<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, 1997
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 November 3, 1997:
62,623,992, excluding 1,372,987 common shares held as treasury shares,
18,237,864 common shares held by a subsidiary of the Registrant, and 4,001,067
common shares held by TMCT, LLC, representing 80% of the common shares held by
TMCT, LLC.
Number of shares of Series C Common Stock outstanding at November 3, 1997:
25,817,971
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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>
THIRD QUARTER
ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES........................... $814,478 $885,561 $2,400,173 $2,529,615
COSTS AND EXPENSES:
Cost of sales..................... 417,603 456,237 1,224,150 1,337,259
Selling, general and
administrative expenses.......... 272,537 319,044 843,363 947,559
-------- -------- ---------- ----------
690,140 775,281 2,067,513 2,284,818
OPERATING PROFIT................... 124,338 110,280 332,660 244,797
Interest expense................... (14,552) (12,635) (34,820) (28,625)
Interest income.................... 483 358 1,901 3,489
Equity income (loss)............... 2,916 (237) 5,284 144
Other, net......................... (1,421) 780 (110) 6,287
-------- -------- ---------- ----------
Income before income tax provision. 111,764 98,546 304,915 226,092
Income tax provision............... 44,840 42,841 126,772 98,327
-------- -------- ---------- ----------
NET INCOME......................... $ 66,924 $ 55,705 $ 178,143 $ 127,765
======== ======== ========== ==========
Preferred dividend requirements.... $ 7,879 $ 10,911 $ 27,057 $ 32,733
======== ======== ========== ==========
Earnings applicable to common
shareholders...................... $ 59,045 $ 44,794 $ 151,086 $ 95,032
======== ======== ========== ==========
Earnings per common share:
Primary........................... $ .63 $ .43 $ 1.56 $ .89
======== ======== ========== ==========
Fully diluted..................... $ .62 $ .42 $ 1.56 $ *
======== ======== ========== ==========
</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,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................... $ 52,176 $ 145,105
Marketable securities.............................. 31,740
Accounts receivable, less allowance for doubtful
accounts and returns of $66,852 and $79,540 ...... 447,890 488,572
Inventories........................................ 72,935 103,648
Deferred income taxes.............................. 42,036 49,248
Other current assets............................... 61,036 52,159
---------- ----------
Total current assets.............................. 676,073 870,472
Property, plant and equipment, at cost less
accumulated depreciation of $1,008,135 and
$941,803........................................... 984,551 1,177,077
Goodwill............................................ 535,253 530,142
Other intangibles................................... 119,217 46,039
Deferred charges.................................... 156,511 153,454
Equity investments.................................. 345,802 273,349
Other assets........................................ 471,182 479,329
---------- ----------
Total assets...................................... $3,288,589 $3,529,862
========== ==========
</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,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable................................... $ 275,664 $ 304,983
Short-term debt.................................... 149,259 15
Employees' compensation............................ 106,401 112,570
Unearned income.................................... 204,058 233,021
Other current liabilities.......................... 114,718 158,558
----------- ----------
Total current liabilities......................... 850,100 809,147
Long-term debt...................................... 940,132 459,007
Deferred income taxes............................... 104,888 129,491
Other liabilities................................... 528,509 595,235
----------- ----------
Total liabilities................................. 2,423,629 1,992,880
Common stock subject to put options................. 29,982 38,172
Commitments and contingencies
Shareholders' equity
Preferred stock, $1 par value; stated at
liquidation value; convertible to Series A common
stock:
Series A: 900,000 shares authorized; 824,000
shares issued and outstanding.................... 411,784 411,784
Series B: 8,439,000 and 25,000,000 shares
authorized; 7,789,000 shares issued and
outstanding; converted to Series A common stock
in 1997.......................................... 164,595
Series C-1: 381,000 shares authorized, issued and
outstanding...................................... 190,486
Series C-2: 245,000 shares authorized, issued and
outstanding...................................... 122,550
Preferred stock, $1 par value; 23,661,000 and
7,100,000 shares authorized; no shares issued or
outstanding
Common stock, $1 par value:
Series A: 500,000,000 shares authorized;
86,219,000 and 69,757,000 shares issued and
outstanding...................................... 86,219 69,757
Series B: 100,000,000 shares authorized; no shares
issued or outstanding
Series C: convertible to Series A common stock;
300,000,000 shares authorized; 25,835,000 and
26,973,000 shares issued and outstanding......... 25,835 26,973
Additional paid-in capital......................... 1,215,445 225,934
Retained earnings.................................. 329,507 533,131
Net unrealized gain on securities.................. 28,466 66,636
----------- ----------
2,410,292 1,498,810
Less deemed treasury stock at cost:
Series A common stock, 23,559,000 shares; and
Series A preferred stock, 735,000 shares......... (1,575,314)
----------- ----------
Total shareholders' equity........................ 834,978 1,498,810
----------- ----------
Total liabilities and shareholders' equity........ $ 3,288,589 $3,529,862
=========== ==========
</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,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by continuing operating activities..... $ 172,157 $ 192,946
Net cash used in discontinued operating activities....... (19,705)
--------- ---------
Net cash provided by operating activities............... 172,157 173,241
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired....................... (106,098) (12,062)
Proceeds from sales of assets............................ 105,962
Capital expenditures..................................... (82,680) (106,284)
Capitalization of product costs.......................... (18,367) (57,720)
Changes in marketable and long-term securities........... 79,845
Other, net............................................... (4,569) 1,523
--------- ---------
Net cash used in investing activities................... (105,752) (94,698)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt............. 438,568 51,221
Repurchase of common stock............................... (400,086) (354,884)
Contribution to TMCT, LLC................................ (249,266)
Net proceeds from issuance of commercial paper........... 101,546 246,941
Dividends paid........................................... (66,837) (59,526)
Proceeds from exercise of stock options.................. 24,505 25,712
Exercise of put options.................................. (6,796) (1,954)
Repurchase of Series B preferred stock................... (91,182)
Other, net............................................... (968) 1,189
--------- ---------
Net cash used in financing activities................... (159,334) (182,483)
--------- ---------
Decrease in cash and cash equivalents..................... (92,929) (103,940)
Cash and cash equivalents at beginning of year............ 145,105 182,901
--------- ---------
Cash and cash equivalents at end of period................ $ 52,176 $ 78,961
========= =========
</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, 1996.
