<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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
State of Incorporation: Delaware I.R.S. Employer Id. No. 95-4481525
___________________
TIMES MIRROR SQUARE
Los Angeles, California 90053
Telephone: (213) 237-3700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
Number of shares of Series A Common Stock outstanding at May 8, 1997: 68,997,386
Number of shares of Series C Common Stock outstanding at May 8, 1997: 26,620,836
================================================================================
<PAGE>
THE TIMES MIRROR COMPANY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Financial information herein, and management's discussion thereof, include
consolidated data for The Times Mirror Company ("Registrant" or "Times
Mirror") and its subsidiaries. Registrant and its subsidiaries are sometimes
herein referred to collectively as the "Company".
2
<PAGE>
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31
--------------------
1997 1996
-------- --------
<S> <C> <C>
REVENUES............................................................ $773,882 $806,759
-------- --------
COSTS AND EXPENSES:
Cost of sales...................................................... 398,408 446,276
Selling, general and administrative expenses....................... 287,934 310,255
-------- --------
686,342 756,531
OPERATING PROFIT.................................................... 87,540 50,228
Interest expense.................................................... (10,012) (7,407)
Interest income..................................................... 964 1,956
Other, net.......................................................... 873 3,294
-------- --------
Income before income taxes.......................................... 79,365 48,071
Income taxes........................................................ 34,132 22,034
-------- --------
NET INCOME.......................................................... $ 45,233 $ 26,037
======== ========
Preferred dividend requirements..................................... $ 10,911 $ 10,911
======== ========
Earnings available to common shareholders........................... $ 34,322 $ 15,126
======== ========
Primary earnings per share.......................................... $ .36 $ .14
======== ========
Fully diluted earnings per share.................................... $ * $ *
======== ========
</TABLE>
________________
* Per share amount on a fully diluted basis has been omitted as the amount is
antidilutive in relation to the primary share amount.
See notes to condensed consolidated financial statements
3
<PAGE>
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.................................................... $ 48,990 $ 145,105
Marketable securities........................................................ 14,468 31,740
Accounts receivable, less allowance for doubtful accounts and returns of
$67,954 and $79,540........................................................ 449,601 488,572
Inventories.................................................................. 100,744 103,648
Deferred income taxes........................................................ 49,967 49,248
Other current assets......................................................... 55,189 52,159
---------- ----------
Total current assets....................................................... 718,959 870,472
Property, plant and equipment, at cost less accumulated depreciation of
$961,299 and $941,803........................................................ 1,163,688 1,177,077
Goodwill...................................................................... 509,167 530,142
Other intangibles............................................................. 42,707 46,039
Deferred charges.............................................................. 150,457 153,454
Other assets.................................................................. 718,268 752,678
---------- ----------
Total assets............................................................... $3,303,246 $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>
MARCH 31, DECEMBER 31,
1997 1996
----------- -------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable...................................................................... $ 270,360 $ 304,983
Short-term debt....................................................................... 108,995 15
Employees' compensation............................................................... 79,597 112,570
Unearned income....................................................................... 234,647 233,021
Other current liabilities............................................................. 137,932 158,558
---------- ----------
Total current liabilities........................................................... 831,531 809,147
Long-term debt.......................................................................... 433,693 459,007
Deferred income taxes................................................................... 98,850 129,491
Other liabilities....................................................................... 582,154 595,235
---------- ----------
Total liabilities................................................................... 1,946,228 1,992,880
Common stock subject to put options..................................................... 18,146 38,172
Commitments and contingencies
Shareholders' Equity
Series A preferred stock, $1 par value; 900,000 shares authorized;
824,000 shares issued and outstanding; stated at liquidation value.................. 411,784 411,784
Series B preferred stock, $1 par value; 25,000,000 shares authorized;
7,789,000 shares issued and outstanding; stated at liquidation value;
convertible to Series A common stock................................................ 164,595 164,595
Preferred stock, $1 par value; 7,100,000 shares authorized; no shares issued or
outstanding
Common stock
Series A, $1 par value; 500,000,000 shares authorized;
66,955,000 and 69,757,000 shares issued and outstanding........................... 66,955 69,757
Series B, $1 par value; 100,000,000 shares authorized; no shares issued or
outstanding
Series C, convertible, $1 par value; 300,000,000 shares authorized;
