<PAGE> 1
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13492
THE TIMES MIRROR COMPANY
<TABLE>
<S> <C>
DELAWARE 95-4481525
STATE OF INCORPORATION I.R.S. EMPLOYER ID. NO.
</TABLE>
TIMES MIRROR SQUARE
LOS ANGELES, CALIFORNIA 90053
TELEPHONE: (213) 237-3700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Number of shares of Series A Common Stock outstanding at May 8, 1995:
83,045,823
Number of shares of Series C Common Stock outstanding at May 8, 1995:
29,058,096
- --------------------------------------------------------------------------------
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<PAGE> 2
THE TIMES MIRROR COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Financial information herein, and management's discussion thereof, include
consolidated data for The Times Mirror Company ("Registrant" or "Times Mirror")
and its subsidiaries. Registrant and its subsidiaries are sometimes herein
referred to collectively as the "Company".
1
<PAGE> 3
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
------------------------
MARCH 31, MARCH 27,
1995 1994
---------- ---------
<S> <C> <C>
REVENUES............................................................. $ 774,011 $733,706
---------- --------
COSTS AND EXPENSES:
Cost of sales...................................................... 422,558 404,874
Selling, general and administrative expenses....................... 324,088 295,903
Restructuring charge............................................... 3,223
---------- --------
749,869 700,777
OPERATING PROFIT..................................................... 24,142 32,929
Interest expense..................................................... (8,772) (17,709)
Interest income...................................................... 6,392 421
Nonrecurring gain.................................................... 7,163
Other, net........................................................... 371 1,057
---------- --------
Income from continuing operations before income taxes................ 29,296 16,698
Income taxes....................................................... 14,209 9,197
---------- --------
Income from continuing operations.................................... 15,087 7,501
Discontinued operations.............................................. 1,638,905 15,225
---------- --------
Income before cumulative effect of change in accounting principle.... 1,653,992 22,726
Cumulative effect of change in accounting principle, net of income
tax benefit of $2,861.............................................. (4,511)
---------- --------
NET INCOME........................................................... $1,649,481 $ 22,726
========== ========
Preferred dividends.................................................. $ 4,730
==========
Earnings available to common shareholders............................ $1,644,751 $ 22,726
========== ========
Primary earnings per common share:
Continuing operations.............................................. $ .08 $ .06
Discontinued operations............................................ 13.28 .12
Cumulative effect of change in accounting principle................ (.04)
---------- --------
Primary earnings per common share.................................... $ 13.32 $ .18
========== ========
Fully diluted earnings per common share:
Income before cumulative effect of change in accounting
principle....................................................... $ 12.80 $ .18
Cumulative effect of change in accounting principle................ (.04)
---------- --------
Fully diluted earnings per common share.............................. $ 12.76 $ .18
========== ========
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE> 4
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3
<PAGE> 5
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
---------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents........................................ $ 442,910 $ 81,944
Marketable securities............................................ 84,633
Accounts receivable, less allowance for doubtful accounts and
returns of $63,410 and $72,317................................ 484,187 535,982
Inventories...................................................... 181,297 153,017
Deferred income taxes............................................ 50,569
Net assets of discontinued cable television operations........... 642,377
Prepaid expenses................................................. 105,276 119,960
---------- ----------
Total Current Assets.......................................... 1,348,872 1,533,280
Property, plant and equipment, at cost less accumulated
depreciation of $851,179 and $828,711............................ 1,304,716 1,311,130
Goodwill........................................................... 772,200 732,293
Other intangibles.................................................. 120,956 124,082
Deferred charges................................................... 166,315 154,989
Other assets....................................................... 508,686 409,527
---------- ----------
$4,221,745 $4,265,301
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 6
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
---------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable................................................. $ 329,880 $ 362,139
Accrued liabilities.............................................. 37,318 43,741
Short-term debt.................................................. 794 645,870
Deferred income taxes............................................ 36,681
Dividends payable................................................ 11,456 34,727
Other current liabilities........................................ 311,517 363,199
---------- ----------
Total Current Liabilities..................................... 690,965 1,486,357
Long-term debt..................................................... 247,603 246,462
Deferred income taxes.............................................. 143,025 131,163
Other liabilities.................................................. 477,480 444,276
---------- ----------
Total Liabilities............................................. 1,559,073 2,308,258
---------- ----------
Commitments and contingencies
Shareholders' Equity
Series A Preferred Stock, $1 par value; 900,000 shares
authorized;
824,000 shares issued; stated at liquidation value............ 411,784
Series B Preferred Stock, $1 par value; 25,000,000 shares
authorized; 16,561,000 shares issued; stated at liquidation
value......................................................... 349,954
Preferred stock, $1 par value; 7,100,000 shares authorized; no
shares issued
Common stock
Series A, $1 par value; 500,000,000 shares authorized;
82,924,000 and 99,024,000 issued............................. 82,924 99,024
Series B, $1 par value; 100,000,000 shares authorized; no
shares issued
Series C, convertible, $1 par value; 300,000,000 shares