Certain amounts in previously issued financial statements have been
reclassified to conform to the 1997 presentation.
NOTE 2 -- RECAPITALIZATION
During the third quarter, the Company completed a transaction (the
Transaction) involving agreements with its largest stockholders, Chandler
Trust No. 1 and Chandler Trust No. 2 (Chandler Trusts). The Transaction
consisted of two components: (a) the merger of Chandis Securities Company
(Chandis), a holding company owned by Chandler Trust No. 2 and affiliated
minority investors, into a subsidiary of the Company (the Merger) and (b) the
formation of a new limited liability company by the Company and the Chandler
Trusts.
On August 8, 1997, Chandis merged with and into Chandis Acquisition
Corporation (CAC), a Delaware corporation and wholly-owned subsidiary of the
Company. Pursuant to the Merger Agreement, the Chandis shareholders received
6,581,000 shares of Series A Common Stock, 9,656,000 shares of Series C Common
Stock, 381,000 shares of new Series C-1 Preferred Stock, and 245,000 shares of
new Series C-2 Preferred Stock. At the time of the Merger, Chandis owned
8,581,000 shares of Series A Common Stock, 9,656,000 shares of Series C Common
Stock, and 381,000 shares of Series A Preferred Stock. CAC is not a "permitted
transferee" as defined in the Company's Certificate of Incorporation,
therefore, the Series C Common Stock was converted to Series A Common Stock as
a result of the Merger. The Company's shares owned by CAC are reported as
treasury stock for financial reporting purposes. Additionally, Chandis owned
an interest in undeveloped real estate and certain other assets and
liabilities. The Merger was a tax-free transaction.
The Series C-1 Preferred Stock and Series C-2 Preferred Stock holders were
paid initial dividends of $4,755,000 and $395,000, respectively, during the
third quarter of 1997. Commencing October 1, 1997, the annual dividend rate on
the Series C-1 Preferred Stock and Series C-2 Preferred Stock is 5.8% and may
increase commencing in 2001 to a maximum of 8.4% (based on the percentage
increases, if any, in the dividends paid by the Company on its common stock).
The Series C-1 Preferred Stock and Series C-2 Preferred Stock are convertible
into Series A Common Stock in 2025 at the earliest; however, the number of
shares of Series A Common Stock into which the Series C-2 Preferred Stock can
be converted is limited.
Concurrent with the consummation of the Merger, the Company (including
certain of its subsidiaries) and the Chandler Trusts formed TMCT, LLC (LLC), a
Delaware limited liability company, and the following capital contributions
were made to LLC:
1. the Company contributed approximately $249,266,000 in cash and 8 real
properties (the Real Properties) with an aggregate market value of
approximately $225,850,000;
2. the Chandler Trusts contributed approximately 5,001,000 shares of Series
A Common Stock and 443,000 shares of Series A Preferred Stock
(Contributed Shares).
7
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The cash contributed to LLC by the Company was used by LLC to purchase a
portfolio of securities (Portfolio). The Company has leased the Real
Properties from LLC under a lease with an initial term of 12 years. The lease
is accounted for as a financing arrangement and, accordingly, the Real
Properties' book value remains on the Company's condensed consolidated balance
sheet and continues to be depreciated at the rates in effect prior to the
contribution of the Real Properties to LLC. The depreciation, along with a
reduction of property, plant and equipment of $168,021,000, which represents
the estimated net book value of the Real Properties at the end of the lease
term, will result in a net book value of zero for the Real Properties at
August 8, 2009. At that time, the Company has the option to purchase all the
Real Properties for their fair market value. If the Real Properties are not
purchased by the Company, they will remain assets of LLC and may be leased by
the Company at a fair value rent as provided for under the terms of the lease
agreement. The lease provides for two additional 12-year lease terms with fair
value purchase options at the end of each lease term. The lease financing
obligation of $225,850,000 represents the present value of the minimum lease
payments for the Real Properties and is reported, net of the original issue
discount of $168,021,000, as debt in the Company's condensed consolidated
balance sheet.
The Company and the Chandler Trusts share in the cash flow, profits and
losses of the various assets held by LLC. The cash flow from the Real
Properties and the Portfolio is largely allocated to the Chandler Trusts and
the cash flow from the Contributed Shares is largely allocated to the Company.
Due to the allocations of the economic benefits in the LLC, 80% of the
Contributed Shares are included in treasury stock for financial reporting
purposes.