26,665,000 and 26,973,000 shares issued and outstanding........................... 26,665 26,973
Additional paid-in capital............................................................ 257,714 225,934
Retained earnings..................................................................... 366,831 533,131
Net unrealized gain on securities..................................................... 44,328 66,636
---------- ----------
Total shareholders' equity.......................................................... 1,338,872 1,498,810
---------- ----------
Total liabilities and shareholders' equity.......................................... $3,303,246 $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>
FIRST QUARTER ENDED
MARCH 31
--------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by continuing operating activities............................. $ 30,698 $ 31,507
Net cash used in discontinued operating activities............................... (1,591)
--------- ---------
Net cash provided by operating activities....................................... 30,698 29,916
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in marketable and long-term securities................................ 60,574
Capital expenditures............................................................. (22,016) (26,911)
Capitalization of product costs.................................................. (6,323) (14,280)
Other, net....................................................................... (196) (5,669)
--------- ---------
Net cash provided by (used in) investing activities............................ (28,535) 13,714
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of common stock...................................................... (201,622) (155,709)
Proceeds from issuance of premium equity participating securities................ 51,221
Dividends paid................................................................... (20,130) (17,420)
Proceeds from exercise of stock options.......................................... 15,208 14,329
Net proceeds from issuance of commercial paper................................... 108,980
Other, net....................................................................... (714) 96
--------- ---------
Net cash used in financing activities.......................................... (98,278) (107,483)
--------- ---------
Decrease in cash and cash equivalents............................................. (96,115) (63,853)
Cash and cash equivalents at beginning of year.................................... 145,105 182,901
--------- ---------
Cash and cash equivalents at end of period........................................ $ 48,990 $ 119,048
========= =========
</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 the previously issued financial statements have been
reclassified to conform to the 1997 presentation.
NOTE 2 -- RESTRUCTURING
The balance sheet classification of restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Other current liabilities:
1995 Restructuring............................ $ 52,817 $ 69,111
1996 Restructuring............................ 6,007 7,341
Other liabilities:
1995 Restructuring............................ 77,285 79,409
1996 Restructuring............................ 2,318 2,864
-------- --------
$138,427 $158,725
======== ========
</TABLE>
During the quarter ended March 31, 1997, cash spent on severance payments
related to 1995 restructuring efforts totaled $2,332,000. At March 31, 1997,
the remaining liability for 1995 severance costs aggregated $15,898,000.
NOTE 3 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the periods ended March 31, 1997 and 1996 included
interest of $6,851,000 and $7,206,000 and income taxes of $51,455,000 and
$4,632,000, respectively.
NOTE 4 -- DEBT
Short-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- -------------
<S> <C> <C>
Commercial paper at a weighted average interest rate of 5.7%......... $108,980
Current maturities of long-term debt................................. 15 $15
-------- ---
$108,995 $15
======== ===
</TABLE>
7
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- -------------
<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
7 1/4% Debentures due November 15, 2096.............................................. 148,000 148,000
4 1/4% PEPS due March 15, 2001; 1,305,000 securities stated at current maturity value 39,232 64,543
Others at various interest rates, maturing through 2001.............................. 80 84
-------- --------
434,277 459,592
Less current maturities.............................................................. (15) (15)
Unamortized discount................................................................. (569) (570)
-------- --------
Long-term debt....................................................................... $433,693 $459,007
======== ========
</TABLE>
The 4 1/4% Premium Equity Participating Securities (PEPS) hedge 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 March 31, 1997 and
December 31, 1996, the fair market value of Netscape common stock was $30.0625
and $56.875 per share, respectively.
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.
Liquid Yield Option Notes were issued in the second quarter of 1997 as
described in Note 11.
NOTE 5 -- EARNINGS AND DIVIDENDS PER SHARE
Primary earnings per share is computed by dividing net income, less
preferred dividend requirements, by the weighted average number of shares of
common stock and common stock equivalents outstanding during the period, except
when the common stock equivalents result in less than 3% dilution. The weighted
average number of shares used for primary earnings per share totaled 96,248,000
and 105,225,000 for the quarters ended March 31, 1997 and 1996, respectively.
Fully diluted earnings per share is computed by dividing net income, less
preferred dividend requirements, for Series A preferred stock, by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding, assuming that the Series B preferred stock was converted to common
stock as further described in Note 11. The weighted average number of shares
used in computing fully diluted earnings per share totaled 100,947,000 and
113,014,000 for the quarters ended March 31, 1997 and 1996, respectively.
