<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 SEPTEMBER 30, 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
<TABLE>
<S> <C>
STATE OF INCORPORATION: DELAWARE I.R.S. EMPLOYER ID. NO. 95-4481525
</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 October 31, 1996:
71,676,855
Number of shares of Series C Common Stock outstanding at October 31, 1996:
27,208,551
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ----------------------
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES....................... $ 885,561 $ 864,797 $2,529,615 $2,481,545
COSTS AND EXPENSES:
Cost of sales................. 456,237 473,127 1,337,259 1,353,746
Selling, general and
administrative expenses...... 319,044 342,651 947,559 994,173
Restructuring, impairment and
one-time charges............. 379,451 382,674
--------- ---------- ---------- ----------
775,281 1,195,229 2,284,818 2,730,593
--------- ---------- ---------- ----------
OPERATING PROFIT (LOSS)........ 110,280 (330,432) 244,797 (249,048)
Interest expense............... (12,635) (8,001) (28,625) (21,740)
Interest income................ 358 7,467 3,489 22,349
Other, net..................... 543 5,324 6,431 10,210
--------- ---------- ---------- ----------
Income (loss) from continuing
operations before income tax
provision (benefit)........... 98,546 (325,642) 226,092 (238,229)
Income tax provision (benefit). 42,841 (82,730) 98,327 (40,878)
--------- ---------- ---------- ----------
Income (loss) from continuing
operations.................... 55,705 (242,912) 127,765 (197,351)
Discontinued operations........ (56,019) 1,578,458
Cumulative effect of changes in
accounting principles, net of
income tax benefit of $8,817.. (12,724)
--------- ---------- ---------- ----------
NET INCOME (LOSS).............. $ 55,705 $ (298,931) $ 127,765 $1,368,383
========= ========== ========== ==========
Preferred dividend
requirements.................. $ 10,911 $ 13,385 $ 32,733 $ 31,951
========= ========== ========== ==========
Premium paid for Series B pre-
ferred stock redemptions...... $ -- $ 21,267 $ -- $ 21,267
========= ========== ========== ==========
EARNINGS (LOSS) APPLICABLE TO
COMMON SHAREHOLDERS........... $ 44,794 $ (333,583) $ 95,032 $1,315,165
========= ========== ========== ==========
Primary earnings (loss) per
share:
Continuing operations......... $ .43 $ (2.48) $ .89 $ (2.17)
Discontinued operations....... (.50) 13.65
Cumulative effect of
accounting changes, net...... (.11)
--------- ---------- ---------- ----------
Primary earnings (loss) per
share......................... $ .43 $ (2.98) $ .89 $ 11.37
========= ========== ========== ==========
Fully diluted earnings per
share:
Income before cumulative
effect of changes in
accounting principles........ $ .42 $ * $ * $ 10.50
Cumulative effect of
accounting changes, net...... (.10)
--------- ---------- ---------- ----------
Fully diluted earnings per
share......................... $ .42 $ * $ * $ 10.40
========= ========== ========== ==========
</TABLE>
- --------
* Per share amount on a fully diluted basis has been omitted as the amount is
antidilutive in relation to the primary per share amount.
See notes to condensed consolidated financial statements
3
<PAGE>
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 78,961 $ 182,901
Marketable securities.............................. 72,806
Accounts receivable, less allowances for doubtful
accounts and returns of $79,524 and $79,536....... 537,387 561,828
Inventories........................................ 167,257 173,568
Deferred income taxes.............................. 94,437 134,395
Other current assets............................... 93,206 122,539
---------- ----------
Total Current Assets.............................. 971,248 1,248,037
Property, plant and equipment, at cost less
accumulated depreciation of $963,238 and $903,608.. 1,189,030 1,174,831
Goodwill............................................ 651,396 651,745
Other intangibles................................... 85,191 84,186
Deferred charges.................................... 215,384 199,188
Other assets........................................ 495,988 459,172
---------- ----------
$3,608,237 $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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable................................... $ 340,009 $ 395,292
Short-term debt.................................... 247,152 253
Employees' compensation............................ 104,261 118,111
Unearned income.................................... 207,131 222,893
Other current liabilities.......................... 126,189 298,641
---------- ----------
Total Current Liabilities......................... 1,024,742 1,035,190
Long-term debt...................................... 300,461 247,934
Deferred income taxes............................... 126,742 140,087
Other liabilities................................... 594,919 587,712
---------- ----------
Total Liabilities................................. 2,046,864 2,010,923
Common stock subject to put options................. 31,041
Commitments and contingencies
Shareholders' Equity
Preferred stock:
Series A, $1 par value; 900,000 shares authorized;
824,000 shares issued; stated at liquidation
value............................................ 411,784 411,784
Series B, $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; 71,729,000 and 77,765,000 shares
issued........................................... 71,729 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; 27,258,000 and 27,933,000
shares issued.................................... 27,258 27,933
Additional paid-in capital......................... 208,338 192,266
Retained earnings.................................. 597,713 875,981
Net unrealized gain on securities.................. 48,915 55,912
---------- ----------