As a result of the Transaction, for financial reporting purposes and
earnings per share calculations, the number of shares of Series A Common Stock
outstanding was reduced by 6,001,000 and the number of shares of Series A
Preferred Stock outstanding was reduced by 381,000. Of the $411,784,000 stated
value of Series A Preferred Stock and 86,219,000 shares of Series A Common
Stock shown as outstanding on September 30, 1997, $221,298,000 and
$190,486,000 stated value of Series A Preferred Stock were held by LLC and
CAC, respectively, and approximately 5,001,000 and 18,238,000 shares of Series
A Common Stock were held by LLC and CAC, respectively. Accordingly, 80% of the
shares held by LLC and all the shares held by CAC are included in the shares
held in treasury stock for financial reporting purposes.
For additional information regarding the Transaction, see the Company's
Current Report on Form 8-K filed on August 11, 1997.
NOTE 3 -- RESTRUCTURING
The balance sheet classification of restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Other current liabilities:
1995 Restructuring.................................. $ 54,588 $ 69,111
1996 Restructuring.................................. 2,465 7,341
Other liabilities:
1995 Restructuring.................................. 43,232 79,409
1996 Restructuring.................................. 2,864
-------- --------
$100,285 $158,725
======== ========
</TABLE>
8
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The restructuring liabilities relate primarily to severance costs and lease
payments. During the year to date ended September 30, 1997, cash spent on
severance payments related to 1995 restructuring efforts totaled $5,715,000.
At September 30, 1997, the remaining liability for 1995 severance costs
aggregated $12,515,000.
NOTE 4 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the year to date ended September 30, 1997 and 1996
included interest of $23,671,000 and $29,294,000 and income taxes of
$124,118,000 and $48,470,000, respectively.
Non-cash transactions during the year to date ended September 30, 1997 were
as follows (in thousands):
<TABLE>
<S> <C>
Value of assets received by the Company in the Merger:
Series A Common Stock.............................................. $ 435,508
Series C Common Stock.............................................. 490,064
Series A Preferred Stock........................................... 190,486
Other net assets, including cash of $5,784......................... 21,050
----------
Total assets received............................................. 1,137,108
Value of stock issued by the Company in the Merger:
Series A Common Stock.............................................. 334,008
Series C Common Stock.............................................. 490,064
Series C-1 Preferred Stock......................................... 190,486
Series C-2 Preferred Stock......................................... 122,550
----------
Total stock issued................................................ 1,137,108
Fair value of Real Properties contributed to LLC.................... 225,850
Lease financing obligation, net of original issue discount.......... 57,829
</TABLE>
NOTE 5 -- DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps and forward interest rate swaps are used to manage
exposure to market risk associated with changes in interest rates. Interest
rate swaps are accounted for on the accrual basis. Payments made or received
are recognized as an adjustment to interest expense. Amounts received in
connection with forward swaps and terminated swaps are amortized on a
straight-line basis as a reduction in interest expense over the term of the
swaps.
The Company's exposure to market risk associated with fluctuations in the
value of foreign currencies relative to the U.S. dollar may be managed with
foreign currency forward contracts, currency options, currency swaps or other
risk management instruments permitted by the Company's internal policy
guidelines. The Company enters into forward contracts from time to time.
Forward contracts that do not qualify as accounting hedges are marked to
market.
9
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 6 -- DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Short-term debt:
Commercial paper at a weighted average interest
rate of 5.7%...................................... $101,546
Notes payable at 6.125% due January 2, 1998........ 40,000
Current maturities of long-term debt............... 7,713 $ 15
-------- --------
Total short-term debt............................. $149,259 $ 15
======== ========
Long-term debt:
4 1/4% PEPS due March 15, 2001; 1,305,000
securities stated at current maturity value....... $ 46,980 $ 64,543
Lease financing obligation expiring on August 8,
2009, net of unamortized discount of $159,976,
with an interest rate of 4.3% (Note 2)............ 56,683
7 1/4% Debentures due March 1, 2013................ 148,215 148,215
4.75% Liquid Yield Option Notes due 2017, net of
unamortized discount of $300,187.................. 199,813
7 1/2% Debentures due July 1, 2023................. 98,750 98,750
6.61% Debentures due September 15, 2027, net of
unamortized discount of $103...................... 249,897
7 1/4% Debentures due November 15, 2096, net of
unamortized discount of $566 and $570............. 147,434 147,430
Others at various interest rates, maturing through
2001.............................................. 73 84
-------- --------
947,845 459,022
Less current maturities............................ (7,713) (15)
-------- --------
Total long-term debt.............................. $940,132 $459,007
======== ========
</TABLE>
Interest rate swaps outstanding at September 30, 1997 converted the weighted
average interest rate on the Company's fixed rate debt due in 2013, 2023 and
the Liquid Yield Option Notes (LYON(TM)) from 6.2% to 5.2% for the year to
date ended September 30, 1997.
In September 1997, the Company issued $250,000,000 of 6.61% Debentures due
September 15, 2027 (Debentures) with interest payable semiannually commencing
March 15, 1998. The Debentures are redeemable at the option of the Company, in
whole or in part, at any time after September 15, 2004 at a redemption price
equal to the greater of (a) 100% of the principal amount or (b) the sum of the
present value of the remaining scheduled payments of principal and interest
discounted to the redemption date. The Debentures may be put to the Company on
September 15, 2004 at 100% of face value plus accrued interest.
