<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 1-13492
------------------------
THE TIMES MIRROR COMPANY
<TABLE>
<S> <C>
DELAWARE
STATE OF INCORPORATION 95-4481525
I.R.S. EMPLOYER ID. NO.
</TABLE>
TIMES MIRROR SQUARE
LOS ANGELES, CALIFORNIA 90053
TELEPHONE: (213) 237-3700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Series A Common Stock outstanding at November 6, 1998:
54,324,881, excluding 18,237,864 shares held by subsidiaries of the Registrant;
4,001,067 shares held by TMCT, LLC, representing 80% of the shares held by TMCT,
LLC; 7,877,700 shares held by Eagle New Media Investments, LLC and 2,389,653
shares held as treasury shares.
Number of shares of Series C Common Stock outstanding at November 6, 1998:
25,257,950.
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<PAGE> 2
THE TIMES MIRROR COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Financial information herein, and management's discussion thereof, include
consolidated data for The Times Mirror Company ("Registrant" or "Times Mirror")
and its subsidiaries. Registrant and its subsidiaries are sometimes herein
referred to collectively as the "Company."
2
<PAGE> 3
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ------------------------
1998 1997 1998 1997
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES................................... $ 729,399 $699,067 $2,199,347 $2,090,626
COSTS AND EXPENSES:
Cost of sales............................ 385,249 368,139 1,157,622 1,080,077
Selling, general and administrative
expenses.............................. 260,400 233,218 743,179 715,424
Restructuring and one-time charges....... 80,012 119,709
---------- -------- ---------- ----------
725,661 601,357 2,020,510 1,795,501
OPERATING PROFIT........................... 3,738 97,710 178,837 295,125
Interest expense........................... (20,320) (11,502) (54,680) (27,187)
Interest income............................ 13,872 444 21,549 1,822
Equity income (loss)....................... 1,223 336 (5,865) (798)
Other, net................................. 6,451 3,192 20,877 4,552
---------- -------- ---------- ----------
Income from continuing operations before
income tax provision..................... 4,964 90,180 160,718 273,514
Income tax provision....................... 24,536 36,118 88,488 114,087
---------- -------- ---------- ----------
Income (loss) from continuing operations... (19,572) 54,062 72,230 159,427
Discontinued operations:
Income from operations, net of income
taxes................................. 11,985 12,862 14,645 18,716
Net gain on disposal, net of income
taxes................................. 1,084,136 1,084,136
---------- -------- ---------- ----------
NET INCOME................................. 1,076,549 66,924 1,171,011 178,143
Preferred dividend requirements............ 5,424 7,879 16,272 27,057
---------- -------- ---------- ----------
Earnings applicable to common
shareholders............................. $1,071,125 $ 59,045 $1,154,739 $ 151,086
========== ======== ========== ==========
Basic earnings (loss) per share:
Continuing operations.................... $ (.30) $ .50 $ .64 $ 1.41
Discontinued operations.................. 13.01 .14 12.66 .20
---------- -------- ---------- ----------
Basic earnings per share................... $ 12.71 $ .64 $ 13.30 $ 1.61
========== ======== ========== ==========
Diluted earnings per share:
Continuing operations.................... $ * $ .49 $ .63 $ 1.37
Discontinued operations.................. * .13 12.33 .19
---------- -------- ---------- ----------
Diluted earnings per share................. $ * $ .62 $ 12.96 $ 1.56
========== ======== ========== ==========
Weighted average shares outstanding:
Basic.................................... 84,262 91,847 86,799 94,077
========== ======== ========== ==========
Diluted.................................. 84,262 98,320 89,068 96,886
========== ======== ========== ==========
</TABLE>
- ---------------
* Antidilutive
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 995,459 $ 48,659
Marketable securities..................................... 49,509
Accounts receivable, less allowances for doubtful accounts
and returns of $45,379 and $42,769..................... 347,910 363,252
Inventories............................................... 63,356 44,896
Deferred income taxes..................................... 50,153 58,018
Prepaid expenses.......................................... 38,533 22,081
Net assets of discontinued operations..................... 111,922 427,722
Other current assets...................................... 24,087 36,598
---------- ----------
Total current assets.............................. 1,680,929 1,001,226
Property, plant and equipment, net.......................... 926,741 934,700
Goodwill.................................................... 629,601 502,886
Other intangibles........................................... 96,956 104,550
Deferred charges............................................ 125,284 133,290
Equity investments.......................................... 106,335 101,448
Prepaid pension costs....................................... 404,775 366,807
Investments and other assets................................ 163,839 93,713
---------- ----------
Total assets...................................... $4,134,460 $3,238,620
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current liabilities
Accounts payable.......................................... $ 193,189 $ 246,813
Short-term debt........................................... 254,183 139,067
Employees' compensation................................... 97,750 103,505