Total Shareholders' Equity........................ 1,530,332 1,806,236
---------- ----------
$3,608,237 $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>
YEAR TO DATE ENDED
SEPTEMBER 30
---------------------
1996 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by continuing operating activities... $ 204,709 $ 201,624
Net cash used in discontinued operating activities..... (19,705) (8,503)
--------- ----------
Net cash provided by operating activities............. 185,004 193,121
CASH FLOWS FROM INVESTING ACTIVITIES
Changes in marketable and noncurrent securities, net... 68,082 (200,463)
Capital expenditures................................... (106,284) (96,848)
Capitalization of product costs........................ (57,720) (59,562)
Acquisitions, net of cash acquired..................... (12,062) (57,325)
Proceeds from disposal of cable television operations.. 1,225,013
Proceeds from sales of assets.......................... 80,948
Other, net............................................. 1,523 (26,485)
--------- ----------
Net cash provided by (used in) investing activities of
continuing operations................................. (106,461) 865,278
Net cash used in investing activities of discontinued
operations............................................ (24,059)
--------- ----------
Net cash provided by (used in) investing activities... (106,461) 841,219
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of common and preferred stock.............. (448,020) (178,730)
Proceeds from issuance of premium equity participating
securities............................................ 51,221
Dividends paid......................................... (59,526) (78,303)
Proceeds from exercise of stock options................ 25,712
Principal repayments of other debt..................... (143) (100,415)
Net proceeds (repayment) of commercial paper and short-
term borrowings, net.................................. 246,941 (488,010)
Other, net............................................. 1,332 3,215
--------- ----------
Net cash used in financing activities................. (182,483) (842,243)
--------- ----------
Increase (decrease) in cash and cash equivalents........ (103,940) 192,097
Cash and cash equivalents at beginning of year.......... 182,901 81,944
--------- ----------
Cash and cash equivalents at end of period.............. $ 78,961 $ 274,041
========= ==========
</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.
Financial information in the Notes to Condensed Consolidated Financial
Statements excludes discontinued operations, except where noted.
NOTE 2 -- RESTRUCTURING
At September 30, 1996, the Company had restructuring liabilities of
$169,639,000, of which $78,900,000 was included in "Other current liabilities"
and $90,739,000 was included in "Other liabilities" in the condensed
consolidated balance sheet.
Cash spent for restructuring program actions amounted to $88,110,000 during
the year to date ended September 30, 1996, of which $38,899,000 was for
severance payments. As of September 30, 1996, approximately 2,400 full-time
equivalent employees had terminated employment under the 1995 restructuring
program. The remaining liability for severance costs at September 30, 1996
aggregated $25,177,000.
NOTE 3 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the year to date ended September 30, 1996 and 1995
included interest, net of amounts capitalized, of $29,294,000 and $27,769,000
and income taxes of $48,470,000 and $45,855,000, respectively.
NOTE 4 -- DEBT
Short-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Commercial paper..................................... $246,941
Current maturities of long-term debt................. 211 $ 253
-------- --------
$247,152 $ 253
======== ========
</TABLE>
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 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 current maturity value of
approximately $40.33 per security.................. 52,628
Others at various interest rates, maturing through
2001............................................... 1,079 1,222
-------- --------
300,672 248,187
Less current maturities............................. (211) (253)
-------- --------
Long-term debt...................................... $300,461 $247,934
======== ========
</TABLE>
7
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 the 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
maturity value will generally move in tandem with changes in the fair market
value of the Netscape stock. The PEPS obligation is recorded (a) at its
current maturity value or (b) at the issuance price of $39.25 if the fair
market value of Netscape common stock is between $39.25 and $45.14. At
September 30, 1996, the fair market value of Netscape common stock was $46.375
per share, and the maturity value at that date, which is determined by a
formula, is 86.96% of the fair market value.
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 for a
notional amount of $100,000,000, expiring in 2023, which exchanges payments to
the Company at a fixed rate of 7 3/8% for payments by the Company at a
variable rate based generally on LIBOR.
NOTE 5 -- COMMON STOCK DIVIDENDS
The third quarter 1996 cash dividend of $.10 per share of common stock was
declared in the second quarter of 1996. A cash dividend of $.06 per share of
common stock was declared in the quarter ended September 30, 1995.
NOTE 6 -- STOCK REPURCHASE PROGRAM AND RELATED TRANSACTIONS
In connection with the Company's ongoing common stock repurchase program, in
October 1996, the Company's Board of Directors authorized the repurchase over
the next three years of an additional 12 million shares of common stock and
Conversion Preferred Stock, Series B. The October 1996 repurchase
authorization brings the aggregate shares remaining for repurchase to
approximately 15.6 million shares.