authorized; 29,166,000 and 30,939,000 issued................. 29,166 30,939
Additional paid-in capital....................................... 167,973 167,898
Retained earnings................................................ 1,620,871 1,720,725
---------- ----------
2,662,672 2,018,586
Less treasury stock, at cost; 1,345,000 Series A shares.......... 61,543
---------- ----------
Total Shareholders' Equity.................................... 2,662,672 1,957,043
---------- ----------
$4,221,745 $4,265,301
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 7
THE TIMES MIRROR COMPANY
STATEMENT OF CONDENSED CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
------------------------
MARCH 31, MARCH 27,
1995 1994
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by continuing operating activities............... $ 24,015 $ 56,242
Net cash provided by discontinued cable television operations...... 6,693 46,388
---------- ---------
Net cash provided by operating activities....................... 30,708 102,630
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of cable television operations.............. 1,225,013
Investment in marketable and long-term securities.................. (162,339)
Acquisitions, net of cash acquired................................. (48,405) (13,084)
Capital expenditures............................................... (27,296) (24,244)
Additions to product development costs............................. (18,746) (12,543)
Proceeds from sales of assets...................................... 5,418 299,903
Other, net......................................................... (7,383) (1,417)
---------- ---------
Net cash provided by investing activities of continuing
operations...................................................... 966,262 248,615
Net cash used in investing activities of discontinued cable
television operations........................................... (13,268) (32,297)
---------- ---------
Net cash provided by investing activities....................... 952,994 216,318
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of commercial paper and short-term borrowings............ (488,010) (259,904)
Principal repayments of long-term debt............................. (100,107)
Dividends paid..................................................... (34,727) (34,726)
Other, net......................................................... 108 (191)
---------- ---------
Net cash used in financing activities........................... (622,736) (294,821)
---------- ---------
Increase in cash and cash equivalents................................ 360,966 24,127
Cash and cash equivalents at beginning of year....................... 81,944 46,756
---------- ---------
Cash and cash equivalents at end of period........................... $ 442,910 $ 70,883
========== =========
</TABLE>
See notes to condensed consolidated financial statements
6
<PAGE> 8
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PREPARATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for interim periods are not necessarily
indicative of the results that may be expected for the fiscal year. For further
information, refer to the consolidated financial statements and accompanying
notes incorporated in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
Certain amounts in the previously issued financial statements have been
reclassified to conform to the first quarter 1995 presentation. Financial
information in the Notes to Condensed Consolidated Financial Statements excludes
discontinued operations, except where noted.
NOTE 2 -- ACCOUNTING CHANGE
Effective January 1, 1995, the Company changed its method of accounting for
certain contract-related revenues from the licensing and sale of training
programs and related materials. Prior to 1995, revenues were recognized for
licensing fees, as well as the sale of training products and seminars. However,
the majority of the revenues were recognized as licensing fees on the date a
non-cancelable agreement was signed and a master copy of the training materials
was delivered to the customer. As of January 1, 1995, revenues are recognized
either when the training products are delivered or the seminars presented, with
no revenues recognized for licensing fees. The Company believes that this
provides for consistent accounting treatment among its professional training
companies. The Company recorded a cumulative charge of $7,372,000 ($4,511,000
net of taxes, or 4 cents per share) as of January 1, 1995. The effect of this
change on first quarter 1995 net income before cumulative effect of the change
in accounting principle was not significant.
NOTE 3 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the periods ended March 31, 1995 and March 27, 1994
included interest, net of amounts capitalized, of $15,782,000 and $14,903,000
and income taxes of $14,899,000 and $9,071,000 respectively.
The reorganization described in Note 14 resulted in the following non-cash
transactions during the period ended March 31, 1995 (in thousands):
<TABLE>
<S> <C>
Partial redemption of certain shareholder interests............... $932,000
Transfer of debt, related interest and other liabilities to Cox... 133,257
Exchange of debentures............................................ 246,965
Issuance of Series A preferred stock.............................. 411,784
Exchange of common stock for Series B preferred stock............. 349,954
Retirement of treasury stock...................................... 61,543
</TABLE>
NOTE 4 -- DISCONTINUED OPERATIONS
On February 1, 1995, the Company completed the merger of its cable
television operations with Cox Communications, Inc. (Cox). The Company received
cash proceeds of $1,225,013,000 and recognized a gain of $1,634,294,000, or
$13.24 per share, related to the merger.
7
<PAGE> 9
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 -- DISCONTINUED OPERATIONS (CONTINUED)
The cable television operations are reported as discontinued operations for
all periods presented. Income from discontinued operations is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 27,
1995 1994
---------- ------------
<S> <C> <C>
Revenues........................................... $ 41,919 $122,968
---------- --------
Income before income taxes......................... 7,730 27,175
Income taxes....................................... 3,119 11,950
---------- --------
Net income......................................... 4,611 15,225
Net gain on disposal............................... 1,634,294
---------- --------
Total discontinued operations...................... $1,638,905 $ 15,225
========== ========
</TABLE>
The net assets of the cable television operations transferred to Cox, which
were comprised primarily of property, plant and equipment and intangible assets,
were classified as net assets of discontinued cable television operations as of
December 31, 1994.
