompanying consolidated statements of operations are retirement
and deferred compensation expense of approximately $1,800,000 related to this
resignation. In addition, Communications acquired 748,734 shares of
Tribune/Swab-Fox Common Stock and 111 shares of 6 1/2 percent Cumulative
Convertible Preferred Stock of Tribune/Swab-Fox for $565,000, with a cash
payment of $100,000 and the issuance of a promissory note for the balance
providing for payments over the period 1994 through 1998. Communications also
acquired a Tribune/Swab-Fox 11 percent Convertible Subordinated Debenture due
1997 (which was called for early retirement in 1994) in the principal amount of
$141,000 held by the former Chairman and Chief Executive Officer. These
security acquisitions are reflected in investments on the accompanying balance
sheets. Subsequent to December 31, 1994, upon exercise of an option,
Communications acquired 389,000 shares of Tribune/Swab-Fox common stock from
the Profit Sharing Plan and Trust of Tribune/Swab-Fox of which the former
chairman and chief executive officer is the trustee, for $291,750, with a cash
payment of $72,937 and a note payable for $218,813.
Under a management agreement with Tribune/Swab-Fox, Communications
provides management and administrative services to Tribune/Swab-Fox. During
1994, 1993 and 1992, management fees charged to Tribune/Swab-Fox were $280,000,
$460,000 and $520,000, respectively. Pursuant to the management agreement, the
management fees are to be reviewed annually and approved by both Communications
and Tribune/Swab-Fox. The management fees approved for 1995 are a fixed $45,000
with a redetermination if the merger of Communications and Tribune/Swab-Fox is
not approved. Additionally, through December 31, 1993, Communications leased
office space from Tribune/Swab-Fox. In December, 1993, Communications acquired
from Tribune/Swab-Fox one of the previously leased office buildings for $255,000
or $47 per square foot, a price comparable to prices paid by independent third
parties for similar buildings in the immediate area. The lease on the remaining
office building was not renewed.
On December 30, 1994, Communications loaned $1,250,000 under a
$2,500,000 line-of-credit to Tribune/Swab-Fox which bears interest (10% at
December 31, 1994) at 1.5 percent above the Chase Manhattan prime rate and is
due July 1, 1995.
NPC paid approximately $170,000 to Green Country Distributors, Inc.
(Green Country), an affiliated company of Tribune, for transportation services
in 1992. NPC paid approximately $198,000 to a leasing company owned by certain
stockholders of Tribune/Swab-Fox, World and the General Manager of NPC for
vehicle leases in 1992. Green Country paid approximately $79,000 to this leasing
company for vehicle leases in 1992. In a separate but related transaction,
concurrent with the termination of the JOA, World acquired the interests of such
stockholders of Tribune/Swab-Fox in this leasing company for approximately
$70,000.
F-20
<PAGE>
T/SF COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1994, 1993 and 1992
10. Accrued Liabilities:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Current portion of deferred contract
liabilities $ 533 $ 432
Accrued interest 112 197
Accrued vacation 249 413
Accrued payroll 1,522 763
Deferred revenue 2,750 2,607
Accrued other liabilities 1,889 2,324
------ ------
$7,055 $6,736
====== ======
</TABLE>
11. Business Segment Information:
Communications' operations are conducted primarily through three
business segments entirely within the continental United States. These segments
and the primary operations of each are as follows:
<TABLE>
<CAPTION>
Business Segment Operations
---------------- ----------
<C> <S>
Publishing Publication through September 30, 1992, of The Tulsa Tribune, an evening
newspaper published six days per week in Tulsa, Oklahoma, publication of weekly
free-distribution shopper-newspapers by Shopper's Guide and Marks-Roiland
(through September 30, 1993), and publication of five trade journals (four
after August, 1994) by BMT Communications, Inc.
Information Provider of motor vehicle reports, truck driver employment information,
Services worker's compensation information, credit reports, criminal records reports,
and other pre-employment screening information and services, and, until March,
1994, reseller of long-distance telephone service to the insurance and trucking
industries.
Exposition Publisher of various convention/trade show publications and publisher of trade
Services journal, provider of registration services, exhibitor marketing and information
services, all to the exposition industry. Prior to 1994, Communications included
Atwood in the Publishing segment. In connection with the Galaxy acquisition,
Communications added the Exposition Services segment which also includes Atwood.
Atwood has been reclassified into the Exposition Services segment for 1993 and 1992.