In connection with the stock repurchase program and the Company's other
efforts to simplify its balance sheet, the Company has entered into, or may in
the future enter into, a variety of equity-based instruments including, but
not limited to, put and call transactions and forward purchase contracts with
respect to its common stock or Conversion Preferred Stock, Series B. The
timing and terms of any such transactions will depend on market conditions,
the status of the stock repurchase program, the Company's liquidity and other
considerations.
During the year to date ended September 30, 1996, the Company issued
1,700,000 put options with an average strike price of $41.01. The cash
received from the sale of these put options was not significant. The put
options, which have various 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 the 745,000
put options outstanding at September 30, 1996 has been transferred from
shareholders' equity to "Common stock subject to put options."
NOTE 7 -- STOCK OPTIONS
The Company granted each eligible employee 100 options for common stock on
January 31, 1996. This grant is expected to result in approximately 1,200,000
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.
8
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 8 -- 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 the Company's 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; (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 9 -- 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 10 -- PENDING SALE OF ASSETS
The Company is in the process of selling its art book publisher, Harry N.
Abrams, Incorporated. This sale, which is expected to result in a gain, is
scheduled to be completed in the fourth quarter of 1996. Revenue of this
business represented approximately one percent of consolidated revenues of the
Company for the nine months ended September 30, 1996 and the year ended
December 31, 1995.
NOTE 11 -- SUBSEQUENT EVENT
On October 15, 1996, the Company and Mosby-Year Book, Inc. (Mosby), a
wholly-owned subsidiary of the Company, completed an Exchange Agreement
pursuant to which The McGraw-Hill Companies, Inc. sold all of the outstanding
shares of the capital stock of its subsidiary, Shepard's/McGraw-Hill, Inc.
(Shepard's), to the Company in exchange for (i) the stock of Times Mirror
Higher Education Group, Inc., (ii) the assets and related liabilities of
Mosby's college-level life and physical science text business, (iii) certain
assets and liabilities of Times Mirror International Publishers -- U.S., Inc.
and affiliated entities relating to the Company's college text business, (iv)
a cash payment of $25 million, subject to a post closing adjustment, and (v)
the Company's commitment related to certain real estate assets in an amount
not to exceed $10.5 million. Revenues of these businesses represented
approximately seven percent of consolidated revenues of the Company for the
nine months ended September 30, 1996 and the year ended December 31, 1995.
Subject to the completion of a pending regulatory review, it is anticipated
that Shepard's will be contributed, in exchange for cash, to a new 50/50
partnership between the Company and Reed Elsevier, Inc., as part of a broader
strategic alliance between Matthew Bender, Times Mirror's legal publisher, and
LEXIS-NEXIS, a Reed Elsevier subsidiary and provider of full-text online
information services in the legal, news, business and government areas.
9
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
General. For the third quarter of 1996, modest revenue growth with
-------
significant companywide reductions in operating expenses led to continued
strong improvements in operating results and the operating margin. These
improvements primarily reflect the impact of the Company's 1995 restructuring
and other cost reduction programs. Charges incurred for these restructuring
programs in the third quarter of 1995 totaled $402.2 million and resulted in a
loss for that quarter. For the fourth quarter of 1996, the rate of year over
year improvement in operating results and earnings per share growth is
expected to moderate, as the 1996 fourth quarter has five fewer days than
1995's, and a significant portion of last year's cost reduction programs were
in place by the fourth quarter of 1995. The 1996 calendar shift reflects the
traditional operating calendar of the newspaper group which, when compared to
the same periods in 1995, had six extra days in the first quarter of 1996 but
will have five fewer days in the fourth quarter of 1996.
In addition, on October 15, 1996 the Company completed a transaction with
The McGraw-Hill Companies, Inc. exchanging Times Mirror's college publishing
businesses, $25 million in cash and certain real estate commitments not to
exceed $10.5 million, for Shepard's/McGraw-Hill, Inc. (Shepard's), the
nation's premier legal citation service. The continuing impact of this
exchange is expected to lower fourth quarter 1996 revenues in the Professional
Information segment, but should be accretive to the Company's earnings
overall.
Newspaper Publishing. In the third quarter of 1996, the operating
--------------------
performance of the Newspaper Publishing segment improved significantly,
largely due to the decline in the segment's operating expenses resulting from
the Company's cost reduction programs and, to a lesser extent, lower newsprint
expense. Advertising trends in key categories remained relatively unchanged
from the first half of 1996 with mixed results reflecting declines in retail
advertising offset by increases in classified and national advertising in most
markets. Promotional campaigns at the Los Angeles Times, which included a
reduced single copy price in certain markets, lowered circulation revenues in
the 1996 third quarter but increased single copy sales by more than 30 percent
in the affected areas. As a result, The Times reported increased daily
circulation for the first time in five years.
For the fourth quarter of 1996, segment operating profitability is expected
to show strong year over year improvement, based on cost reductions and
continued declines in the price of newsprint. However, with five fewer days in
the quarter's calendar, growth in segment revenue year over year may be
difficult to achieve in the current advertising environment. Overall, the
Newspaper Publishing segment for the full year is likely to experience slight
growth in revenue but expects significant profit expansion given the outlook
for more favorable newsprint pricing and the impact of the 1995 restructuring
and other expense reductions.