In April 1997, the Company received gross proceeds of $195,530,000 from the
issuance of Liquid Yield Option Notes. The LYONs are zero coupon subordinated
notes with an aggregate face value of $500 million and a yield to maturity of
4.75%. Each LYON has a $1,000 face value and is convertible at the option of
the holder any time prior to maturity. If conversion is elected, the Company
will, at its option, deliver (a) 5.828 shares of Series A common stock per
each LYON or (b) cash equal to the market value of such shares. On or after
April 15, 2002, the LYONs may be redeemed at any time by the Company for cash
equal to the issuance price plus accrued original discount through the date of
redemption. In addition, each LYON may be redeemed for
10
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
cash at the option of the holder on April 15 in the years 2002, 2007 or 2012.
The cash payable for each LYON at these redemption dates is approximately $495,
$625 and $791, respectively, which is equal to the issuance price plus accrued
original discount through the date of redemption. The Company also entered into
an interest rate swap agreement for a notional amount of $170,111,000, expiring
April 15, 2002, to exchange a fixed interest rate of 4.75% for a variable rate
based on six-month LIBOR less 2.458%.
Effective March 31, 1997, the Company's $400 million revolving line of credit
was amended to replace the consolidated minimum net worth requirement with a
financial ratio measuring coverage of interest expense. The Company's earnings
before interest expense, income taxes, depreciation and amortization, divided
by interest expense, must be greater than or equal to 5.0.
The 4 1/4% Premium Equity Participating Securities (PEPS) hedge all, or 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.
Changes in the current maturity value of the PEPS are included as a separate
component of shareholders' equity, net of applicable income taxes. At September
30, 1997 and December 31, 1996, the fair market value of Netscape common stock
was $36.00 and $56.875 per share, respectively. The PEPS are redeemable at the
option of the Company, in whole or in part, at any time after December 15,
2000.
NOTE 7 -- 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. The weighted
average number of shares used for primary earnings per share totaled 94,105,000
and 104,564,000 for the quarters ended September 30, 1997 and 1996,
respectively, and 96,579,000 and 106,454,000 for the year to date ended
September 30, 1997 and 1996, respectively.
Fully diluted earnings per share is computed by dividing net income, less
preferred dividend requirements and, in 1997, adding the after tax interest
expense on the LYONs, by the weighted-average number of shares of common stock
and common stock equivalents outstanding, assuming the conversion of Series B
Preferred Stock and convertible debt securities in the applicable periods. No
conversion was assumed for all other preferred stocks because the effect was
antidilutive. The weighted average number of shares for fully diluted earnings
per share is 97,077,000 and 112,501,000 for the quarters ended September 30,
1997 and 1996, respectively, and 99,939,000 and 114,755,000 for the year to
date ended September 30, 1997 and 1996, respectively.
Cash dividends of $.15 per share of common stock were declared in the quarter
ended September 30, 1997. During the fourth quarter of 1996, the Company began
declaring and paying common stock dividends in the same quarter; previously,
dividends were declared in the quarter prior to payment. As a result, in the
third quarter of 1996, no dividends were declared in order to adopt the new
procedures.
NOTE 8 -- 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 12 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996. The Company repurchased 7,892,000 shares of common
stock in the open market during the year to date ended September 30, 1997. The
aggregate cost for these repurchases was $406,882,000, of which $111,530,000
related to the forward purchase contracts described below.
Pursuant to the original terms of the Series B preferred stock (PERCs), the
Company called the PERCs for redemption and issued 4,446,000 shares of Series A
common stock in exchange for all of the outstanding PERCs
11
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
on April 2, 1997. In addition, in early May 1997, the Company exercised its
early termination right on forward purchase contracts for 3,900,000 shares of
its PERCs resulting in the purchase of approximately 2,226,000 Series A common
shares for an aggregate cost of $111,530,000.
At September 30, 1997, the Company had 560,000 put options outstanding with
an average strike price of approximately $53.54. The put options, which have
various expiration dates in the fourth quarter of 1997, 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."
NOTE 9 -- STOCK OPTIONS
During the year to date ended September 30, 1997, the Company issued
1,100,000 shares of its common stock as a result of the exercise of stock
options.
The Company granted each eligible employee 100 stock options on February 6,
1997. This grant resulted in the issuance of approximately 1,339,000 stock
options at an option price of $46.5625 which was equal to fair value at the
date of grant. These options will be fully vested on February 6, 2000 for
employees still employed by the Company at that date.
NOTE 10 -- 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; (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 11 -- CONTINGENT LIABILITIES
The Company and its subsidiaries are defendants in various 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.
12
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 12 -- FUTURE ACCOUNTING REQUIREMENTS
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
(SFAS 128) was issued in February 1997 and will be adopted by the Company on
December 31, 1997. Early adoption is not permitted; however, all prior years
earnings per share data must be restated upon adoption to conform to the new
standard. SFAS 128 simplifies the calculation of earnings per share data by
replacing primary and fully diluted earnings per share with basic and diluted
earnings per share, respectively. Basic earnings per share excludes dilutive
securities, including stock options, and is calculated using the weighted
average common shares outstanding for the period. Diluted earnings per share,
which is generally consistent with the fully diluted calculation under present
accounting rules, reflects the dilution to earnings that would occur if
securities, stock options and other dilutive securities resulted in the
issuance of common stock. The Company anticipates that prior years earnings
per share, when restated for SFAS 128, will remain unchanged or will be
slightly higher. Under SFAS 128, the Company would have reported earnings per
common share in 1997 as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD YEAR TO
QUARTER QUARTER QUARTER DATE
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic........................................... $.37 $.60 $.64 $1.61
Diluted......................................... * * .62 1.56
</TABLE>
- --------
* Antidilutive
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130), and Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131), were issued in June 1997. The disclosures required by
these statements must be reported by the Company in 1998. The Company is
reviewing SFAS 130 and SFAS 131 and will adopt them by the required dates.
