<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
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
State of Incorporation: Delaware I.R.S. Employer Id. No. 95-4481525
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, 1996: 75,876,172
Number of shares of Series C Common Stock outstanding at May 8, 1996: 27,568,320
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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".
-2-
<PAGE>
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31
----------------------
1996 1995
-------- ----------
<S> <C> <C>
REVENUES.................................................... $806,759 $ 773,670
-------- ----------
COSTS AND EXPENSES:
Cost of sales............................................. 446,276 422,200
Selling, general and administrative expenses.............. 310,255 321,989
Restructuring charge...................................... 3,223
-------- ----------
756,531 747,412
OPERATING PROFIT............................................ 50,228 26,258
Interest expense............................................ (7,407) (8,732)
Interest income............................................. 1,956 6,392
Other, net.................................................. 3,294 7,534
-------- ----------
Income from continuing operations before income taxes....... 48,071 31,452
Income taxes.............................................. 22,034 15,102
-------- ----------
Income from continuing operations........................... 26,037 16,350
Discontinued operations..................................... 1,637,642
Cumulative effect of changes in accounting principles,
net of income tax benefit of $8,817....................... (12,724)
-------- ----------
NET INCOME.................................................. $ 26,037 $1,641,268
======== ==========
Preferred dividend requirements............................. $ 10,911 $ 4,730
======== ==========
Earnings available to common shareholders................... $ 15,126 $1,636,538
======== ==========
Primary earnings per share:
Continuing operations..................................... $ .14 $ .09
Discontinued operations................................... 13.27
Cumulative effect of accounting changes, net.............. (.10)
-------- ----------
Primary earnings per share.................................. $ .14 $ 13.26
======== ==========
Fully diluted earnings per share............................ $ * $ 12.70
======== ==========
- -----------
* Per share amount on a fully diluted basis has been omitted as the amount is
antidilutive in relation to the primary per share amount.
</TABLE>
See notes to condensed consolidated financial statements
-3-
<PAGE>
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
---------- -----------
<S> <C> <C>
ASSETS (UNAUDITED)
Current Assets
Cash and cash equivalents................................ $ 119,048 $ 182,901
Marketable securities.................................... 19,272 72,806
Accounts receivable, less allowance for doubtful
accounts and returns of $71,636 and $79,536........... 491,301 561,828
Inventories.............................................. 178,393 173,568
Deferred income taxes.................................... 104,271 134,395
Other current assets..................................... 98,344 122,539
---------- ----------
Total Current Assets.................................. 1,010,629 1,248,037
Property, plant and equipment, at cost less accumulated
depreciation of $920,499 and $903,608.................... 1,172,208 1,174,831
Goodwill................................................... 647,839 651,745
Other intangibles.......................................... 84,025 84,186
Deferred charges........................................... 207,579 199,188
Other assets............................................... 429,972 459,172
---------- ----------
$3,552,252 $3,817,159
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
-4-
<PAGE>
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable............................................. $ 313,684 $ 395,292
Employees' compensation...................................... 81,950 118,111
Unearned income.............................................. 241,937 222,893
Other current liabilities.................................... 155,830 298,894
---------- ----------
Total Current Liabilities................................. 793,401 1,035,190
Long-term debt................................................. 299,076 247,934
Deferred income taxes.......................................... 98,433 140,087
Other liabilities.............................................. 619,814 587,712
---------- ----------
Total Liabilities......................................... 1,810,724 2,010,923
Common stock subject to put options............................ 7,351
Commitments and contingencies
Shareholders' Equity
Series A preferred stock, $1 par value; 900,000 shares
authorized; 824,000 shares issued; stated at
liquidation value........................................... 411,784 411,784
Series B preferred stock, $1 par value; 25,000,000 shares
authorized; 7,789,000 shares issued; stated at
liquidation value........................................... 164,595 164,595
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;
76,864,000 and 77,765,000 shares issued................... 76,864 77,765
Series B, $1 par value; 100,000,000 shares authorized;
no shares issued
Series C, convertible, $1 par value; 300,000,000 shares
authorized; 27,827,000 and 27,933,000 shares issued....... 27,827 27,933
Additional paid-in capital................................... 199,435 192,266
Retained earnings............................................ 820,368 875,981
Net unrealized gain on securities............................ 33,304 55,912
---------- ----------
Total Shareholders' Equity........................... 1,734,177 1,806,236
---------- ----------