NOTE 5 -- NONRECURRING GAIN
In March 1995, the Company sold warrants to purchase preferred stock
obtained as part of the 1993 sale of its broadcast television stations. This
transaction resulted in a gain of $7,163,000, or $4,500,000 (4 cents per share)
after taxes.
NOTE 6 -- INVENTORIES
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
Newsprint, paper, and other raw materials............ $ 50,049 $ 33,789
Books and other finished products.................... 103,113 94,290
Work-in-process...................................... 28,135 24,938
--------- --------
$ 181,297 $153,017
========= ========
</TABLE>
NOTE 7 -- DEBT
Short-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
Commercial paper..................................... $124,330
Short-term borrowings................................ 363,680
8 7/8% Notes due February 1, 1998, called on February
1, 1995............................................ 100,000
Debt assumed by Cox Communications, Inc. ............ 57,349
Current maturities of long-term debt................. $ 794 511
----- --------
$ 794 $645,870
===== ========
</TABLE>
8
<PAGE> 10
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 7 -- DEBT (CONTINUED)
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
7 1/4% Debentures due March 1, 2013................. $148,215
7 1/2% Debentures due July 1, 2023.................. 98,750
7 1/8% Debentures due March 1, 2013................. $148,215
7 3/8% Debentures due July 1, 2023.................. 98,750
Others at various interest rates, maturing through
2001.............................................. 1,432 1,539
-------- --------
248,397 248,504
Unamortized discount................................ (1,531)
Less current maturities............................. (794) (511)
-------- --------
$247,603 $246,462
======== ========
</TABLE>
Commercial paper and short-term borrowings carried a weighted average
interest rate of 6.1% at December 31, 1994. In January 1995, the Company
completed an exchange offer for $246,965,000 of the 7 1/8% and 7 3/8% Debentures
for similar debentures bearing interest rates of 7 1/4% and 7 1/2%,
respectively. The publicly held notes of $57,349,000 at December 31, 1994 were
assumed by Cox on February 1, 1995 as part of the reorganization described in
Note 14. Part of the proceeds received from the reorganization transactions were
used to retire all of the Company's commercial paper and short-term borrowings
and to redeem the 8 7/8% Notes on February 1, 1995. In addition, the Company has
$48,815,000 of unused standby letters of credit at March 31, 1995.
NOTE 8 -- EARNINGS AND DIVIDENDS PER COMMON SHARE
Primary earnings per common share is computed by dividing net income, less
preferred dividend requirements, by the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. The
weighted average number of shares for primary earnings per share totaled
123,416,000 and 129,032,000 for the quarter ended March 31, 1995 and March 27,
1994, respectively.
Fully diluted earnings per common share for the quarter ended March 31,
1995 is computed by dividing net income, less preferred dividend requirements
for Series A preferred stock, by the weighted average number of shares of common
stock and common stock equivalents outstanding, assuming that the Series B
preferred stock was converted to common stock on a one for one basis on March 1,
1995. The weighted average number of shares for fully diluted earnings per share
was 129,044,000 for the quarter ended March 31, 1995. Fully diluted earnings per
share for the quarter ended March 27, 1994 are the same as the primary earnings
per share.
Cash dividends of 6 cents and 27 cents per share of common stock were
declared in the quarter ended March 31, 1995 and March 27, 1994, respectively,
payable in the following quarter.
NOTE 9 -- CASH MANAGEMENT SYSTEM
Under the Company's cash management system, the bank notifies the Company
daily of checks presented for payment against its primary disbursing accounts.
The Company transfers funds from other sources, such as short-term investments
to cover the checks presented for payment. This program results in a book cash
overdraft in the primary disbursing accounts as a result of the checks
outstanding. The book overdraft, which was reclassified to accounts payable, was
approximately $28,242,000 and $54,263,000 at March 31, 1995 and December 31,
1994, respectively.
9
<PAGE> 11
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 10 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company enters into interest rate swaps and foreign currency forward
contracts to manage exposures associated with interest rate and foreign currency
fluctuations. The Company has two interest rate swap agreements, one for
$150,000,000 expiring in 2010 and one for $100,000,000 expiring in 2023. These
agreements exchange payments to the Company at fixed rates of 7 1/8% and 7 3/8%,
respectively, for payments by the Company at a variable rate based generally on
LIBOR. These payments are recognized as an adjustment to interest expense
related to the debt. The Company has forward contracts maturing in 1995 to sell
approximately $22,229,000 of foreign currency. Gains and losses on the forward
contracts, which do not qualify as accounting hedges, are recognized currently
in earnings. The fair value of the interest rate swaps and forward contracts,
based on estimates received from third parties, was not significant at March 31,
1995.
The fair value of long-term debt at March 31, 1995, based primarily on the
Company's current refinancing rates for publicly issued fixed rate debt with
comparable maturities, was $229,459,000, compared to a carrying value of
$247,603,000. The carrying value of cash equivalents, marketable and long-term
securities and short-term debt approximates fair value at March 31, 1995 due to
the short maturity period for these instruments.