13
<PAGE>
THE TIMES MIRROR COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Improved operating performance and higher earnings per share reflect
continued year-over-year profit margin expansion in each of the Company's
business segments, as well as a decrease in average shares outstanding and
lower preferred dividends. Earnings increased for the third quarter and year
to date ended September 30, 1997 despite the absence of revenues from the
college and scientific publishing businesses which were divested in the fourth
quarter of 1996. Earnings per share increased more than 47% for the third
quarter of 1997 compared to the same quarter of last year. For the year to
date ended September 30, 1997, earnings per share rose more than 75% from the
same period in 1996.
In the third quarter of 1997, the Company also completed a significant
recapitalization with its largest shareholder, the Chandler Trusts. The
transaction, which is described in Note 2 to the condensed consolidated
financial statements, resulted in a net effective reduction in the outstanding
Series A Common Stock of six million shares and will reduce preferred dividend
requirements by 34.1% to $21.7 million annually. The Company continued its
ongoing share repurchase program and repurchased 1.4 million shares and 7.9
million shares in the third quarter and year to date ended September 30, 1997,
respectively.
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes the Company's consolidated financial results
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
------------------ ----------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues........................... $814,478 $885,561 $2,400,173 $2,529,615
Operating profit................... 124,338 110,280 332,660 244,797
Interest expense, net.............. (14,069) (12,277) (32,919) (25,136)
Net income......................... 66,924 55,705 178,143 127,765
Preferred dividend requirements.... 7,879 10,911 27,057 32,733
Earnings applicable to common
shareholders...................... 59,045 44,794 151,086 95,032
Earnings per common share:
Primary........................... $ .63 $ .43 $ 1.56 $ .89
Fully diluted..................... $ .62 $ .42 $ 1.56 $ *
</TABLE>
- --------
* Antidilutive
Consolidated operating profit for the third quarter and the year to date
ended September 30, 1997 increased 12.7% and 35.9%, respectively, reflecting
continued strength in the Newspaper Publishing segment, which achieved
advertising revenue growth at all newspapers and benefited from lower year-to-
year newsprint price comparisons.
The Company's consolidated revenues in 1997 declined due to the 1996
divestitures in the Professional Information segment. Excluding the revenues
of divested businesses, revenues would have increased 3.9% in the 1997 third
quarter and 3.0% for the year to date ended September 30, 1997 compared to the
same prior year periods.
Net interest expense for the third quarter and the year to date ended
September 30, 1997 increased compared to the same prior year periods primarily
due to higher debt levels.
14
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
During the third quarter of 1997, the Company recorded gains on the sale of
investments in Tejon Ranch Co. and WebTV Network, Inc., which were largely
offset by charges related to the disposition of assets and other items.
ANALYSIS BY SEGMENT
The following sections discuss the revenues and operating results of the
Company's principal lines of business. All comments, except as noted, apply to
both the third quarter and the year to date ended September 30, 1997 compared
to the same prior year periods.
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
------------------------ ----------------------------
1997 1996 CHANGE 1997 1996 CHANGE
-------- -------- ------ ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Advertising.............. $403,947 $378,695 6.7% $1,215,025 $1,139,965 6.6%
Circulation.............. 107,694 109,952 (2.1) 325,695 336,438 (3.2)
Other.................... 18,838 14,309 31.7 52,444 38,589 35.9
-------- -------- ---------- ----------
$530,479 $502,956 5.5% $1,593,164 $1,514,992 5.2%
======== ======== ========== ==========
Operating profit.......... $ 86,079 $ 72,205 19.2% $ 290,943 $ 199,165 46.1%
======== ======== ========== ==========
</TABLE>
Newspaper Publishing revenue continued to grow at all newspapers reflecting
the strong current advertising environment nationwide. Advertising revenues
for the segment were up in every category, with particular strength in
national and classified advertising. Higher advertising revenues in 1997 were
partly offset by a modest decline in circulation revenues, as the newspapers'
marketing strategies achieved higher circulation volume but resulted in lower
overall circulation revenues.
Each of the Company's top metropolitan daily newspapers had solid increases
in year-over-year daily and Sunday circulation for the six-months ended
September 30, 1997 as reported by the Company to the Audit Bureau of
Circulations. Total circulation averages for the Newspaper Publishing segment
for the six-month period ended September 30, 1997 were 2,312,828 daily, a 1.5%
increase, and 3,040,126 Sunday, an increase of 0.6%, compared to the six-month
period ended September 30, 1996. At the Los Angeles Times, circulation
averaged 1,050,176 daily, up 21,103, and 1,361,748 Sunday, up 11,859. At
Newsday, average daily circulation was 568,914, up 4,160, and Sunday was
664,988, an increase of 8,093. The Baltimore Sun reported an average daily
circulation of 312,825, an increase of 8,119, and 479,812 on Sunday, up 1,994.
At The Hartford Courant, average daily circulation was 210,800, an increase of
1,956 and Sunday was 302,859, up 671.
Segment operating profit rose on the higher revenues as well as the lower
year-over-year newsprint expense. For the third quarter of 1997, newsprint
expense declined slightly compared to the third quarter of 1996. Although the
average price per ton of newsprint rose during the third quarter of 1997, it
remained below year-ago average prices. For the year to date ended September
30, 1997, newsprint expense declined over 17% compared to the same prior year
period. These declines were due to lower average year-over-year newsprint
prices but were partly offset by higher consumption from continued circulation
and advertising linage growth. Other operating expenses for the third quarter
and year to date ended September 30, 1997 rose 6.4% and 4.1%, respectively,
compared to the same prior year periods, due in part to higher variable costs
associated with growing volumes of advertising and circulation.