Cash dividends of $.10 per share of common stock were declared in the
quarters ended March 31, 1997 and 1996. On May 8, 1997, the Company's Board of
Directors approved an increase in the quarterly dividend to $.15 per share on
its common stock, beginning with the June 10, 1997 payment date.
8
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 6 -- 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 3,957,000 shares of common stock
during the first quarter of 1997 for an aggregate cost of $201,622,000. The
aggregate remaining shares authorized for repurchase at March 31, 1997 is
approximately 6.8 million shares.
At March 31, 1997, the Company had 360,000 put options outstanding with an
average strike price of approximately $50.41. The cash received from the sale
of these put options was not significant. The put options, which have
expiration dates in the second 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."
During the first quarter of 1997, the Company issued 733,000 shares of its
common stock as a result of the exercise of stock options.
As further described in Note 11, the Company redeemed its Series B
preferred stock and exercised its early termination right on forward purchase
contracts in the second quarter of 1997.
NOTE 7 -- STOCK OPTIONS
The Company granted each eligible employee 100 stock options on February 6,
1997. This grant is expected to result in the issuance of approximately
1,266,000 stock options at a price of $46.5625. These options will be fully
vested on February 6, 2000 for employees still employed by the Company at that
date.
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 the Company's 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.
9
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 -- FUTURE ACCOUNTING REQUIREMENT
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
(SFAS 128) was issued in February 1997 and must be adopted by the Company on
December 31, 1997. Early adoption is not permitted, however, all prior year
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 period earnings per share,
when restated for SFAS 128, will remain unchanged or will be slightly higher.
If the Company had been permitted to adopt SFAS 128 in the first quarter of
1997, the Company would have reported basic earnings per common share of $.37
and diluted earnings per common share of $.37.
NOTE 11 -- SUBSEQUENT EVENTS
In April 1997, the Company received gross proceeds of $195,530,000 from the
issuance of Liquid Yield Option Notes (LYON(TM)) due in 2017. 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 for 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 cash at the option of the holder on April 15, 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%.
Pursuant to the original terms of its Series B preferred stock (PERCs), the
Company issued 4,446,000 shares of Series A common stock in exchange for all of
the outstanding PERCs on April 2, 1997. As a result, dividend requirements on
the Company's preferred stock outstanding after the April 2, 1997 conversion
will be $24,708,000 for the remainder of 1997 and $32,943,000 for 1998 and
future years.
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.
10
<PAGE>
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
During the first quarter of 1997, the Company continued to improve its
operating results led by the performance of Newspaper Publishing, its largest
business segment. The following table summarizes the Company's consolidated
financial results (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Quarter
----------------------------------
1997 1996 Change
-------- -------- ---------
<S> <C> <C> <C>
Revenues.................................... $773,882 $806,759 (4.1)%
Operating profit............................ 87,540 50,228 74.3
Interest expense, net....................... 9,048 5,451 66.0
Net income.................................. 45,233 26,037 73.7
Preferred dividend requirements............. 10,911 10,911 -
Earnings applicable to common shareholders.. 34,322 15,126 126.9
Primary earnings per share.................. $ .36 $ .14 157.1
</TABLE>
Consolidated operating profit for the first quarter of 1997 rose to $87.5
million from $50.2 million in the first quarter of 1996. The improvement
primarily reflects the strong operating performance of the Newspaper Publishing
segment, which benefited from increased economic strength in the Los Angeles and
Long Island markets and experienced advertising revenue growth at all
newspapers. Lower newsprint expense was another major contributor to the 1997
first quarter results; however, the Company anticipates that newsprint prices
will firm and rise for the balance of the year. In addition, operating
profitability for last year's first quarter was relatively low due to seasonal
losses in the Company's college and scientific publishing businesses which were
sold near year-end 1996. As a result, the Company does not expect year-over-
year comparisons to be as favorable for the remaining quarters of 1997.
In the first quarter of 1997, Times Mirror's consolidated revenues declined
due to the divestitures of college and scientific publishing businesses in the
Professional Information segment.
Earnings per share for the first quarter of 1997 rose to $.36 per share, an
increase of more than 150 percent from $.14 per share for the first quarter of
1996. Earnings applicable to common shareholders, reflecting deductions for
preferred dividend requirements, were $34.3 million in the first quarter of 1997
compared to $15.1 million in the first quarter of 1996.
Net interest expense for the first quarter of 1997 rose to $9.0 million
from $5.5 million in the same prior year quarter due to increased debt levels
and reductions in interest earning investments.