$3,552,252 $3,817,159
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
-5-
<PAGE>
THE TIMES MIRROR COMPANY
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31
---------------------
1996 1995
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by continuing operating activities................. $43,270 $ 25,510
Net cash provided by (used in) discontinued operating activities..... (1,591) 5,198
--------- ---------
Net cash provided by operating activities......................... 41,679 30,708
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in marketable and long-term securities..................... 48,811 (162,339)
Capital expenditures.................................................. (26,911) (27,179)
Capitalization of product costs....................................... (14,280) (18,736)
Acquisitions, net of cash acquired.................................... (3,099) (48,405)
Proceeds from disposal of cable television operations................. 1,225,013
Proceeds from sales of assets......................................... 5,418
Other, net............................................................ (2,570) (3,763)
--------- ---------
Net cash provided by investing activities of continuing operations.... 1,951 970,009
Net cash used in investing activities of
discontinued operations.............................................. (17,015)
--------- ---------
Net cash provided by investing activities......................... 1,951 952,994
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of common stock........................................... (155,709)
Proceeds from issuance of premium equity participating securities..... 51,221
Dividends paid........................................................ (17,420) (34,727)
Proceeds from exercise of stock options............................... 14,329
Principal repayments of other debt.................................... (80) (100,107)
Repayment of commercial paper and
short-term borrowings, net......................................... (488,010)
Other, net............................................................ 176 108
--------- ---------
Net cash used in financing activities.............................. (107,483) (622,736)
--------- ---------
Increase (decrease) in cash and cash equivalents....................... (63,853) 360,966
Cash and cash equivalents at beginning of year......................... 182,901 81,944
--------- ---------
Cash and cash equivalents at end of period............................. $ 119,048 $ 442,910
========= =========
</TABLE>
See notes to condensed consolidated financial statements
-6-
<PAGE>
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
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
Certain amounts in the previously issued financial statements have been
reclassified to conform to the first quarter 1996 presentation. Financial
information in the Notes to Condensed Consolidated Financial Statements excludes
discontinued operations, except where noted.
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
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. 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 changes in accounting
principles was not significant.
Effective January 1, 1995, the Company adopted the Financial Accounting
Standards Board's Practice Bulletin 13, "Direct-Response Advertising and
Probable Future Benefits," which clarified the accounting for direct-response
advertising costs. The Company recorded a cumulative charge of $14,169,000
($8,213,000 net of taxes, or 6 cents per share) as of January 1, 1995. The
effect of this change on first quarter 1995 net income before cumulative effect
of changes in accounting principles was not significant.
-7-
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
NOTE 3 - 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 2 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 for a detailed discussion of these transactions.
NOTE 4 - DISCONTINUED OPERATIONS
Discontinued operations include cable programming, consumer multimedia, an
electronic shopping joint venture and cable television. The cable programming
business, consumer multimedia business and the joint venture were discontinued
during the third quarter of 1995. The cable television operations were disposed
of on February 1, 1995 in connection with the reorganization described in
Note 3, for a nontaxable gain of $1.634 billion or $13.24 per share.
The combined results of operations of these businesses have been reported as
discontinued operations. The income from discontinued operations is as follows
(in thousands):
<TABLE>
<CAPTION>
March 31,
1995
----------
<S> <C>
Revenues........................ $ 42,260
----------
Income before income taxes...... 5,574
Income taxes.................... 2,226
----------
Net income...................... 3,348
Net gain on disposal............ 1,634,294
----------
Total discontinued operations... $1,637,642
==========
</TABLE>
-8-
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
NOTE 5 - RESTRUCTURING
At March 31, 1996, the Company had restructuring liabilities of $190,428,000, of
which $93,524,000 is included in "Other current liabilities" and $96,904,000 is
included in "Other liabilities" in the condensed consolidated balance sheet.
Cash spent for restructuring program actions was $67,321,000 during the quarter
ended March 31, 1996, of which $29,413,000 was for severance payments. As of
March 31, 1996, approximately 2,300 full-time equivalent employees had
terminated employment under the 1995 restructuring program. The remaining
liability for severance costs at March 31, 1996 aggregated $34,663,000.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the periods ended March 31, 1996 and 1995 included
interest, net of amounts capitalized, of $7,206,000 and $15,782,000 and income
taxes of $4,632,000 and $14,972,000, respectively.