15
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
-------------------------- --------------------------
1997 1996 CHANGE 1997 1996 CHANGE
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $214,928 $303,966 (29.3)% $603,018 $797,989 (24.4)%
======== ======== ======== ========
Operating profit....... $ 49,262 $ 49,390 (.3)% $ 91,163 $ 89,795 1.5 %
======== ======== ======== ========
Professional Information segment's operating profit for the 1997 third quarter
was approximately the same as the prior year, even though results for the third
quarter of 1996 included $30.3 million of operating profit from businesses which
have since been divested. Operating profit margins in the 1997 third quarter
improved significantly, to 22.9% compared to the same prior year period.
Excluding the 1996 third quarter revenues of $101.6 million from divested
businesses, revenues would have increased 6.2% for the third quarter of 1997
compared to the third quarter of 1996. For the year to date ended September 30,
1997, revenues would have increased slightly and operating profit would have
increased 33.5%, excluding the results from divested businesses. The improvement
in revenue and operating profit is largely due to a return to normalized levels
of revenues in the third quarter of 1997 at Mosby, whose results in the 1996
third quarter were significantly affected by its change in domestic and
international sales distribution channels. In addition, the training companies
achieved improved operating profit in the 1997 third quarter compared to the
1996 third quarter.
Professional Information's operating profit does not include the Company's
$4.2 million share of equity income from the Shepard's joint venture, which was
partially offset by an equity loss related to MD Consult, an investment in a
startup medical online joint venture.
MAGAZINE PUBLISHING
Magazine Publishing revenues and operating profit were as follows (dollars in
thousands):
<CAPTION>
THIRD QUARTER YEAR TO DATE
-------------------------- --------------------------
1997 1996 CHANGE 1997 1996 CHANGE
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $ 65,974 $ 59,563 10.8% $183,361 $174,852 4.9%
======== ======== ======== ========
Operating profit....... $ 5,491 $ 2,893 89.8% $ 13,350 $ 5,709 100+%
======== ======== ======== ========
Magazine Publishing achieved significant improvement in results primarily due
to higher advertising revenues at the Company's largest publications, notably
Golf, Field & Stream and Outdoor Life. The startup of Verge and the acquisition
of Skateboarding and Warp in April 1997 contributed to higher newsstand sales.
CORPORATE AND OTHER
Corporate and Other revenues and operating loss were as follows (dollars in
thousands):
<CAPTION>
THIRD QUARTER YEAR TO DATE
-------------------------- --------------------------
1997 1996 CHANGE 1997 1996 CHANGE
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $ 3,145 $ 19,078 (83.5)% $ 20,944 $ 41,913 (50.0)%
======== ======== ======== ========
Operating loss......... $(16,494) $(14,208) (16.1)% $(62,796) $(49,872) (25.9)%
======== ======== ======== ========
</TABLE>
The Corporate and Other operating loss increased primarily due to information
system conversion costs.
16
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements are funded by its operations.
Proceeds from borrowings have been used to fund acquisitions and share
repurchases.
CAPITAL MARKET TRANSACTIONS
The Company repurchased in the open market approximately 7.9 million and 8.6
million shares of its common stock during the year to date ended September 30,
1997 and 1996, respectively.
In August 1997, the Company completed a significant recapitalization with
its largest shareholder, the Chandler Trusts. The transaction resulted in a
net effective reduction in the outstanding Series A Common Stock of
approximately six million shares and Series A Preferred Stock with a stated
value of $367.5 million (see Note 2 to the condensed consolidated financial
statements for further information). The recapitalization, together with share
repurchases, decreased common shares outstanding at September 30, 1997 to 88.5
million shares from 96.7 million shares at December 31, 1996. In addition,
preferred dividend requirements for the 1997 full year are expected to decline
to $32.5 million compared to $43.6 million in 1996.
In connection with the recapitalization transaction mentioned above, the
Company entered into a lease financing arrangement which added net debt of
$57.8 million (see Note 2 to the condensed consolidated financial statements
for further information) and issued $250 million of 6.61% Debentures due
September 15, 2027 (Debentures). The Debentures are redeemable at the option
of the Company, in whole or in part, at any time after September 15, 2004 at a
redemption price equal to the greater of (a) 100% of the principal amount or
(b) the sum of the present value of the remaining scheduled payments of
principal and interest discounted to the redemption date. The Debentures may
be put to the Company on September 15, 2004 at 100% of face value plus accrued
interest.
Total debt at September 30, 1997 rose to $1.1 billion from $459.0 million at
December 31, 1996 primarily due to the issuance of Liquid Yield Option Notes
(LYONs(TM)), Debentures and commercial paper. During April 1997, the Company
issued the LYONs due in 2017 and received gross proceeds of $195.5 million. At
September 30, 1997, the Company had a $400 million long-term revolving line of
credit through a group of domestic and international banks. This line of
credit is used to support a commercial paper program which is available for
short-term cash requirements. The Company had approximately $101.5 million of
commercial paper outstanding at September 30, 1997 under this credit facility.
Additionally, in October 1997 the Company filed a shelf registration statement
for $300 million of securities.