Professional Information. The 1996 fourth quarter exchange of the Company's
------------------------
college publishing businesses for Shepard's accomplished two important
objectives. First, the Company's strategic position in legal publishing has
been strengthened. Second, the Company's other publishing operations have been
transformed into a focused health sciences and information services group
under the Mosby brand name.
Legal Publishing. The acquisition of Shepard's is an important step in
broadening the mix of legal research tools that Matthew Bender & Co., Times
Mirror's legal publisher, will now offer its customers. Shepard's provides a
comprehensive mix of Federal and state jurisdictional and topical Citator
services delivered in print, CD-ROM and online. "Shepardizing(TM)" is a key
process for all U.S. lawyers checking the continuing validity of a case or
statutory reference in light of subsequent legal changes. Shepard's citation
business has grown strongly with the expansion of the legal profession in the
U.S. and achieved revenues of $86 million in 1995.
In addition, in the third quarter of 1996, Times Mirror and Reed Elsevier
Inc. announced a strategic alliance which includes three elements: first, the
formation of a 50/50 partnership to own and operate Shepard's; second,
10
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
a long-term cross-license agreement to offer Matthew Bender publications online
through LEXIS and to provide a significant portion of the LEXIS case law
database through Matthew Bender's CD-ROM products; and third, the joint pursuit
of other product development and acquisition opportunities. The formation of
the partnership with Reed Elsevier is expected to be completed later this year,
pending regulatory review.
Health Sciences Publishing. The exchange of the college publishing businesses
for Shepard's facilitates establishment of new domestic and international
distribution channels. Domestically, Mosby will redeploy the resources that
become available from the sale of its college publishing business to establish
its own direct sales force. As a result, domestic sales through distributors
will be discontinued at the end of 1996 and Mosby will establish direct
relationships with its domestic customers. In addition, Times Mirror
International Publishers, an unprofitable international distribution operation
for the general book publishing group, will be substantially closed by year
end. In September 1996, the Company selected Harcourt Brace & Co. as its
exclusive international distributor of Mosby professional medical publications
in most international markets.
As a result of charges taken in connection with the exchange of the college
publishing businesses for Shepard's, and other strategic changes made in the
book publishing operations resulting from the exchange, the Company expects to
report a small gain on the exchange in the fourth quarter of 1996. In addition,
the continuing impact of this exchange is expected to reduce revenues but
result in higher earnings in the fourth quarter of 1996.
Consumer Media. In the 1996 third quarter, the Company announced its
--------------
intention to sell Harry N. Abrams, a leading publisher of quality art books.
Abrams revenues are expected to exceed $45 million in 1996. The sale of this
publisher is expected to generate a small gain in the fourth quarter of 1996
and is not expected to materially impact the operating results of this segment
for the remainder of 1996.
11
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes Times Mirror's financial results (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
------------------- ----------------------
1996 1995 1996 1995
-------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues.......................... $885,561 $ 864,797 $2,529,615 $2,481,545
Restructuring, impairment and one-
time charges..................... (379,451) (382,674)
Operating profit (loss)........... 110,280 (330,432) 244,797 (249,048)
Interest expense.................. (12,635) (8,001) (28,625) (21,740)
Interest income................... 358 7,467 3,489 22,349
Income (loss) from continuing
operations....................... 55,705 (242,912) 127,765 (197,351)
Net loss from discontinued
operations....................... (56,019) (55,836)
Net gain on disposal of cable
television....................... 1,634,294
Cumulative effect of accounting
changes, net..................... (12,724)
Net income (loss)................. 55,705 (298,931) 127,765 1,368,383
Preferred dividend requirements... 10,911 13,385 32,733 31,951
Premium paid for Series B
preferred stock redemptions...... 21,267 21,267
Earnings (loss) applicable to
common shareholders.............. 44,794 (333,583) 95,032 1,315,165
Primary earnings (loss) per share
from continuing operations....... $ .43 $ (2.48) $ .89 $ (2.17)
Primary earnings (loss) per share. $ .43 $ (2.98) $ .89 $ 11.37
</TABLE>
Consolidated revenues for the third quarter of 1996 rose 2.4 percent
compared to the third quarter of 1995 while revenues for the first three
quarters of 1996 increased 1.9 percent compared to the same prior year period.
Revenue increases for the 1996 third quarter were reported by most Times
Mirror companies with the newspapers achieving a 3.9 percent gain in
advertising revenues. Magazine revenues were lower for the quarter and year to
date compared to prior year periods.
Consolidated operating profit increased 53.7 percent to $110.3 million in
the third quarter of 1996 from $71.7 million in the third quarter of 1995,
excluding the 1995 restructuring program-related charges of $402.2 million.