The reorganization described in Note 3 resulted in the following non-cash
transactions during the period ended March 31, 1995 (in thousands):
<TABLE>
<S> <C>
Fair value of Cox Class A common stock issued to
noncontrolling shareholders and accounted for as
a 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 7 - OTHER, NET
Other, Net in 1995 includes a gain of $7,163,000, or $4,500,000 (4 cents per
share) after taxes on the sale of warrants to purchase preferred stock obtained
as part of the 1993 sale of the broadcast television stations.
-9-
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
NOTE 8 - DEBT
Debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
7-1/4% Debentures due March 1, 2013........... $148,215 $148,215
7-1/2% Debentures due July 1, 2023............ 98,750 98,750
4-1/4% PEPS due March 15, 2001;
1,305,000 securities stated at the issuance
price of $39.25 per security................ 51,221
Others at various interest rates,
maturing through 2001........................ 1,143 1,222
-------- --------
299,329 248,187
Less current maturities....................... (253) (253)
-------- --------
Long-term debt................................ $299,076 $247,934
======== ========
</TABLE>
In March 1996, the Company issued 1,305,000 securities, designated as "4-1/4%
Premium Equity Participating Securities (PEPS)" for gross proceeds of $39.25 per
security. This obligation hedges a significant portion of the Company's
investment in common stock of Netscape Communications Corporation (Netscape).
The amount payable at maturity is determined by reference to the fair market
value of the Netscape stock. As a result, the payable will generally move in
tandem with changes in the fair market value of the Netscape stock. The PEPS
obligation is recorded at its maturity value or at the issuance price of $39.25
if the fair market value of Netscape common stock is between $39.25 and $45.14.
At March 31, 1996, the fair market value of Netscape common stock is $41.50 per
share.
NOTE 9 - EARNINGS AND DIVIDENDS PER SHARE
Primary earnings per 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, except when the
common stock equivalents are antidilutive or result in less than 3% dilution.
The weighted average number of shares used for primary earnings per share
totaled 105,225,000 and 123,416,000 for the quarters ended March 31, 1996 and
1995, respectively.
-10-
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Fully diluted earnings per share 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 outstanding at the end of the 1995
first quarter and common stock equivalents outstanding, assuming that the Series
B preferred stock outstanding at the end of the 1996 and 1995 first quarters was
converted to common stock on a one-for-one basis on March 1, 1995 and January 1,
1996, respectively. The weighted average number of shares for fully diluted
earnings per share is 113,014,000 and 129,027,000 for the quarters ended March
31, 1996 and 1995, respectively.
Cash dividends of 6 cents per share of common stock were declared in the
quarters ended March 31, 1996 and 1995, respectively.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------- ------------------
Fair Fair
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Assets:
Investments $ 7,937 $ 64,729 $ 7,937 $102,663
Liabilities:
Long-term debt 299,076 297,679 247,934 273,582
Off Balance Sheet:
Unrealized net gain on
interest rate swaps - 8,880 - 19,478
Unrealized gain on foreign
currency forward swap - 527 - -
</TABLE>
Investments are comprised of investments in equity securities, which are
classified as available-for-sale, and are carried at fair value in the condensed
consolidated balance sheets. Fair value is based on estimated or quoted market
prices. The unrealized gain is reported as a separate component of shareholders'
equity, net of applicable income taxes.
NOTE 11 - CAPITAL STOCK AND STOCK REPURCHASE PROGRAM
The Company's stock repurchase program, which includes the issuance of put
options from time-to-time, is described in Note 13 to the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
During the first quarter of 1996, the Company issued 200,000 put options with an
average strike price of $36.75. The cash received from the sale of these put
options was not significant. The put options, which have mid-1996 expiration
dates, entitle the holder to sell shares of Times Mirror common stock to the
Company at the strike price on the expiration date of the put option. The
potential obligation under these put options has been transferred from
shareholders' equity to "Common stock subject to put options."
The Company repurchased 1,864,000 shares of common stock during the first
quarter of 1996 for an aggregate cost of $64,542,000.