NOTE 11 -- STOCK OPTION PLANS
As described in Note 12 to the Consolidated Financial Statements in the
Company's 1994 Annual Report, the Company has various stock option plans. In
connection with the reorganization (see Note 14), the number of options and the
option price were adjusted in order to preserve the economic value of the
outstanding options. The following table sets forth information relative to the
stock option plans:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Options Outstanding at December 31, 1994........ 4,532,657 $19.46 to $37.93
Adjustment due to reorganization.............. 3,065,245
Granted....................................... 41,940 $18.88
Exercised..................................... (58,010) $24.61 to $32.13
Canceled...................................... (130,033) $14.54 to $36.94
---------
Options Outstanding at March 31, 1995........... 7,451,799 $11.43 to $22.28
========
</TABLE>
At March 31, 1995, there were 632,808 options outstanding with purchase
prices equal to 75 percent of the fair market value on the date of grant.
NOTE 12 -- INCOME TAXES
The company's effective tax rate for continuing operations exceeds the
federal statutory income tax rate due principally to state taxes and permanent
state and federal tax differences related to the non-deductible amortization of
goodwill.
NOTE 13 -- CONTINGENT LIABILITIES
The Company and its subsidiaries are defendants in actions for libel and
other matters arising out of their business operations. In addition from time to
time, the Company and its subsidiaries are involved as parties in various
governmental and administrative proceedings, including environmental matters.
The Company does not believe that any such proceedings currently pending will
have a material adverse effect on its consolidated
10
<PAGE> 12
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 13 -- CONTINGENT LIABILITIES (CONTINUED)
financial position, although an adverse resolution in any reporting period of
one or more of these matters could have a material impact on results of
operations for that period.
NOTE 14 -- REORGANIZATION
On February 1, 1995, the Company completed the merger of its cable
television operations with Cox Communications, Inc. (Cox) and related
transactions. The transactions involved in the reorganization included the
merger of the cable television operations with Cox, the retirement of
approximately 75% of total debt outstanding at December 31, 1994, the issuance
of two new series of preferred stock, and a partial redemption of certain
shareholder interests through the distribution of Cox common stock. See Note 18
to the Consolidated Financial Statements in the Company's 1994 Annual Report for
a detailed discussion of these transactions.
NOTE 15 -- PREFERRED STOCK DIVIDEND REQUIREMENTS
The Series A preferred stock has a dividend rate of 8% of its liquidation
value of $411,784,000. The Series B preferred stock has a dividend rate of
$1.374 per share. Both series of preferred stock are entitled to cumulative
dividends effective March 1, 1995.
11
<PAGE> 13
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CABLE MERGER AND RELATED TRANSACTIONS
During the first quarter of 1995, the Company completed the merger of its
cable television operations with Cox Communications, Inc. (Cox) and also
completed related transactions, including the issuance of two new series of
preferred stock and the retirement of nearly 75 percent of total debt
outstanding at year-end 1994. Note 18 to the Consolidated Financial Statements
in the Company's 1994 Annual Report provides a detailed discussion of these
transactions. The first quarter 1995 results included a gain of $1.634 billion,
or $13.24 per share, on the merger and also benefited from lower interest
expense due to the debt reduction and higher interest income from the investment
of cash proceeds from the merger. Dividend requirements on the new preferred
shares in the first quarter reduced earnings available to common shareholders by
$4.7 million. The full-year impact of the preferred dividend requirements on
earnings available to common shareholders is expected to total approximately $47
million, but this impact is expected to be substantially offset by the net
benefit from higher interest income and lower interest expense.
OUTLOOK FOR 1995
Although the economic recovery in its major newspaper markets has been
slower than anticipated, the Company expects total revenues in 1995 to exceed
the prior year, reflecting increased advertising revenues, expanded sales in its
professional information operations, and the impact of planned acquisitions.
Revenue growth in 1995 is expected to be substantially offset by the impact of
higher newsprint prices and increased paper and postage costs overall. In
addition, costs related to new initiatives, as discussed below, are currently
expected to reduce 1995 results by as much as $30 million on an after-tax basis,
comprised of $6 to $7 million in Newspaper Publishing, $4 to $6 million in
Professional Information, $12 to $15 million in Consumer Media, and $5 to $6
million in Corporate and Other.
NEW BUSINESS DEVELOPMENT
As previously announced, and as noted above, the Company is pursuing a
series of new initiatives to develop new businesses and products, as well as to
reduce ongoing operating and administrative processing costs. Spending on these
new initiatives reduced first quarter results by $7.4 million, or $4.4 million
(4 cents per share) after taxes.
Acquisitions in the Professional Information segment in the first quarter
of 1995 totaled approximately $45 million, including the purchases of Madison
Publishing Corporation and StayWell Health Management Systems for the Company's
fast-growing consumer health information business.