This increase primarily reflects significant improvements in the Newspaper
Publishing segment.
Higher operating profit for the third quarter and the first three quarters
of 1996 was partially offset by an increase in interest expense and lower
interest income, reflecting higher debt levels and reductions in interest
earning investments compared to 1995. These investments were substantially
reduced, beginning in the latter part of 1995, due to the cash requirements of
the restructuring program and share repurchases.
Third quarter 1996 income from continuing operations was $55.7 million, or
$.43 per share, compared with income from continuing operations for the prior
year quarter of $37.1 million, or $.21 per share, excluding the 1995
restructuring program charges and other special items. For the first three
quarters of 1996, income from continuing operations was $127.8 million, or
$.89 per share, compared to income from continuing operations for the same
prior year period of $82.5 million, or $.44 per share, excluding the 1995
restructuring program charges and other special items. Giving effect to the
excluded items, the loss on continuing operations for the first three quarters
of 1995 was $197.4 million or $2.17 per share. Net income for the first three
quarters of 1995 included a gain of $1.63 billion, or $14.13 per share, on the
first quarter 1995 disposition of the Company's discontinued cable television
operations, as well as an after-tax charge of $12.7 million, or $.11 per
share, for accounting changes.
12
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ANALYSIS BY SEGMENT
The following sections discuss the segment results of the Company's
principal lines of business excluding the impact of the restructuring program-
related charges of $402.2 million in the 1995 third quarter and $3.2 million
in the 1995 first quarter. For further information on restructuring program
charges, 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 and the condensed consolidated financial statements and
accompanying notes contained in the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995. All comments, except as noted, apply
to both the third quarter and first three quarters of 1996 compared to the
same prior year periods.
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit (loss) were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
------------------------- ----------------------------
1996 CHANGE 1995 1996 CHANGE 1995
-------- ------ --------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Advertising............ $378,695 3.9% $ 364,641 $1,139,965 1.5% $1,123,339
Circulation............ 109,952 (1.0) 111,012 336,438 .4 334,987
Other.................. 14,309 34.0 10,675 38,589 25.5 30,741
-------- --------- ---------- ----------
$502,956 3.4 $ 486,328 $1,514,992 1.7 $1,489,067
======== ========= ========== ==========
Operating profit (loss). $ 72,205 100+ $(208,486) $ 199,165 100+ $ (120,048)
Operating profit
excluding restructuring
program charges........ 72,205 100+ 35,051 199,165 57.2 126,712
</TABLE>
Newspaper Publishing revenues in the third quarter of 1996 rose slightly
over the third quarter of 1995, despite relatively flat full-run advertising
volume, reflecting both advertising rate increases at the beginning of the
year and increased volume in national and classified advertising. Led by the
Eastern newspapers' classified advertising and The Times' national
advertising, advertising revenues for the third quarter of 1996 increased
modestly compared to the same prior year period. However, retail advertising
remained weak in most of the Company's newspaper markets reflecting mergers
and consolidations of department stores and consumer electronic stores, as
well as realignment of supermarket advertising spending towards direct mail in
Southern California and weaknesses in local advertising in Baltimore. The
third quarter advertising revenue increase, along with the six additional
weekdays in the January period, led to a year over year improvement in
advertising revenues for the first three quarters of 1996. Third quarter 1996
circulation revenues decreased from the prior year quarter largely due to
pricing and promotional activities undertaken by the The Times. Circulation
revenues for the first three quarters of 1996 were flat, as slight declines in
circulation in most markets were offset by home delivery price increases early
in the year. The increase in other revenues was largely due to new media
initiatives and 1996 acquisitions.
Operating profit for the Newspaper Publishing segment more than doubled in
the 1996 third quarter and increased 57.2 percent in the first three quarters
of 1996, primarily due to strong results at The Times and Newsday, the
Company's two largest newspapers. The segment's operating profit margin in the
1996 third quarter rose to 14.4 percent from 7.2 percent in the prior year's
quarter. This margin improvement reflects both a 3.4 percent gain in revenues
and a 4.5 percent decrease in expenses, largely due to the Company's cost
reduction programs. In addition, newsprint expense, accounting for
approximately 20 percent of the operating costs of this
13
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
segment in the third quarter and first three quarters of both years, declined
in the third quarter of 1996 relative to the third quarter of 1995 due to
lower average per-ton prices and decreased consumption levels following the
closure of the Baltimore Evening Sun, the New York City edition of Newsday and
certain sections of other newspapers. Excluding newsprint expense, other costs
decreased by approximately 3.4 percent in the third quarter of 1996 compared
to the third quarter of 1995 as a result of various cost reduction measures.