-11-
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
NOTE 12 - STOCK OPTIONS
The Company granted each eligible employee 100 stock options on January 31,
1996. This grant is expected to result in the issuance of approximately
1,400,000 stock options at a price of $30.8125. These options will vest 100
percent on January 31, 1999 for employees still employed by the Company at that
date.
NOTE 13 - 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 14 -- USE OF ESTIMATES AND OTHER UNCERTAINTIES
Financial statements prepared in accordance with generally accepted accounting
principles require management to make estimates and judgments that affect
amounts and disclosures reported in the financial statements. Actual results
could differ from those estimates, although management does not believe that any
differences would materially affect its financial position or reported results.
The Company's future results could be adversely affected by a number of factors,
including (a) an increase in paper, printing and distribution costs over the
levels anticipated; (b) increased consolidation among major retailers or other
events depressing the level of display advertising; (c) an economic downturn in
the Company's principal newspaper markets or other occurrences leading to
decreased circulation and diminished revenues from both display and classified
advertising; (d) competitive pressures arising from increased consolidation in
the legal information industry and the college textbook publishing industry;
(e) an increase in expenses related to new initiatives and product improvement
efforts in the legal information, flight information and health information
operating units; (f) unfavorable foreign currency fluctuations; and (g) a
general economic downturn resulting in decreased professional or corporate
spending on discretionary items such as information or training and in decreased
consumer spending on discretionary items such as magazines or newspapers.
NOTE 15 - 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 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 16 - SUBSEQUENT EVENTS
In early May 1996, the Company terminated an interest rate swap as well as its
two forward swap agreements. The net cash payment related to the termination of
these agreements was not significant. At the completion of these transactions,
the Company had one interest rate swap outstanding.
On May 9, 1996, the Board of Directors approved an increase in the quarterly
dividend to 10 cents per share on its common stock, beginning with the June 10,
1996 payment date.
-12-
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
OVERVIEW
GENERAL
- -------
First quarter operating results were strong, aided by better than expected
newspaper advertising revenues early in the quarter and significant reductions
in operating expenses achieved through the Company's 1995 restructuring and
other cost reduction programs.
NEWSPAPER PUBLISHING OUTLOOK
- ----------------------------
In the first quarter of 1996, Newspaper Publishing achieved significantly
improved operating performance on modest revenue gains, as a decline in
operating expenses resulting from last year's restructuring and other cost
reduction programs was greater than expected. In addition, newsprint suppliers
did not implement the price increases originally scheduled for March 1996. First
quarter 1996 newsprint prices, which were approximately 36 percent higher than
last year's first quarter, are expected to decline for the remainder of 1996.
Newsprint expense accounted for more than 20 percent of this segment's operating
costs in the first quarter of 1996.
Based on the outlook for more favorable newsprint pricing and other expense
reductions overall, the Newspaper Publishing segment is expected to continue to
experience year-over-year profit margin expansion.
PROFESSIONAL INFORMATION OUTLOOK
- --------------------------------
During the first quarter, Times Mirror announced plans to explore its strategic
alternatives for the higher education publishing businesses and CRC Press. The
higher education publishing businesses include business and economics publisher
Richard D. Irwin; business professional publisher IPRO; life and physical
science publisher Wm. C. Brown Publishers; social science and humanities
publisher Brown & Benchmark Publishers; and related college publishing
activities in another Times Mirror professional information company. CRC Press
publishes scientific and technical information. The Company's higher education
publishing businesses collectively rank fifth among U.S. college publishers.
Times Mirror plans to concentrate its resources in businesses in which it can be
a market leader; i.e., ranking number one or two in the marketplace.
The nature of the strategic alternative selected for these businesses, including
divestiture, could have a material impact on the results of this segment in
1996. In addition, because Times Mirror International Publishing manages the
international sales and distribution for these businesses, the reduction of
international revenues resulting from a sale of college and scientific
publishing may increase international distribution costs of other professional
information companies within Times Mirror, particularly in health sciences.
For the year, the outlook for the Company's remaining professional information
companies remains positive, as revenues and operating profits at Matthew Bender,
the Company's legal publishing franchise, are expected to be stable after three
years of decline. In addition, Jeppesen Sanderson, the flight information
company, will continue to grow both core and new lines of business. Apart from
the expected sale of its college publishing business, Mosby-Year Book, a leader
in health science publishing, is expected to show continued growth, particularly
in its consumer health information business.