Common share repurchases are intended to enhance shareholder value as well
as to offset dilution from the shares of common stock issued under the
Company's stock-based employee compensation and benefit programs. In
connection with the Company's ongoing common stock repurchase program, in
October 1997 the Company's Board of Directors authorized the repurchase over
the next three years of an additional 10 million shares of common stock. The
October 1997 authorization brings the aggregate shares remaining for
repurchase to approximately 12.9 million shares. Repurchases are expected to
be made in the open market or in private transactions, depending on market
conditions, and may be discontinued at any time. In connection with this
program, the Company from time to time sells put options on its common stock.
17
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR TO DATE CASH FLOW
The following table sets forth certain items from the Statements of Condensed
Consolidated Cash Flows (in millions):
<TABLE>
<CAPTION>
YEAR TO DATE
----------------
1997 1996
------- -------
<S> <C> <C>
Net cash provided by
continuing operating
activities............. $ 172.2 $ 192.9
Capital expenditures.... (82.7) (106.3)
Acquisitions, net of
cash acquired.......... (106.1) (12.1)
Proceeds from sales of
assets................. 106.0
Repurchase of common
stock including
exercise of put
options................ (406.9) (356.8)
Issuance of commercial
paper and long-term
debt................... 540.1 298.2
</TABLE>
Cash generated by continuing operating activities for the year to date ended
September 30, 1997 was lower compared to the same period in 1996 as higher
operating profit in 1997 was offset by higher income tax payments and the
absence of cash generated by operations from the Company's college and
scientific publishing businesses which were sold near year end 1996.
Capital expenditures for the year to date ended September 30, 1997 were lower
compared to the same period in 1996 due to fewer office relocations and
consolidations. Capital expenditures for the 1997 full year are expected to
decrease somewhat from 1996 levels as capital costs associated with real estate
relocations are expected to decline. Cash spent on acquisitions includes Krames
Communications Incorporated, a publisher of consumer-oriented health education
information, which was acquired during the third quarter of 1997. Cash received
from sales of assets includes the 1997 third quarter sale of investments in
Tejon Ranch Co. and WebTV Network, Inc. In addition, the Company contributed
$249.3 million to TMCT, LLC (see Note 2 to the condensed consolidated financial
statements for further information).
DIVIDENDS
Cash dividends of $.15 per share of common stock were declared for the third
quarter of 1997. During the fourth quarter of 1996, the Company began declaring
and paying common stock dividends in the same quarter; previously, dividends
were declared in the quarter prior to payment. As a result, in the third
quarter of 1996, no dividends were declared in order to adopt the new
procedures.
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 10
to the condensed consolidated financial statements.
18
<PAGE>
THE TIMES MIRROR COMPANY
BUSINESS SEGMENT INFORMATION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER
ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Newspaper Publishing............... $530,479 $502,956 $1,593,164 $1,514,992
Professional Information........... 214,928 303,966 603,018 797,989
Magazine Publishing................ 65,974 59,563 183,361 174,852
Corporate and Other................ 3,145 19,078 20,944 41,913
Intersegment Revenues.............. (48) (2) (314) (131)
-------- -------- ---------- ----------
$814,478 $885,561 $2,400,173 $2,529,615
======== ======== ========== ==========
OPERATING PROFIT (LOSS)
Newspaper Publishing............... $ 86,079 $ 72,205 $ 290,943 $ 199,165
Professional Information........... 49,262 49,390 91,163 89,795
Magazine Publishing................ 5,491 2,893 13,350 5,709
Corporate and Other................ (16,494) (14,208) (62,796) (49,872)
-------- -------- ---------- ----------
$124,338 $110,280 $ 332,660 $ 244,797
======== ======== ========== ==========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing............... $ 27,144 $ 26,663 $ 82,021 $ 80,500
Professional Information........... 10,003 12,419 28,005 36,123
Magazine Publishing................ 1,828 1,543 5,223 4,713
Corporate and Other................ 557 645 2,027 1,739
-------- -------- ---------- ----------
$ 39,532 $ 41,270 $ 117,276 $ 123,075
======== ======== ========== ==========
CAPITAL EXPENDITURES
Newspaper Publishing............... $ 20,977 $ 13,698 $ 53,923 $ 40,604
Professional Information........... 6,266 30,117 18,710 53,411
Magazine Publishing................ 384 4,181 1,307 8,908
Corporate and Other................ 1,564 1,590 8,740 3,361
-------- -------- ---------- ----------
$ 29,191 $ 49,586 $ 82,680 $ 106,284
======== ======== ========== ==========
</TABLE>
19
<PAGE>
THE TIMES MIRROR COMPANY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material legal proceedings are pending.
ITEM 5. OTHER EVENTS
On October 23, 1997, SBC Warburg Dillon Read Inc. notified the Company that
SBC Warburg Inc., a holder of the Company's LYONs, had been merged into Dillon
Read & Co. Inc. on September 2, 1997, and that it beneficially owns
$22,350,000 principal amount at maturity of the LYONs (rather than $19,350,000
as SBC Warburg Inc. had previously disclosed to the Company) which it may from
time to time offer and sell pursuant to the Company's Registration Statement
No. 333-30773 under the Securities Act of 1933, as amended, relating to the
LYONs and the Prospectus dated August 22, 1997, included therein.
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) During the third quarter of 1997, the Company filed a report on Form 8-K
on August 11, 1997, announcing that the Company had entered into a transaction
with the Chandler Trusts, the Company's largest stockholder, consisting of (i)
the formation of a new limited liability company among the Company and the
Chandler Trusts and (ii) the merger of a holding company owned by one of the
Chandler Trusts and affiliated minority investors with and into a subsidiary
of the Company. The Company reported that the transaction resulted in a net
effective reduction in the number of shares of Series A Common Stock
outstanding by approximately six million shares. Copies of related documents
were included in the filing.