</TABLE>
Summarized financial information by industry segment is as follows:
F-21
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net revenues from sales to
unaffiliated customers:
Publishing $18,608 $ 41,652 $71,475
Exposition services 21,057 10,483 9,168
Information services 15,091 14,499 13,643
Corporate 1,533 1,343 545
------- -------- -------
$56,289 $ 67,977 $94,831
------- -------- -------
Operating profit (loss):
Publishing $ 2,891 $ (9,509) $ 944
Exposition services 1,453 297 363
Information services 2,992 2,505 2,708
------- -------- -------
Operating profit (loss) from segments 7,336 (6,707) 4,015
Corporate expenses, net (338) (2,288) (1,430)
Interest expense (559) (1,620) (2,388)
------- -------- -------
Income (loss) from operations before
unusual gain, income taxes and
extraordinary loss $ 6,439 $(10,615) $ 197
------- -------- -------
Identifiable assets:
Publishing $14,871 $ 24,422 $46,852
Exposition services 11,534 4,714 4,196
Information services 12,101 12,387 11,460
Corporate 10,631 5,538 7,310
------- -------- -------
$49,137 $ 47,061 $69,818
------- -------- -------
Depreciation and amortization:
Publishing $ 866 $ 2,563 $ 5,967
Exposition services 1,167 291 248
Information services 1,035 898 1,100
Corporate 73 42 72
------- -------- -------
$ 3,141 $ 3,794 $ 7,387
------- -------- -------
</TABLE>
F-22
<PAGE>
Summarized financial information by industry segment - continued:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Capital expenditures:
Publishing $ 109 $ 578 $ 418
Exposition services 3,175 180 201
Information services 935 800 702
Corporate 128 264 2
------ ------ ------
$4,347 $1,822 $1,323
------ ------ ------
</TABLE>
Operating profit is net revenues less applicable operating expenses.
Corporate general and administrative expenses are allocated to each of the
industry segments and to general corporate expenses based on management's
estimates of time devoted to each segment and general corporate matters.
Included in 1993 corporate general and administrative expenses is the
retirement and deferred compensation expenses related to the former Chairman of
the Board.
Included in the information services division operating profit in 1992
is settlement of a major lawsuit with MCI that had been in process since late
1989. Costs and expenses related to the lawsuit were expensed by
Communications as incurred.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist of cash and cash
equivalents, prepaid expenses, other equipment, goodwill and deferred finance
charges.
Capital expenditures include additions to property, plant and equipment,
goodwill and advertising lists.
During 1994, 1993 and 1992, no customer represented ten percent or
more of Communications' revenues.
F-23
<PAGE>
Exhibit 21
T/SF COMMUNICATIONS CORPORATION
-------------------------------
SUBSIDIARIES
<TABLE>
<CAPTION>
Entity Percent Owned Jurisdiction of Incorporation
------ ------------- -----------------------------
<S> <C> <C>
Tribune/Swab-Fox Companies, Inc. 77.6% Delaware - parent company
T/SF Communications Corporation Delaware - parent company
<CAPTION>
Subsidiaries of T/SF Communications Corporation
-----------------------------------------------
<S> <C> <C>
Atwood Convention Publishing, Inc. 100% (1) Missouri - convention publications
BMT Communications, Inc. (formerly BMT 100% (1) Oklahoma - trade publications
Publications, Inc.)
Convention News Source, Inc. 100% (2) Missouri - inactive
DacNet, Inc. 100% (3) Oklahoma - inactive
Expo Magazine, Inc. 100% (4) Kansas - trade publications
Galaxy Design & Printing, Inc. 100% (5)* Maryland - commercial printing
Galaxy Registration, Inc. 100% (1)* Maryland - convention registration
M-R Creative, Inc. 100% (6)** New York - advertising design
T/SF New York, Inc., (formerly 100% (1)** New York - shopper-newspaper publications
Marks-Roiland Communications, Inc.)
National Employment Screening Services, Inc. 100% (3) Oklahoma - employment screening
New York Community Newspapers, Inc. 100% (4) New York - inactive
Shopper's Guide, Inc. 100% (4)*** New Jersey - shopper-newspaper publications
South Jersey Shopper, Inc. 100% (7) New Jersey - inactive
Transportation Communications Services, Inc., 100% (3) Oklahoma - information service
(formerly TSF Information Services Corp.)
T/SF Investment Co. 100% (4) Delaware - investment holding company
Transportation Information Services, Inc 100% (1) Oklahoma-motor vehicle reports and truck
driver employment information
Tulsa Tribune Company 100% (1) Delaware - newspaper publication
until October 1, 1992
</TABLE>
-----------------------------------------------
(1) Owned by T/SF Investment Co.
(2) Owned by Atwood Convention Publishing, Inc.
(3) Owned by Transportation Information Services, Inc.
(4) Owned by T/SF Communications Corporation.
(5) Owned by Galaxy Registration, Inc.
(6) Owned by Marks-Roiland Communications, Inc.
(7) Owned by Shopper's Guide, Inc.
* Acquired effective March 1, 1994.
** Sold assets effective November 1, 1993.
*** Sold assets effective April 30, 1994.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1994 T/SF COMMUNICATIONS CORPORATION CONSOLIDATED FINANCIAL
STATEMENTS 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-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,311
<SECURITIES> 2,000
<RECEIVABLES> 9,041
<ALLOWANCES> 506
<INVENTORY> 596
<CURRENT-ASSETS> 29,493
<PP&E> 7,408
<DEPRECIATION> 2,824
<TOTAL-ASSETS> 49,137
<CURRENT-LIABILITIES> 13,317
<BONDS> 3,674
<COMMON> 486
0
0
<OTHER-SE> 29,481
<TOTAL-LIABILITY-AND-EQUITY> 49,137
<SALES> 51,094
<TOTAL-REVENUES> 56,289
<CGS> 35,069
<TOTAL-COSTS> 45,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 483
<INTEREST-EXPENSE> 559
<INCOME-PRETAX> 6,439
<INCOME-TAX> 2,589
<INCOME-CONTINUING> 3,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,850
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
</TABLE>