11
<PAGE>
ANALYSIS BY SEGMENT
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
First Quarter
-----------------------------------
1997 1996 Change
-------- -------- ----------
<S> <C> <C> <C>
Revenues
Advertising............................. $391,203 $369,924 5.8%
Circulation............................. 108,465 113,251 (4.2)
Other................................... 14,997 11,761 27.5
-------- -------- ----
$514,665 $494,936 4.0%
======== ======== ====
Operating profit.......................... $ 92,457 $ 50,995 81.3%
======== ======== ====
</TABLE>
Newspaper Publishing revenues were higher in the first quarter of 1997
compared to the same prior year period reflecting increases in national and
classified help-wanted advertising and improved economic conditions in the
Southern California and Long Island, New York markets. Daily circulation gains
were achieved at the Los Angeles Times, Newsday and the Hartford Courant during
the six months ended March 31, 1997, as the newspapers' marketing strategies of
lower pricing and discounts resulted in higher circulation but lower overall
circulation revenues. Daily circulation at The Times rose 47,691, or 4.7
percent, to 1,068,812 during the same period versus the comparable six-month
results for the prior year, as reported to the Audit Bureau of Circulations.
The improvement resulted from the continuing success of The Times' marketing and
promotional campaign launched last year. Newsday reported circulation gains of
4,030 on daily and 3,025 on Sunday, due to improved customer service, 5:30 a.m.
home delivery, a redesigned Sunday newspaper, a new Monday business section,
introduction of credit card billing for home subscribers and active marketing
and promotions of the newspaper.
Segment operating profit increased significantly due to the revenue gains
as well as a substantial year-over-year decline in newsprint expense. For the
first quarter of 1997, newsprint expense, which accounted for more than 15
percent of this segment's operating costs, declined almost 30 percent compared
to the first quarter of 1996.
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
First Quarter
-----------------------------------
1997 1996 Change
-------- -------- ----------
<S> <C> <C> <C>
Revenues................................. $190,862 $237,074 (19.5)%
======== ========
Operating profit......................... $ 17,527 $ 13,161 33.2%
======== ========
</TABLE>
Comparisons of results in the Professional Information segment are heavily
influenced by the change in business mix resulting from the sale of the college
and scientific publishing businesses and the commencement of the Shepard's 50/50
joint venture, which is accounted for on the equity method. The segment's 1997
first quarter operating profit increased, reflecting a sharp reduction in
seasonal losses related to the book publishing businesses which were sold near
year-end 1996, partly offset by the absorption of the costs of a workforce
reduction at Mosby-Year Book. The segment's revenues for the 1997 first quarter
declined largely due to the divestitures. Excluding the revenues of the
recently divested businesses, segment revenues reported in the first quarter of
1997 approximated pro forma segment revenues for the first quarter of 1996.
Professional Information's operating profit does not include the Company's
$2.6 million share of equity income for the Shepard's joint venture, which was
partially offset by an equity loss for MD Consult, an investment in a startup
medical online joint venture. Equity income or losses on investments are
recorded in "Other, net."
12
<PAGE>
MAGAZINE PUBLISHING
Magazine Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
First Quarter
-----------------------------------
1997 1996 Change
-------- -------- ----------
<S> <C> <C> <C>
Revenues................................. $57,876 $63,120 (8.3)%
======= =======
Operating profit......................... $ 2,591 $ 2,963 (12.6)%
======= =======
</TABLE>
Magazine Publishing revenues and operating profit declined in the first
quarter of 1997 compared to the first quarter of 1996, as both advertising and
circulation revenues weakened in 1997 while last year's first quarter benefited
from the issuance of a special edition of Field & Stream and a Golf Magazine
Tour section.
CORPORATE AND OTHER
Corporate and Other revenues and operating loss were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
First Quarter
-----------------------------------
1997 1996 Change
-------- -------- ----------
<S> <C> <C> <C>
Revenues................................. $ 10,682 $ 11,637 (8.2)%
======== ========
Operating loss........................... $(25,035) $(16,891) 48.2%
======== ========
</TABLE>
Corporate and Other for the first quarters of 1997 and 1996 includes the
results of Harry N. Abrams, Incorporated., the Company's art book publisher as
well as the National Journal, Inc., both of which were previously reported in
the Consumer Media segment, which has now been renamed Magazine Publishing. The
Corporate and Other operating loss increased primarily due to information system
conversion costs, as well as losses from these operating businesses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements are funded by its operations.