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit (loss) were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
-------------------------- -------------------------
1996 CHANGE 1995 1996 CHANGE 1995
-------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $303,966 2.6% $296,260 $797,989 3.7% $769,699
Operating profit (loss).. 49,390 100+ (19,417) 89,795 100+ 12,302
Operating profit
excluding restructuring
program charges......... 49,390 3.5 47,703 89,795 13.1 79,422
</TABLE>
Professional Information revenue growth continued for the third quarter and
the first three quarters of 1996, but at a slower pace compared to the same
periods in the prior year. For the third quarter and first three quarters of
1996, revenues increased due principally to higher revenues at Mosby-Year Book,
Inc., the Company's health science publisher, due to growth in all business
lines which was partially offset by lower revenues resulting from the
realignment of its domestic distribution operations. In addition, the Company
achieved higher revenues at Jeppesen Sanderson and the training companies for
the third quarter and the first three quarters of 1996. These revenue gains
were partly offset by a decline at Matthew Bender and lower international book
sales.
Segment operating profit in the third quarter of 1996 improved over the prior
year quarter, but at a slower rate compared to the first half of 1996. This
reflected strong performances in the college publishing businesses due to lower
expenses, partly offset by higher expenses at Mosby for new products and online
services, as well as the effects resulting from the changes in its distribution
operations mentioned above.
CONSUMER MEDIA
Consumer Media revenues and operating profit (loss) were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
-------------------------- -------------------------
1996 CHANGE 1995 1996 CHANGE 1995
-------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $ 78,641 (4.6)% $ 82,393 $216,763 (3.0)% $223,455
Operating profit (loss).. 4,431 100+ (51,944) 3,872 100+ (57,477)
Operating profit (loss)
excluding restructuring
program charges......... 4,431 (19.8) 5,528 3,872 100+ (5)
</TABLE>
Operating profit at Times Mirror Magazines increased in the third quarter of
1996 largely due to cost controls, but the segment as a whole was impacted by
difficult year over year revenue comparisons due to the 1995 release of a new
edition of a major title by Harry N. Abrams and a one-time 1995 license fee
received by Times Mirror Magazines.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures in 1996 are expected to total approximately $140
million for the full year, compared to $128.6 million spent in 1995.
14
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total debt of $547.6 million at September 30, 1996 increased approximately
$300 million from the year end 1995 level due to the issuance of commercial
paper and Premium Equity Participating Securities (PEPS). As described in Note
4 to the Condensed Consolidated Financial Statements, the PEPS hedge a
significant portion of the Company's investment in Netscape Communications
Corporation common stock. The Company's debt-to-adjusted capitalization ratio
increased to 26.4 percent at September 30, 1996 from 12.1 percent at December
31, 1995.
In connection with the Company's ongoing common stock repurchase program, in
October 1996, the Company's Board of Directors authorized the repurchase over
the next three years of an additional 12 million shares of common stock and
Conversion Preferred Stock, Series B. The October 1996 repurchase
authorization brings the aggregate shares remaining for repurchase to
approximately 15.6 million shares.
In connection with the stock repurchase program and the Company's other
efforts to simplify its balance sheet, the Company has entered into, or may in
the future enter into, a variety of equity-based instruments including, but
not limited to, put and call transactions and forward purchase contracts with
respect to its common stock or Conversion Preferred Stock, Series B. The
timing and terms of any such transactions will depend on market conditions,
the status of the stock repurchase program, the Company's liquidity and other
considerations.
During the first three quarters of 1996, the Company repurchased 8.6 million
shares of common stock for an aggregate cost of $356.8 million and issued
short-term put options for proceeds of approximately $2.2 million.
The Company's cash requirements are funded primarily by its operating
activities. The Company also obtains external financing through the issuance
of commercial paper and fixed rate debt and has unsecured long-term revolving
bank lines of credit with commitments totaling $400 million at September 30,
1996. In addition to direct borrowing, these lines of credit are used to
support the Company's commercial paper program. At September 30, 1996, $246.9
million of commercial paper was outstanding. Future commercial paper issuances
or other loan drawdowns are available under the revolving lines of credit to
be used for short-term or other periodic cash requirements.
YEAR TO DATE CASH FLOWS
Operating cash flow from continuing operations was $204.7 million and $201.6
million in the first three quarters of 1996 and 1995, respectively. Cash
generated by the higher operating profit during the first three quarters of
1996 was mostly offset by restructuring-related expenditures, while 1995's
first three quarters were impacted by substantial expenditures for newsprint,
as higher inventory levels were established to mitigate continuing price
increases.
Net cash used by investing activities of continuing operations during the
first three quarters of 1996 was $106.5 million, while net cash provided by
investing activities from continuing operations was $865.3 million for the
same period in 1995. The 1995 period included proceeds from the disposition of
the cable television operations. Capital expenditures were $106.3 million in
the first three quarters of 1996 compared to $96.8 million for the same period
in 1995. Approximately $12.1 million in cash was utilized for acquisitions in
the first three quarters of 1996, significantly lower than the $57.3 million
spent in the prior year period. Capitalized product costs in the first three
quarters of 1996 of $57.7 million were slightly less than the $59.6 million
capitalized in the same prior year period. Proceeds of $68.1 million from a
reduction in marketable securities benefited the first three quarters of 1996
while $200.5 million was used to purchase marketable securities in the same
period in 1995.