-13-
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
- ----------------------------------
The following table summarizes Times Mirror's financial results (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------
1996 1995
--------- -----------
<S> <C> <C>
Revenues $806,759 $ 773,670
Operating profit 50,228 26,258
Interest expense (7,407) (8,732)
Interest income 1,956 6,392
Income from continuing operations 26,037 16,350
Net income from discontinued operations 3,348
Net gain on disposal of discontinued 1,634,294
operations
Cumulative effect of changes in (12,724)
accounting principles
Net income 26,037 1,641,268
Preferred dividend requirements 10,911 4,730
Earnings available to common
shareholders 15,126 1,636,538
Earnings per share from continuing
operations $ .14 $ .09
Earnings per share $ .14 $ 13.26
</TABLE>
In the first quarter of 1996, Times Mirror's consolidated revenues increased 4.3
percent to $806.8 million and consolidated operating profit rose to $50.2
million, primarily reflecting the improvement in the Newspaper Publishing
segment.
Net interest expense of $5.5 million was nearly double the $2.3 million in the
first quarter of 1995, as interest income declined in the first quarter of 1996.
Interest-earning investments were substantially reduced, beginning in the latter
part of 1995, due to the significant cash requirements of the restructuring
program and share repurchases.
Income from continuing operations for the first quarter of 1996 increased to
$26.0 million from $14.1 million in the prior year, excluding a 1995 gain on an
asset sale and a 1995 restructuring charge. Earnings improved in all business
segments, due principally to greater than expected cost savings resulting from
the 1995 restructuring and other cost reduction programs.
Net income in the 1996 first quarter was $26.0 million, or 14 cents per share,
compared with $1.641 billion, or $13.26 per share, in the prior year. The 1995
first quarter included a gain of $1.634 billion, or $13.24 per share, on the
disposition of the Company's discontinued cable television operations. Net
income for the first quarter of 1995 also included net income from discontinued
operations of $3.3 million, or 3 cents per share, an after-tax restructuring
charge in Newspaper Publishing of $2.2 million, or 2 cents per share, and a
$12.7 million after-tax charge, or 10 cents per share, for accounting changes.
-14-
<PAGE>
ANALYSIS BY SEGMENT
NEWSPAPER PUBLISHING
- --------------------
Newspaper Publishing revenues and operating profit were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------------
1996 CHANGE 1995
-------- ------- --------
<S> <C> <C> <C>
Revenues
Advertising $369,924 3.6% $356,961
Circulation 113,251 3.0 109,903
Other 11,761 26.6 9,288
-------- --------
$494,936 3.9% $476,152
======== ========
Operating Profit $ 50,995 44.3% $ 35,345
======== ========
Operating Profit Excluding
Restructuring Charge $ 50,995 32.2% $ 38,568
======== ========
</TABLE>
Newspaper Publishing revenues in the first quarter of 1996 increased slightly
over the prior year period, reflecting higher advertising and circulation
revenues due in part to the six additional weekdays included in the 1996
quarter. However, the reported advertising and circulation revenue increases do
not reflect any adjustment for the closing of the New York City edition of
Newsday in mid-July 1995 or the Baltimore Evening Sun in mid-September 1995.
First-quarter Newspaper Publishing revenues are historically the smallest
quarter of the year. Advertising revenues improved at most of the Company's
newspapers, as higher retail and classified advertising more than offset a
slight decline in national advertising. Higher circulation revenues at The Times
and other newspapers, due largely to pricing increases and reduced discounting,
more than offset lower circulation revenues at Newsday, which was impacted by
the closure of its New York City edition.
Operating profit for the Newspaper Publishing segment rose substantially in the
1996 first quarter, led by strong results at the Los Angeles Times and Newsday,
the Company's two largest newspapers. Excluding a restructuring charge in 1995,
the operating profit margin in the first quarter of 1996 expanded to 10.3
percent from last year's 8.1 percent, despite an increase of nearly 30 percent
in newsprint expense, as all other costs declined by approximately 4 percent.