During the first quarter of 1995, the Company completed structuring its
cable television programming joint venture with Cox. Times Mirror and Cox have
each committed up to $100 million to investments identified by the joint
venture. The Company expects to make contributions as capital calls are made.
The first two investments identified by the joint venture are the Outdoor Life
channel, scheduled for launch in July 1995, and Speedvision, which is expected
to debut in January 1996 and will be the first channel for automotive, marine
and aviation enthusiasts. The Company initially will own two-thirds of the
Outdoor Life channel and one-third of Speedvision.
NEWSPAPER PUBLISHING OUTLOOK
In the first quarter of 1995, the economic recovery in Southern California
and New York continued, but at a much slower pace than other U.S. regions. As a
result of the constrained economies in its major newspaper markets, advertising
revenue growth at the Company's major newspapers was below the industry
12
<PAGE> 14
average for the first quarter. If this economic trend continues, advertising
revenue growth may remain slow throughout the year, and may be further impacted
by continued structural shifts in retail promotional spending, retail
consolidations and growth in discount stores, which use little newspaper
advertising. The average price per ton of newsprint in 1995 is expected to rise
by more than 45 percent over the 1994 level. Newsprint expense in 1994
represented approximately 15 percent of the segment's total operating costs.
Overall, 1995 newsprint price increases are expected to be partially offset by
declines in consumption due to waste reduction efforts, editorial product
changes and lower circulation levels. As previously mentioned, the 1995 segment
results are expected to be reduced by spending for new initiatives, including
electronic online services of the Los Angeles Times and Newsday/New York
Newsday. The Company's net income will also be reduced by equity losses related
to electronic and shopping joint ventures between The Times and Pacific Telesis
and between Newsday/New York Newsday and NYNEX.
PROFESSIONAL INFORMATION OUTLOOK
Higher revenues are expected for most of the professional information
businesses in 1995. However, Matthew Bender, the largest profit contributor in
the segment, is expected to show declines in revenues and operating profit in
1995. In addition, the segment's full-year results are expected to be reduced by
costs associated with the previously described new initiatives. These costs
relate primarily to the development of new electronic business activities in
health information services and legal publishing.
CONSUMER MEDIA OUTLOOK
Consumer Media revenues in 1995 are expected to improve over the prior year
due to increased advertising revenues at the magazines. However, the segment is
expected to generate operating losses throughout the year due to costs
associated with new initiatives in the consumer multimedia and television
programming businesses, including expenses related to the launch of the Outdoor
Life channel, currently scheduled for July 1995. The Company's net income will
also be reduced by equity losses related to its investment in Speedvision, which
is expected to debut in January 1996.
COST REDUCTION AND RESTRUCTURING EFFORTS
Over the past several years, Times Mirror has provided restructuring
reserves in order to streamline the operating and administrative functions of
its businesses. The Company is continuing to pursue cost reduction and process
re-engineering opportunities and, in the first quarter of 1995, recorded a $3.2
million pre-tax charge for a voluntary separation program at The Baltimore Sun.
In addition, as part of the previously-noted new initiatives, the 1995 results
are expected to be impacted by costs for the development and installation of a
network to link product, marketing and administrative databases across the
Company. The network is also designed to reduce certain operating and
administrative processing costs over time, and the impact of these costs is
reflected in the Corporate and Other segment. Other opportunities to reduce
costs could lead to additional restructuring or other charges in future periods.
13
<PAGE> 15
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes Times Mirror's financial results (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
MARCH 31 MARCH 27
1995 1994
---------- ---------
<S> <C> <C>
Revenues............................................. $ 774,011 $733,706
Restructuring charge................................. (3,223)
Impact of new initiatives on operating profit........ (7,433)
Operating profit..................................... 24,142 32,929
Nonrecurring gain.................................... 7,163
Interest expense..................................... (8,772) (17,709)
Interest income...................................... 6,392 421
Income from continuing operations.................... 15,087 7,501
Discontinued operations.............................. 1,638,905 15,225
Net income........................................... 1,649,481 22,726
Primary earnings per share:
Continuing operations.............................. .08 .06
Discontinued operations............................ 13.28 .12
Net income......................................... 13.32 .18
Effective tax rate for continuing operations......... 48.5% 55.1%
</TABLE>
Times Mirror's consolidated revenues increased 5.5 percent for the first
quarter of 1995, reflecting increases in each of the company's business
segments. Revenue gains in the Professional Information segment reflected
improvements in health information services, higher education and international
sales, while increased revenues in the Consumer Media segment were due largely
to higher advertising revenues at the Company's consumer magazines. A modest
improvement in the Newspaper Publishing segment primarily reflected advertising
revenue gains at each of the Eastern newspapers.
Consolidated operating profit in the first quarter of 1995 fell 26.7
percent from the prior year quarter, due primarily to more pronounced seasonal
losses in the higher education operations, continued declines at Matthew Bender,
and the impact of new initiatives, which included continued start-up losses in
the new consumer multimedia and television programming businesses. The 1995
results were also impacted by a $3.2 million charge (2 cents per share after
taxes) for a voluntary separation program at The Baltimore Sun.