During the first quarter of 1997, cash generated from operating activities and
proceeds from short-term borrowings were used primarily for common share
repurchases. At March 31, 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 $109
million of commercial paper outstanding at March 31, 1997.
In April 1997, the Company issued Liquid Yield Option Notes (LYON) due in
2017 in a private placement under Rule 144A of the Securities Act of 1933 and
received gross proceeds of $195.5 million. 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
for 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 cash at the option of the
holder on April 15, 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 agreed to file a shelf registration statement with the
Securities and Exchange Commission with respect to the resale of the LYONs and
the Series A common stock issuable upon conversion of the LYONs. The Company
also entered into an interest rate swap agreement for a notional amount of
$170.1 million, 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%.
13
<PAGE>
Pursuant to the original terms of its Series B preferred stock (PERCs), the
Company issued 4.4 million shares of Series A common stock in exchange for all
of the outstanding PERCs on April 2, 1997. As a result, dividend requirements
on the Company's preferred stock outstanding after the April 2, 1997 conversion
will be $24.7 million for the remainder of 1997 and $32.9 million for 1998 and
future years.
In early May 1997, the Company exercised its early termination right on
forward purchase contracts for 3.9 million shares of its PERCs resulting in the
purchase of approximately 2.2 million Series A common shares for an aggregate
cost of $111.5 million.
The following table sets forth certain items from the Statements of
Condensed Consolidated Cash Flows (in millions):
<TABLE>
<CAPTION>
First Quarter
------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net cash provided by continuing operating activities........... $ 30.7 $ 31.5
Capital expenditures .......................................... (22.0) (26.9)
Repurchases of common stock.................................... (201.6) (155.7)
Issuance of debt and securities................................ 109.0 51.2
</TABLE>
Cash generated by continuing operations in the first quarter of 1997 was
slightly lower compared to the first quarter of 1996 as higher operating profit
in 1997 and reduced restructuring expenditures were offset by higher 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.
Capital expenditures during the first quarter of 1997 decreased compared to
the first quarter of 1996 due to fewer office relocations and consolidations.
Capital expenditures for the remainder of 1997 are expected to decrease somewhat
from 1996 levels as capital costs associated with real estate relocations are
expected to lessen.
Total debt at March 31, 1997 rose to $542.7 million from $459.0 million at
December 31, 1996 primarily due to an increase in short-term borrowings. The
proceeds from these borrowings, as well as funds generated from operations and
cash received from the exercise of stock options, were used for share
repurchases. The Company repurchased approximately 4.0 million and 1.9 million
shares of its common stock during the first quarters of 1997 and 1996,
respectively.
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. The remaining aggregate
stock repurchase authorization at March 31, 1997 totaled approximately 6.8
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.
DIVIDENDS
Cash dividends of $.10 per share of common stock were declared for the
first quarters of 1997 and 1996. On May 8, 1997, the Company's Board of
Directors approved an increase in the quarterly dividend to $.15 per share on
its common stock, beginning with the June 10, 1997 payment date.
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.
14
<PAGE>
THE TIMES MIRROR COMPANY
BUSINESS SEGMENT INFORMATION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Newspaper Publishing........................... $514,665 $494,936
Professional Information....................... 190,862 237,074
Magazine Publishing............................ 57,876 63,120
Corporate and Other............................ 10,682 11,637
Intersegment Revenues.......................... (203) (8)
-------- --------
$773,882 $806,759
======== ========
OPERATING PROFIT (LOSS)
Newspaper Publishing........................... $ 92,457 $ 50,995
Professional Information....................... 17,527 13,161
Magazine Publishing............................ 2,591 2,963
Corporate and Other............................ (25,035) (16,891)
-------- --------
$ 87,540 $ 50,228
======== ========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing........................... $ 27,030 $ 26,635
Professional Information....................... 9,303 12,134
Magazine Publishing............................ 1,620 1,630
Corporate and Other............................ 767 465
-------- --------
$ 38,720 $ 40,864
======== ========
CAPITAL EXPENDITURES
Newspaper Publishing........................... $ 11,155 $ 14,637
Professional Information....................... 6,447 11,441
Magazine Publishing............................ 562 287
Corporate and Other............................ 3,852 546
-------- --------
$ 22,016 $ 26,911
======== ========
</TABLE>
_________________
Corporate and Other includes the results of Harry N. Abrams, Incorporated and
National Journal, Inc. previously included in the Consumer Media segment, which
has now been renamed Magazine Publishing.