15
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Financing activities in the first three quarters of 1996 and 1995 required
cash of $182.5 million and $842.2 million, respectively, as the Company bought
back shares in both years and paid down debt in the 1995 period. Cash of
$448.0 million used for share repurchases in the first three quarters 1996,
including the settlement of year end 1995 repurchases, was partly offset by
proceeds from the issuance of debt securities, including commercial paper, as
well as cash received from the exercise of stock options. The first three
quarters of 1996 also benefited from a $21.6 million reduction in dividends
paid to common shareholders, which declined compared with the prior year
period, primarily due to lower dividend rates and a lower level of shares
outstanding as a result of the share repurchase program which began in the
third quarter of 1995. During the first three quarters of 1995, the Company
repaid $588.4 million of its debt using proceeds from the disposal of cable
television, spent $178.7 million for share repurchases and paid $78.3 million
of dividends to shareholders.
COMMON STOCK DIVIDENDS
The third quarter 1996 cash dividend of $.10 per share of common stock was
declared in the second quarter of 1996. A cash dividend of $.06 per share of
common stock was declared in the quarter ended September 30, 1995.
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 8 to the Condensed Consolidated Financial Statements.
16
<PAGE>
THE TIMES MIRROR COMPANY
BUSINESS SEGMENT INFORMATION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ----------------------
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Newspaper Publishing........... $ 502,956 $ 486,328 $1,514,992 $1,489,067
Professional Information....... 303,966 296,260 797,989 769,699
Consumer Media................. 78,641 82,393 216,763 223,455
Intersegment Revenues.......... (2) (184) (129) (676)
--------- ---------- ---------- ----------
$ 885,561 $ 864,797 $2,529,615 $2,481,545
========= ========== ========== ==========
OPERATING PROFIT (LOSS)
Newspaper Publishing........... $ 72,205 $ (208,486) $ 199,165 $ (120,048)
Professional Information....... 49,390 (19,417) 89,795 12,302
Consumer Media................. 4,431 (51,944) 3,872 (57,477)
Corporate and Other............ (15,746) (50,585) (48,035) (83,825)
--------- ---------- ---------- ----------
$ 110,280 $ (330,432) $ 244,797 $ (249,048)
========= ========== ========== ==========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing........... $ 26,663 $ 27,850 $ 80,500 $ 84,171
Professional Information....... 12,419 11,436 36,123 36,286
Consumer Media................. 1,889 2,285 5,561 7,266
Corporate and Other............ 299 749 891 1,681
--------- ---------- ---------- ----------
$ 41,270 $ 42,320 $ 123,075 $ 129,404
========= ========== ========== ==========
CAPITAL EXPENDITURES
Newspaper Publishing........... $ 13,698 $ 17,143 $ 40,604 $ 44,976
Professional Information....... 30,117 11,861 53,411 36,193
Consumer Media................. 4,209 270 9,021 900
Corporate and Other............ 1,562 10,896 3,248 14,779
--------- ---------- ---------- ----------
$ 49,586 $ 40,170 $ 106,284 $ 96,848
========= ========== ========== ==========
</TABLE>
17
<PAGE>
THE TIMES MIRROR COMPANY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
No material legal proceedings are pending.
ITEM 5. OTHER INFORMATION
-----------------
As previously described in a Form 8-K filed on October 30, 1996, on October
15, 1996, the Company and Mosby-Year Book, Inc. (Mosby), a wholly-owned
subsidiary of the Company, completed an Exchange Agreement pursuant to which
The McGraw-Hill Companies, Inc. sold all of the outstanding shares of the
capital stock of its subsidiary, Shepard's/McGraw-Hill, Inc. (Shepard's), to
the Company in exchange for (i) the stock of Times Mirror Higher Education
Group, Inc., (ii) the assets and related liabilities of Mosby's college-level
life and physical science text business, (iii) certain assets and liabilities
of Times Mirror International Publishers--U.S., Inc. and affiliated entities
relating to the Company's college text business (iv) a cash payment of
$25 million, subject to a post closing adjustment, and (v) the Company's
commitment related to certain real estate assets in an amount not to exceed
$10.5 million. Revenues of these businesses represented approximately seven
percent of consolidated revenues of the Company for the nine months ended
September 30, 1996 and the year ended December 31, 1995. Subject to the
completion of a pending regulatory review, it is anticipated that Shepard's
will be contributed, in exchange for cash, to a new 50/50 partnership between
the Company and Reed Elsevier, Inc., as part of a broader strategic alliance
between Matthew Bender, Times Mirror's legal publisher, and LEXIS-NEXIS, a
Reed Elsevier subsidiary and provider of full-text online information services
in the legal, news, business and government areas.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
11. Computation of Earnings Per Share.
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed for the quarter ended September 30,
1996.
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.