Income from continuing operations for the first quarter of 1995 was $15.1
million, or 8 cents per share after preferred dividend requirements, compared
with $7.5 million, or 6 cents per share, for the comparable 1994 period.
Continuing operations in the 1995 first quarter included a nonrecurring gain on
the sale of securities of $7.2 million, or $4.5 million (4 cents per share)
after taxes. Excluding this nonrecurring gain and the previously mentioned
restructuring charge, income from continuing operations in 1995 would have been
$12.5 million, compared with $7.5 million in the 1994 first quarter. Operating
profit declines in the 1995 first quarter were more than offset by the net
benefit from lower interest expense due to debt reductions and higher interest
income from the investment of cash proceeds from the cable merger.
Net income for the first quarter of 1995 was $1.649 billion, or $13.32 per
share after preferred dividend requirements ($12.76 fully diluted), compared
with $22.7 million, or 18 cents per share, in the 1994 first quarter. The 1995
results reflected the gain of $1.634 billion, or $13.24 per share, on the merger
of the cable television operations in February. Net income for the first
quarters of 1995 and 1994 included income from the discontinued cable television
operations of $4.6 million, or 4 cents per share, and $15.2 million, or 12 cents
per share, respectively. The 1995 first quarter also included a $4.5 million
charge, or 4 cents per share, for an accounting change, which is discussed in
Note 2 to the Condensed Consolidated Financial Statements.
14
<PAGE> 16
The effective tax rate of 48.5 percent in the first quarter of 1995 was
lower than the 55.1 percent rate in the prior-year quarter due to the impact of
tax reserves included in the 1994 tax provision.
ANALYSIS BY SEGMENT
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
MARCH 31 MARCH 27
1995 1994 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Revenues:
Advertising................................... $356,961 $353,159 1.1%
Circulation................................... 109,903 108,761 1.1
Other......................................... 9,288 9,201 1.0
--------- ---------
$476,152 $471,121 1.1
======== ========
Operating Profit.............................. $ 35,345 $ 36,160 (2.3)
======== ========
Impact of New Initiatives on Operating
Profit...................................... $ (2,686)
========
</TABLE>
Newspaper Publishing revenues rose a modest 1.1 percent in the first
quarter of 1995 as compared to last year's first quarter. Advertising revenues
in the Company's major markets were weak in the 1995 first quarter, as Newsday
remained relatively level with the prior year and The Times fell by 1.0 percent.
The other newspapers reported solid improvements in advertising revenues,
largely reflecting strength in classifieds and preprints. Circulation revenues
for the 1995 quarter were slightly ahead of the prior-year first quarter, as
price increases at most of the newspapers more than offset declines in
circulation levels. Circulation price increases, as well as the planned
curtailment of circulation outside primary market areas, contributed to the
lower circulation levels.
Operating profit for the segment declined 2.3 percent in 1995's first
quarter, as improvements at The Times and Newsday were offset by the impact of
The Baltimore Sun restructuring charge and costs related to new initiatives.
Excluding the restructuring charge, the segment's 1995 first-quarter operating
profit would have increased 6.6 percent over 1994's first quarter. Although
newsprint prices increased approximately 20 percent in the 1995 first quarter
compared to the prior-year quarter, the company's aggressive cost management
program resulted in a 2.4 percent decrease in all other expenses, excluding the
restructuring charge. The segment's first-quarter operating margin, excluding
the 1995 restructuring charge, would have been 8.1 percent as compared to 7.6
percent in the prior year quarter.
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
MARCH 31 MARCH 27
1995 1994 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Revenues...................................... $223,338 $198,097 12.7%
======== ========
Operating Profit.............................. $ 8,738 $ 15,294 (42.9)
======== ========
Impact of New Initiatives on Operating
Profit...................................... $ (1,302)
========
</TABLE>
Professional Information revenues in the 1995 first quarter increased 12.7
percent over the prior-year quarter, reflecting significant increases in health
information services, higher education and international sales. Operating profit
in the first quarter of 1995 fell 42.9 percent compared to the prior year
quarter, due primarily to declines at Matthew Bender, higher seasonal losses
associated with expanding product lists in the higher education businesses, and
costs related to new initiatives in the health information services and legal
publishing businesses.
15
<PAGE> 17
CONSUMER MEDIA
Consumer Media revenues and operating losses were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
MARCH 31 MARCH 27
1995 1994 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues....................................... $74,735 $64,637 15.6%
======= =======
Operating Loss................................. $(4,936) $(3,352) (47.3)
======= =======
Impact of New Initiatives on Operating Loss.... $(2,166)
=======
</TABLE>
First-quarter 1995 revenues for the Consumer Media segment increased 15.6
percent over the prior year quarter, due primarily to higher advertising
revenues at Times Mirror Magazines as well as improved consumer art book sales.