15
<PAGE>
THE TIMES MIRROR COMPANY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material legal proceedings are pending.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Computation of Earnings Per Share.
12. Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends.
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed for the quarter ended March 31,
1997.
16
<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: May 13, 1997
17
<PAGE>
EXHIBIT 11
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
PRIMARY
Average shares outstanding........................................................... 93,930,692 105,225,121
Dilutive stock options based on the treasury stock method using
average market price................................................................ 2,317,213 *
------------ ------------
Total.............................................................................. 96,247,905 105,225,121
============ ============
Net income........................................................................... $ 45,233 $ 26,037
============ ============
Preferred dividend requirements...................................................... $ 10,911 $ 10,911
============ ============
Earnings available to common shareholders............................................ $ 34,322 $ 15,126
============ ============
Primary earnings per share........................................................... $ .36 $ .14
============ ============
FULLY DILUTED
Average shares outstanding........................................................... 93,930,692 105,225,121
Common shares assumed issued upon conversion of Series B preferred stock............. 4,446,352 7,789,276
Dilutive stock options based on the treasury stock method using market
price at the close of the period, if higher than average market price............... 2,570,031 *
------------ ------------
Total.............................................................................. 100,947,075 113,014,397
============ ============
Net income........................................................................... $ 45,233 $ 26,037
============ ============
Preferred dividend requirements...................................................... $ 8,236 $ 8,236
============ ============
Earnings available to common shareholders............................................ $ 36,997 $ 17,801
============ ============
Fully diluted earnings per share..................................................... $ ** $ **
============ ============
</TABLE>
________________
* Less than 3% dilution
**Antidilutive
<PAGE>
EXHIBIT 12
PAGE 1 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
First Quarter Ended
March 31, 1997
--------------------
<S> <C>
Fixed Charges
Interest expense.................................................................... $10,012
Portion of rents deemed to be interest.............................................. 4,406
Amortization of debt expense........................................................ 121
-------
Total Fixed Charges............................................................... $14,539
=======
Earnings
Income before income taxes.......................................................... $79,365
Fixed charges....................................................................... 14,539
Amortization of capitalized interest................................................ 997
Add: Equity loss from less than 50% owned unconsolidated affiliates................. 1,852
-------
Total Earnings.................................................................... $96,753
=======
Ratio of earnings to fixed charges.................................................. 6.7x
</TABLE>
<PAGE>
EXHIBIT 12
PAGE 2 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31, 1997
---------------------
<S> <C>
Fixed Charges
Interest expense.................................................................... $10,012
Portion of rents deemed to be interest.............................................. 4,406
Amortization of debt expense........................................................ 121
-------
Total Fixed Charges............................................................... $14,539
Preferred Stock Dividend Requirements................................................. 19,145
-------
Fixed Charges and Preferred Stock Dividends......................................... $33,684
=======
Earnings
Income before income taxes.......................................................... $79,365
Fixed charges....................................................................... 14,539
Amortization of capitalized interest................................................ 997
Add: Equity loss from less than 50% owned unconsolidated affiliates................. 1,852
-------
Total Earnings.................................................................... $96,753
=======
Ratio of earnings to fixed charges and preferred stock dividends...................... 2.9x
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 48,990
<SECURITIES> 14,468
<RECEIVABLES> 517,555
<ALLOWANCES> 67,954
<INVENTORY> 100,744
<CURRENT-ASSETS> 718,959
<PP&E> 2,124,987
<DEPRECIATION> 961,299
<TOTAL-ASSETS> 3,303,246
<CURRENT-LIABILITIES> 831,531
<BONDS> 433,693
0
576,379
<COMMON> 93,620
<OTHER-SE> 668,873
<TOTAL-LIABILITY-AND-EQUITY> 3,303,246
<SALES> 773,882
<TOTAL-REVENUES> 773,882
<CGS> 398,408
<TOTAL-COSTS> 398,408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,605
<INTEREST-EXPENSE> 10,012
<INCOME-PRETAX> 79,365
<INCOME-TAX> 34,132
<INCOME-CONTINUING> 45,233
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,233
<EPS-PRIMARY> .36
<EPS-DILUTED> 0<F1>
<FN>
<F1>PER SHARE AMOUNT ON A FULLY DILUTED BASIS HAS BEEN OMITTED AS THE AMOUNT IS
ANTIDILUTIVE IN RELATION TO THE PRIMARY PER SHARE AMOUNT
</FN>
</TABLE>