Consumption of newsprint declined by approximately 5 percent in the first
quarter of 1996 compared to the prior year due to the closure of Newsday's New
York City edition, the Baltimore Evening Sun and certain sections of The Times
in the latter part of 1995, as well as overall conservation efforts.
-15-
<PAGE>
PROFESSIONAL INFORMATION
- ------------------------
Professional Information revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------------
1996 CHANGE 1995
-------- ------- --------
<S> <C> <C> <C>
Revenues $237,074 6.2% $223,338
======== ========
Operating Profit $ 13,161 50.6% $ 8,738
======== ========
</TABLE>
First quarter 1996 Professional Information revenues grew over the prior year
quarter due principally to higher revenues at Mosby-Year Book, the Company's
health science publisher, and Jeppesen Sanderson, the Company's flight
information business. Segment operating profit in the first quarter of 1996
improved over the prior year as a result of higher operating profit in Mosby's
consumer health information business, which benefited from 1995 acquisitions,
earnings growth at Jeppesen Sanderson and lower seasonal first-quarter losses in
higher education publishing, while results at Matthew Bender stabilized. Because
the sales cycle in higher education publishing is highly seasonal, operating
losses in this business are typically reported in the first quarter with peak
revenue and operating profit results attained in the third and fourth quarters.
CONSUMER MEDIA
- --------------
Consumer Media revenues and operating profit were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------------
1996 CHANGE 1995
------- ------- --------
<S> <C> <C> <C>
Revenues $74,757 .5% $74,369
======= =======
Operating Profit (Loss) $ 1,298 100+ $(2,820)
======= =======
</TABLE>
Consumer Media generated operating profit in the first quarter of 1996, compared
with an operating loss in 1995, largely due to cost reductions at Times Mirror
Magazines resulting from the 1995 restructuring and other cost reduction
programs. Revenues in the 1996 first quarter were up less than one percent from
the prior year quarter, as weakness in advertising revenues at certain magazine
titles slowed revenue growth.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Capital expenditures in 1996 are expected to total approximately $140 million
for the full year, compared to the $128.6 million spent in 1995. The 1996
anticipated increase in capital expenditures is the result of office space
consolidation planned in connection with the 1995 restructuring program.
Total debt at March 31, 1996 of $299.3 million increased $51.1 million from the
year-end 1995 level primarily due to the issuance of Premium Equity
Participating Securities (PEPS) due March 15, 2001. As described in Note 8 to
the Condensed Consolidated Financial Statements, the PEPS hedge a significant
portion of the Company's investment in Netscape Communications Corporation
common stock.
-16-
<PAGE>
In December 1995, the Board of Directors authorized the repurchase of 12 million
shares of common stock over the next three years. Repurchases are expected to
be made from time-to-time in the open market or in private transactions,
depending on market conditions, and may be discontinued at any time. The common
shares purchased are intended, in part, to offset dilution from shares of common
stock issued under the Company's stock-based employee compensation and benefit
programs. In connection with this program, the Company may from time-to-time
sell put options on its common stock. During the first quarter of 1996, the
Company repurchased 1.8 million shares of common stock for an aggregate cost of
$64.5 million and issued 200,000 put options for proceeds of approximately
$176,000.
The Company's cash requirements are funded primarily by its operating
activities. The Company also obtains external financing through the issuance of
fixed rate debt and has unsecured long-term revolving bank lines of credit with
commitments totaling $400 million at March 31, 1996. In addition to loans,
these lines of credit may be used to support a commercial paper program which
was established in late 1995. There was no commercial paper outstanding at
March 31, 1996. Future commercial paper issuances or other debt drawdowns are
expected to be used for short-term or other periodic cash requirements.
CASH FLOWS
- ----------
During the first quarter of 1996, the Company generated $43.3 million in net
cash from continuing operating activities, compared with $25.5 million for the
same period in 1995. The increased cash flow in 1996 is largely attributable to
the increase in operating profit and decreases in accounts receivable and taxes
paid compared to the prior-year period. A total of $67.3 million was spent for
restructuring-related actions in the 1996 first quarter compared to $8.9 million
in the prior-year.