The higher revenues at the magazines were tempered, however, by increased paper
and postage costs in the 1995 first quarter. Costs related to new initiatives,
primarily in the consumer multimedia and television programming businesses, also
contributed to the higher operating loss in the 1995 first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Total debt at March 31, 1995 of $248.4 million declined $643.9 million from
the year-end 1994 level, as proceeds from the cable merger were used to retire
the majority of the Company's short-term debt outstanding at December 31, 1994.
The Company's debt-to-adjusted capitalization ratio fell to 8.5 percent at March
31, 1995 from 31.3 percent at the prior year-end.
Cash flow from continuing operations in 1995 is expected to contribute to
the Company's financial resources. Cash flow in 1995 and future years is
expected to benefit from lower interest expense, interest earned on cash
invested, and significantly reduced dividend and capital expenditure
requirements. As previously discussed, Times Mirror expects to use its cash
resources, including cash flow from operations, for a number of purposes,
including developing its existing businesses and investing in new information
franchises. In addition, as noted earlier, the Company has committed up to $100
million to investments identified by The Times Mirror/Cox Programming Joint
Venture, which is expected to be contributed as capital calls are made.
YEAR-TO-DATE CASH FLOWS
During the first quarter of 1995, the Company generated $24.0 million in
net cash from continuing operations, compared with $56.2 million for the same
period in 1994. The reduced cash flow in the 1995 quarter is largely
attributable to the decrease in operating profit, higher inventory levels,
primarily at the newspapers and professional information companies, and an
increase in taxes paid compared to the prior-year quarter. The higher inventory
levels at the newspapers were due, in part, to the increased newsprint prices.
Decreased cash outlays for restructuring activities in the 1995 first quarter
compared to the prior-year quarter, as well as higher interest income from the
investment of proceeds from the cable merger, partially offset these items.
Net cash provided by investing activities of continuing operations during
the first quarter of 1995 was $966.3 million, compared to $248.6 million in the
1994 quarter. The 1995 quarter reflected proceeds of $1.225 billion from the
cable merger, partially offset by investments in securities of $162.3 million
and acquisitions totaling $48.4 million. The prior-year quarter included the
approximately $300 million of proceeds from the sale of the broadcast television
operations. In the 1995 first quarter, spending for capital projects and product
development exceeded the prior-year quarter by $9.3 million. Full-year capital
spending for continuing operations in 1995 is expected to be slightly below the
1994 level.
Net cash used in financing activities of $622.7 million in the first
quarter of 1995 was more than double the net cash used in the prior-year
quarter. As previously discussed, during the first quarter of 1995 the Company
repaid $588.1 million of its short-term debt and commercial paper borrowings
outstanding at the end of 1994 using proceeds from the cable merger. Dividends
to common shareholders of $34.7 million were
16
<PAGE> 18
paid during the first quarter of both years, representing dividends declared in
the fourth quarter of the previous years.
DIVIDENDS
On March 2, 1995, the Board of Directors declared a dividend of 6 cents per
common share, payable June 10, 1995 to shareholders of record at May 26, 1995.
Beginning in June 1995, the Company has agreed to pay an annual dividend to
common shareholders of no less than 24 cents per share for a period of three
years, subject to the fiduciary duties of its Board of Directors. Thereafter,
the payment of dividends on common stock will depend on future earnings, capital
requirements, financial condition and other factors.
As previously mentioned, Times Mirror issued two new series of preferred
stock during the first quarter of 1995. Earnings per common share will be
reduced by the dividend requirements of the preferred stock. Annual dividends on
the Series A preferred stock will be approximately $28 million in 1995 and $33
million thereafter. Annual dividends on the Series B preferred stock will be
approximately $19 million in 1995, $23 million in 1996 and 1997, and $4 million
in 1998, assuming the Series B preferred stock is not called for redemption
prior to its mandatory conversion to Series A common stock in early 1998.
17
<PAGE> 19
THE TIMES MIRROR COMPANY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material legal proceedings are pending.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11. Computation of Earnings Per Share.
18. Letter Regarding Change in Accounting Principle, dated May 12,
1995, from Ernst & Young LLP.
(b) REPORTS ON FORM 8-K
During the first quarter of 1995, the Company filed current reports
on Form 8-K as follows:
(1) Current Report on Form 8-K dated February 1, 1995, to announce
the completion of the merger of its cable television operations
with Cox Communications, Inc.
(2) Current Report on Form 8-K dated March 23, 1995, to announce the
issuance of the Series A Preferred Stock and the final results of
the Series B Preferred Stock exchange offer.
18
<PAGE> 20
THE TIMES MIRROR COMPANY
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who is also signing in his capacity as
Registrant's chief accounting officer.