The Times Mirror Company
By /s/ Thomas Unterman
-----------------------------------
Thomas Unterman
Senior Vice President and
Chief Financial Officer
Date: November 5, 1996
19
<PAGE>
EXHIBIT 11
PAGE 1 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY
Average shares
outstanding............. 101,178,090 111,797,588 103,432,404 115,684,473
Dilutive stock options
based on the treasury
stock method using
average market price.... 3,385,461 * 3,021,436 **
------------ ------------ ------------ ------------
Total.................. 104,563,551 111,797,588 106,453,840 115,684,473
============ ============ ============ ============
Income (loss) from
continuing operations... $ 55,705 $ (242,912) $ 127,765 $ (197,351)
Discontinued operations.. (56,019) 1,578,458
Cumulative effect of
changes in accounting
principles, net of
income tax benefit of
$8,817.................. (12,724)
------------ ------------ ------------ ------------
Net income (loss)........ $ 55,705 $ (298,931) $ 127,765 $ 1,368,383
============ ============ ============ ============
Preferred dividend
requirements............ $ 10,911 $ 13,385 $ 32,733 $ 31,951
============ ============ ============ ============
Premium paid for Series B
preferred stock
redemptions............. $ -- $ 21,267 $ -- $ 21,267
============ ============ ============ ============
Earnings (loss)
applicable to common
shareholders............ $ 44,794 $ (333,583) $ 95,032 $ 1,315,165
------------ ------------ ------------ ------------
Primary earnings (loss)
per common share:
Continuing operations... $ .43 $ (2.48) $ .89 $ (2.17)
Discontinued operations. (.50) 13.65
Cumulative effect of
accounting changes,
net.................... (.11)
------------ ------------ ------------ ------------
Primary earnings (loss)
per common share........ $ .43 $ (2.98) $ .89 $ 11.37
============ ============ ============ ============
</TABLE>
- --------
* Antidilutive
** Less than 3% dilution
<PAGE>
EXHIBIT 11
PAGE 2 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1996 1995 1996 1995
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
FULLY DILUTED
Average shares
outstanding.............. 101,178,090 111,797,588 103,432,404 115,684,473
Common shares assumed
issued upon conversion of
Series B preferred stock. 7,789,276 12,519,977 7,789,276 9,737,760
Dilutive stock options
based on the treasury
stock method using market
price at the close of the
period, if higher than
average market price..... 3,533,764 * 3,533,764 2,299,279
------------ ----------- ----------- ------------
Total................... 112,501,130 124,317,565 114,755,444 127,721,512
============ =========== =========== ============
Income (loss) from
continuing operations.... $ 55,705 $ (242,912) $ 127,765 $ (197,351)
Discontinued operations... (56,019) 1,578,458
Cumulative effect of
changes in accounting
principles, net of income
tax benefit of $8,817.... (12,724)
------------ ----------- ----------- ------------
Net income (loss)......... $ 55,705 $ (298,931) $ 127,765 $ 1,368,383
============ =========== =========== ============
Preferred dividend
requirements............. $ 8,236 $ 8,236 $ 24,707 $ 19,217
============ =========== =========== ============
Premium paid for Series B
preferred stock
redemptions.............. $ -- $ 21,267 $ -- $ 21,267
============ =========== =========== ============
Earnings (loss) applicable
to common shareholders... $ 47,469 $ (328,434) $ 103,058 $ 1,327,899
============ =========== =========== ============
Fully diluted earnings per
common share:
Income before cumulative
effect of changes in
accounting principles... $ .42 $ * $ * $ 10.50
Cumulative effect of
accounting changes, net. (.10)
------------ ----------- ----------- ------------
Fully diluted earnings per
common share............. $ .42 $ * $ * $ 10.40
============ =========== =========== ============
</TABLE>
- --------
* Antidilutive
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 78,961
<SECURITIES> 0
<RECEIVABLES> 616,911
<ALLOWANCES> 79,524
<INVENTORY> 167,257
<CURRENT-ASSETS> 971,248
<PP&E> 2,152,268
<DEPRECIATION> 963,238
<TOTAL-ASSETS> 3,608,237
<CURRENT-LIABILITIES> 1,024,742
<BONDS> 300,461
0
576,379
<COMMON> 98,987
<OTHER-SE> 854,966
<TOTAL-LIABILITY-AND-EQUITY> 3,608,237
<SALES> 2,529,615
<TOTAL-REVENUES> 2,529,615
<CGS> 1,337,259
<TOTAL-COSTS> 1,337,259
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,303
<INTEREST-EXPENSE> 28,625
<INCOME-PRETAX> 226,092
<INCOME-TAX> 98,327
<INCOME-CONTINUING> 127,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,765
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0<F1>
<FN>
<F1>PER SHARE AMOUNTS ON A FULLY DILUTED BASIS HAS BEEN OMITTED AS THE AMOUNT IS
ANTIDILUTIVE IN RELATION TO THE PRIMARY PER SHARE AMOUNT.
</FN>
</TABLE>