Net cash provided by investing activities of continuing operations during the
first quarter of 1996 was $2.0 million, compared to $970.0 million in the 1995
first quarter. The 1995 period included proceeds of $1.225 billion from the
disposition of the cable television operations. Capital expenditures of $26.9
million in the 1996 first quarter were about the same as the prior year while
cash of $3.1 million used for acquisitions in the first quarter of 1996 was
significantly lower than the $48.4 million spent in the prior-year period.
Capitalized product costs in the first quarter of 1996 of $14.3 million were
slightly less than the $18.7 million capitalized in the prior year. Proceeds of
$48.8 million from a reduction in marketable securities benefited the 1996 first
quarter while $162.3 million was used to purchase marketable securities in the
first quarter of 1995.
For the first quarter of 1996, net cash used in financing activities of $107.5
million was significantly lower than the $622.7 million used in the first
quarter of 1995. During the first quarter of 1995, the Company repaid $588.1
million of its debt using proceeds from the cable transaction. Cash of $155.7
million used for 1996 share repurchases, and to settle year-end 1995 share
repurchases, more than offset the $65.6 million received from the issuance of
securities and the exercise of stock options as well as a $17.3 million
reduction in dividends paid to shareholders.
DIVIDENDS
- ---------
Since June 1995, the Company has paid a quarterly dividend of 6 cents per share
on its common stock. On May 9, 1996, the Board of Directors approved an increase
in the quarterly dividend to 10 cents per share on its common stock, beginning
with the June 10, 1996 payment date.
Dividend requirements on Series A preferred stock were $8.2 million and $2.8
million in the first quarter of 1996 and 1995, respectively, while dividend
requirements on Series B preferred stock were $2.7 million and $1.9 million,
respectively. Both series of preferred stock accrued dividends beginning March
1, 1995. In addition, the Company repurchased nearly 8.8 million shares of
Series B preferred stock during the last part of 1995. The Series B preferred
stock will be converted into Series A common stock on April 1, 1998, unless
previously redeemed by the Company.
FORWARD-LOOKING STATEMENTS
- --------------------------
The forward-looking statements set forth above and elsewhere in this Quarterly
Report on Form 10-Q are subject to uncertainty and could be adversely affected
by a number of factors. Some of these factors are described in Note 14 to the
Condensed Consolidated Financial Statements.
-17-
<PAGE>
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.
12. Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Fixed Charges and Preferred Stock Dividends.
27. Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
A report on Form 8-K dated March 13, 1996 announced the Company's
plan to explore its strategic alternatives for higher education
publishing and CRC Press. A copy of the related press release was
included in such filing.
A report on Form 8-K dated March 19, 1996 announced that the
Company had entered into an Underwriting Agreement on March 13,
1996 with Morgan Stanley & Co., Incorporated relating to the
issuance and sale of the Company's 4-1/4% Premium Equity
Participating Securities due March 15, 2001 (the "PEPS"). The
Company also announced the completion of the issuance and sale of
the PEPS on March 19, 1996, and the issuance of the PEPS pursuant
to an Indenture dated as of March 19, 1996 between the Company and
Citibank, N.A., as trustee. Copies of related documents were
included in such filing.
-18-
<PAGE>
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.
THE TIMES MIRROR COMPANY
Date: May 15, 1996 By /s/ Thomas Unterman
------------------------------------
Thomas Unterman
Senior Vice President and
Chief Financial Officer
-19-
<PAGE>
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
PRIMARY
Average shares outstanding.......................... 105,225,121 123,114,766
Dilutive stock options based on the treasury stock
method using average market price.................. * 301,420
------------ ------------
Total............................................ 105,225,121 123,416,186
============ ============
Income from continuing operations................... $ 26,037 $ 16,350
Discontinued operations............................. 1,637,642
Cumulative effect of changes in accounting
principles, net of income tax benefit of $8,817.... (12,724)
------------ ------------
Net income.......................................... $ 26,037 $ 1,641,268
============ ============
Preferred dividend requirements..................... $ 10,911 $ 4,730
============ ============
Earnings available to common shareholders........... $ 15,126 $ 1,636,538
============ ============
Primary earnings per share:
Continuing operations............................. $ .14 $ .09
Discontinued operations........................... 13.27
Cumulative effect of accounting changes, net...... (.10)
------------ ------------
Primary earnings per share.......................... $ .14 $ 13.26
============ ============
</TABLE>
* Less than 3% dilution: common stock equivalents of 2,566,281 are not added
to weighted average shares.