Date: May 15, 1995
THE TIMES MIRROR COMPANY
By STUART K. COPPENS
--------------------------------
Stuart K. Coppens
Controller and Chief Accounting
Officer
19
<PAGE> 1
EXHIBIT 11
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
---------------------------
MARCH 31, MARCH 27,
1995 1994
----------- -----------
<S> <C> <C>
PRIMARY
Average shares outstanding........................................ 123,114,766 128,607,235
Dilutive stock options based on the treasury stock method using
average market price............................................ 301,420 424,912
----------- -----------
Total........................................................ 123,416,186 129,032,147
========== ==========
Income from continuing operations................................. $ 15,087 $ 7,501
Discontinued operations........................................... 1,638,905 15,225
----------- -----------
Income before cumulative effect of change in accounting
principle....................................................... 1,653,992 22,726
Cumulative effect of change in accounting principle, net of income
tax benefit of $2,861........................................... (4,511)
----------- -----------
Net income........................................................ $1,649,481 $22,726
========== ==========
Preferred dividends............................................... $ 4,730
==========
Earnings available to common shareholders......................... $1,644,751 $22,726
========== ==========
Primary earnings per common share:
Continuing operations........................................... $ .08 $.06
Discontinued operations......................................... 13.28 .12
Cumulative effect of change in accounting principle............. (.04)
----------- -----------
Primary earnings per common share................................. $13.32 $.18
========== ==========
</TABLE>
Page 1 of 2
<PAGE> 2
EXHIBIT 11
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
---------------------------
MARCH 31, MARCH 27,
1995 1994
----------- -----------
<S> <C> <C>
FULLY DILUTED
Average shares outstanding........................................ 123,114,766 128,607,235
Common shares assumed issued upon conversion of Series B
preferred stock................................................. 5,520,393
Dilutive stock options based on the treasury stock method using
market price at the close of the period, if higher than average
market price.................................................... 391,909 424,912
----------- -----------
Total........................................................ 129,027,068 129,032,147
========== ==========
Income from continuing operations................................. $ 15,087 $ 7,501
Discontinued operations........................................... 1,638,905 15,225
----------- -----------
Income before cumulative effect of change in accounting
principle....................................................... 1,653,992 22,726
Cumulative effect of change in accounting principle, net of
income tax benefit of $2,861.................................... (4,511)
----------- -----------
Net Income........................................................ $1,649,481 $22,726
========== ==========
Preferred dividends............................................... $ 2,798
==========
Earnings available to common shareholders......................... $1,646,683 $22,726
========== ==========
Fully diluted earnings per common share:
Income before cumulative effect of change in accounting
principle.................................................... $12.80 $.18
Cumulative effect of change in accounting principle............. (.04)
------ ----
Fully diluted earnings per common share........................... $12.76 $.18
====== ====
</TABLE>
Page 2 of 2
<PAGE> 1
EXHIBIT 18
LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE
May 12, 1995
The Board of Directors
The Times Mirror Company
Times Mirror Square
Los Angeles, California 90053
Dear Sir:
Note 2 of Notes to the Unaudited Condensed Consolidated Financial
Statements of The Times Mirror Company included in its Form 10-Q for the three
months ended March 31, 1995 describes a change in the method of accounting for
recording certain contract-related revenues from the licensing and sale of
training programs and related training materials by one of its operating units.
Under its previous accounting treatment, the entity recognized revenues on the
date a non-cancelable license agreement was signed and an initial copy of the
training materials was delivered to the customer. Under the new accounting
method, revenue is recognized at the time of delivery of the training materials.
If partial shipments of the overall quantity are made, a pro rata share of the
related revenues is recorded as shipped. You have advised us that you believe
that this change is to a preferable method in your circumstances because it
recognizes revenues over the period of contract performance and provides for
consistent accounting treatment among The Times Mirror Company's professional
training companies.
We conclude that the change in the method of accounting for these
contract-related training revenues is to an acceptable alternative method which,
based on your business judgment to make this change for the reasons cited above,
is preferable in your circumstances. We have not conducted an audit in
accordance with generally accepted auditing standards of any financial
statements of the Company as of any date or for any period subsequent to
December 31, 1994, and therefore we do not express any opinion on any financial
statements of The Times Mirror Company subsequent to that date.
Very truly yours,
Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL INFORMATION SET FORTH IN THE REGISTRANT'S QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1,000
<CASH> 442,910
<SECURITIES> 84,633
<RECEIVABLES> 547,597
<ALLOWANCES> 63,410
<INVENTORY> 181,297
<CURRENT-ASSETS> 1,348,872
<PP&E> 2,155,895
<DEPRECIATION> 851,179
<TOTAL-ASSETS> 4,221,745
<CURRENT-LIABILITIES> 690,965
<BONDS> 0
<COMMON> 112,090
0
761,738
<OTHER-SE> 1,788,844
<TOTAL-LIABILITY-AND-EQUITY> 4,221,745
<SALES> 774,011
<TOTAL-REVENUES> 774,011
<CGS> 422,558
<TOTAL-COSTS> 749,869
<OTHER-EXPENSES> (371)
<LOSS-PROVISION> 5,384
<INTEREST-EXPENSE> 8,772
<INCOME-PRETAX> 29,296
<INCOME-TAX> 14,209
<INCOME-CONTINUING> 15,087
<DISCONTINUED> 1,638,905
<EXTRAORDINARY> 0
<CHANGES> (4,511)
<NET-INCOME> 1,649,481
<EPS-PRIMARY> 13.32
<EPS-DILUTED> 12.76
</TABLE>