The Company filed a report on Form 8-K dated September 3, 1997 reporting
that Citibank, N.A., the Trustee under the Indenture dated as of March 19,
1996 between Citibank, N.A. and the Company, had executed a Statement of
Eligibility on Form T-1 under the Trust Indenture Act of 1939. A copy of the
Form T-1 was included in the filing.
The Company filed a report on Form 8-K dated September 9, 1997 which
announced that the Company had entered into an Underwriting Agreement on
September 4, 1997 with Goldman, Sachs & Co., Citicorp Securities, Inc.,
Merrill Lynch & Co. and Morgan Stanley & Co. Incorporated relating to the
issuance and sale of the Company's 6.61% Debentures due September 15, 2027
(the "Debentures"). The Company also announced the completion of the issuance
and sale of the Debentures on September 9, 1997, and the issuance of the
Debentures 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 the filing.
The Company also filed a report on Form 8-K dated September 10, 1997 listing
additional holders of the Company's zero coupon subordinated Liquid Yield
Option(TM) Notes ("LYONs") due 2017, which such owners may from time to time
offer and sell pursuant to the Company's Registration Statement (No. 333-
30773) under the Securities Act of 1933, as amended.
20
<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 12, 1997
21
<PAGE>
EXHIBIT 11
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,
------------------------- -------------------------
1997 1996 1997 1996
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
PRIMARY
Average shares
outstanding............ 91,846,907 101,178,090 94,077,413 103,432,404
Dilutive stock options
based on the treasury
stock method using
average market price... 2,258,100 3,385,461 2,501,987 3,021,436
----------- ------------ ----------- ------------
Total................. 94,105,007 104,563,551 96,579,400 106,453,840
=========== ============ =========== ============
Net income.............. $ 66,924 $ 55,705 $ 178,143 $ 127,765
Preferred dividend
requirements........... (7,879) (10,911) (27,057) (32,733)
----------- ------------ ----------- ------------
Earnings applicable to
common shareholders.... $ 59,045 $ 44,794 $ 151,086 $ 95,032
=========== ============ =========== ============
Primary earnings per
common share........... $ .63 $ .43 $ 1.56 $ .89
=========== ============ =========== ============
FULLY DILUTED
Average shares
outstanding............ 91,846,907 101,178,090 94,077,413 103,432,404
Common shares assumed
issued upon conversion
of Series B preferred
stock.................. 7,789,276 1,481,865 7,789,276
Common shares assumed
issued upon conversion
of LYONs............... 2,914,000 1,803,905
Dilutive stock options
based on the treasury
stock method using
market price at the
close of the period, if
higher than average
market price........... 2,316,241 3,533,764 2,576,001 3,533,764
----------- ------------ ----------- ------------
Total................. 97,077,148 112,501,130 99,939,184 114,755,444
=========== ============ =========== ============
Net income.............. $ 66,924 $ 55,705 $ 178,143 $ 127,765
Preferred dividend
requirements........... (7,879) (8,236) (24,351) (24,707)
Interest expense on
LYONs, net of tax...... 1,376 2,522
----------- ------------ ----------- ------------
Earnings applicable to
common shareholders.... $ 60,421 $ 47,469 $ 156,314 $ 103,058
=========== ============ =========== ============
Fully diluted earnings
per common share....... $ .62 $ .42 $ 1.56 $ *
=========== ============ =========== ============
</TABLE>
- --------
* Antidilutive
<PAGE>
EXHIBIT 12
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
YEAR TO DATE ENDED
SEPTEMBER 30,
1997
------------------
<S> <C>
Fixed charges:
Interest expense........................................... $ 34,845
Portion of rents deemed to be interest..................... 12,946
Amortization of debt expense............................... 879
--------
Total fixed charges....................................... 48,670
Preferred stock dividend requirements....................... 46,315
--------
Fixed charges and preferred stock dividends................ $ 94,985
========
Earnings:
Income before income taxes................................. $304,915
Fixed charges.............................................. 48,670
Amortization of capitalized interest....................... 2,990
Distributed income from less than 50% owned unconsolidated
affiliates................................................ 305
Subtract: Equity income from less than 50% owned
unconsolidated affiliates................................. (53)
Add: Equity loss from less than 50% owned unconsolidated
affiliates................................................ 5,783
--------
Total earnings............................................ $362,610
========
Ratio of earnings to fixed charges.......................... 7.5x
Ratio of earnings to fixed charges and preferred stock
dividends.................................................. 3.8x
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 52,176
<SECURITIES> 0
<RECEIVABLES> 514,742
<ALLOWANCES> 66,852
<INVENTORY> 72,935
<CURRENT-ASSETS> 676,073
<PP&E> 1,992,686
<DEPRECIATION> 1,008,135
<TOTAL-ASSETS> 3,288,589
<CURRENT-LIABILITIES> 850,100
<BONDS> 940,132
0
724,820
<COMMON> 112,054
<OTHER-SE> (1,896)
<TOTAL-LIABILITY-AND-EQUITY> 3,288,589
<SALES> 2,400,173
<TOTAL-REVENUES> 2,400,173
<CGS> 1,224,150
<TOTAL-COSTS> 1,224,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 16,529
<INTEREST-EXPENSE> 34,820
<INCOME-PRETAX> 304,915
<INCOME-TAX> 126,772
<INCOME-CONTINUING> 178,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178,143
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
</TABLE>