Exhibit 11
Page 1 of 2
<PAGE>
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
FULLY DILUTED
Average shares outstanding.......................... 105,225,121 123,114,766
Common shares assumed issued upon conversion of
Series B preferred stock........................... 7,789,276 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
------------ ------------
Total............................................ 113,014,397 129,027,068
============ ============
Income from continuing operations................... $ 26,037 $ 16,350
Discontinued operations............................. 1,637,642
Cumulative effect of changes in accounting
principles, net of income tax benefit of $8,817.... (12,724)
------------ ------------
Net Income.......................................... $ 26,037 $ 1,641,268
============ ============
Preferred dividend requirements..................... $ 8,236 $ 2,798
============ ============
Earnings available to common shareholders........... $ 17,801 $ 1,638,470
============ ============
Fully diluted earnings per share:
Continuing operations.............................. $ ** $ .11
Discontinued operations............................ 12.69
Cumulative effect of accounting changes, net....... (.10)
------------ ------------
Fully diluted earnings per share.................... $ ** $ 12.70
============ ============
</TABLE>
*Less than 3% dilution: common stock equivalents of 3,301,185 are not added
to weighted average shares.
**Antidilutive
Exhibit 11
Page 2 of 2
<PAGE>
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31, 1996
--------------------
<S> <C>
Fixed Charges
Interest expense........................ $ 7,407
Portion of rents deemed to be interest.. 4,884
Amortization of debt expense............ 27
-------
Total Fixed Charges................... $12,318
=======
Earnings
Income from continuing operations
before income taxes.................... $48,071
Fixed charges........................... 12,318
Amortization of capitalized interest.... 833
Distributed income from less than 50%
owned unconsolidated affiliate......... 22
Subtract: Equity income from less than
50% owned unconsolidated affiliate..... (391)
-------
Total Earnings........................ $60,853
=======
Ratio of earnings to fixed charges...... 4.9
</TABLE>
Exhibit 12
Page 1 of 2
<PAGE>
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
-------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31, 1996
-------------------
<S> <C>
Fixed Charges
Interest expense.............................. $ 7,407
Portion of rents deemed to be interest........ 4,884
Amortization of debt expense.................. 27
---------
Total Fixed Charges......................... $ 12,318
Preferred Stock Dividend Requirements............ 18,493
---------
Fixed Charges and Preferred
Stock Dividends............................ $ 30,811
=========
Earnings (Loss)
Earnings from continuing operations
before income taxes.......................... $ 48,071
Fixed charges................................. 12,318
Amortization of capitalized interest.......... 833
Distributed income from less than 50%
owned unconsolidated affiliate............... 22
Subtract: Equity income from less than
50% owned unconsolidated affiliate........... (391)
---------
Total Earnings.............................. $ 60,853
=========
Ratio of earnings to fixed charges and
preferred stock dividends....................... 2.0
</TABLE>
Exhibit 12
Page 2 of 2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MARCH, 31 1996 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 119,048
<SECURITIES> 19,272
<RECEIVABLES> 562,937
<ALLOWANCES> 71,636
<INVENTORY> 178,393
<CURRENT-ASSETS> 1,010,629
<PP&E> 2,092,707
<DEPRECIATION> 920,499
<TOTAL-ASSETS> 3,552,252
<CURRENT-LIABILITIES> 793,401
<BONDS> 0
0
576,379
<COMMON> 104,691
<OTHER-SE> 1,053,107
<TOTAL-LIABILITY-AND-EQUITY> 3,552,252
<SALES> 806,759
<TOTAL-REVENUES> 806,759
<CGS> 446,276
<TOTAL-COSTS> 446,276
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,119
<INTEREST-EXPENSE> 7,407
<INCOME-PRETAX> 48,071
<INCOME-TAX> 22,034
<INCOME-CONTINUING> 26,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,037
<EPS-PRIMARY> .14
<EPS-DILUTED> 0<F1>
<FN>
<F1>PER SHARE AMOUNT ON A FULLY DILUTED BASES HAS BEEN OMITTED AS THE AMOUNT IS
ANTIDILUTIVE IN RELATION TO THE PRIMARY PER SHARE AMOUNT
</FN>
</TABLE>