Unearned income........................................... 144,863 145,728
Other current liabilities................................. 128,241 105,405
----------- -----------
Total current liabilities......................... 818,226 740,518
Long-term debt.............................................. 919,022 925,404
Deferred income taxes....................................... 350,378 175,187
Other liabilities........................................... 518,637 507,912
----------- -----------
Total liabilities................................. 2,606,263 2,349,021
Common stock subject to put options......................... 37,150 13,600
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 C-1: 381,000 shares authorized, issued and
outstanding........................................... 190,486 190,486
Series C-2: 245,000 shares authorized, issued and
outstanding........................................... 122,550 122,550
Preferred stock, $1 par value; 23,035,000 shares
authorized; no shares issued or outstanding
Common stock, $1 par value:
Series A: 500,000,000 shares authorized; 86,816,000 and
86,552,000 shares issued and outstanding.............. 86,816 86,552
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; 25,274,000 and
25,503,000 shares issued and outstanding.............. 25,274 25,503
Additional paid-in capital................................ 1,236,556 1,253,142
Retained earnings......................................... 1,435,296 384,503
Accumulated other comprehensive income.................... 6,748 12,804
----------- -----------
3,515,510 2,487,324
Less treasury stock at cost:
Series A common stock, 30,993,000 and 24,151,000 shares;
and Series A preferred stock, 735,000 shares........... (2,024,463) (1,611,325)
----------- -----------
Total shareholders' equity........................ 1,491,047 875,999
----------- -----------
Total liabilities and shareholders' equity........ $ 4,134,460 $ 3,238,620
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE TIMES MIRROR COMPANY
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR TO DATE ENDED
SEPTEMBER 30,
-------------------------
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities of continuing
operations............................................. $ 161,480 $ 197,119
Net cash provided by (used in) operating activities of
discontinued operations................................ 45,293 (19,326)
---------- ---------
Net cash provided by operating activities................. 206,773 177,793
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from disposal of Matthew Bender/Shepard's.... 1,616,948
Notes receivable.......................................... (69,120)
Investment in marketable securities....................... (49,509)
Acquisitions, net of cash acquired........................ (194,373) (96,875)
Proceeds from sales of other assets....................... 12,729 114,585
Capital expenditures...................................... (93,758) (71,614)
Capitalization of product costs........................... (6,804) (6,367)
Other, net................................................ (28,806) (2,366)
---------- ---------
Net cash provided by (used in) investing activities of
continuing operations................................. 1,187,307 (62,637)
Net cash used in investing activities of discontinued
operations............................................ (18,962) (43,115)
---------- ---------
Net cash provided by (used in) investing activities.... 1,168,345 (105,752)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock................................ (516,065) (400,086)
Net proceeds from issuance of commercial paper and
short-term
borrowings............................................. 154,478 101,546
Repayments of other debt.................................. (50,356) (1,448)
Dividends paid............................................ (63,585) (66,837)
Proceeds from exercise of stock options................... 51,376 24,505
Exercise of put options................................... (5,800) (6,796)
Net proceeds from issuance of long-term debt.............. 438,568
Contribution to TMCT, LLC................................. (249,266)
Other, net................................................ 1,634 (957)
---------- ---------
Net cash used in financing activities.................. (428,318) (160,771)
Increase (decrease) in cash and cash equivalents............ 946,800 (88,730)
Cash and cash equivalents at beginning of year.............. 48,659 140,224
---------- ---------
Cash and cash equivalents at end of period.................. $ 995,459 $ 51,494
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
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, 1997.
Certain amounts in previously issued financial statements have been
reclassified to conform to the 1998 presentation. Financial information in the
accompanying notes to Condensed Consolidated Financial Statements excludes
discontinued operations, except where noted.
NOTE 2 -- COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
130 establishes new rules for the reporting of comprehensive income and its
components; however, the adoption of SFAS 130 had no impact on the Company's net
income or shareholders' equity. SFAS 130 requires unrealized gains or losses on
the Company's available-for-sale securities and foreign currency translation
adjustments to be included in other comprehensive income. Such items were
reported in shareholders' equity prior to the adoption of SFAS 130. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130.
Total comprehensive income amounted to $1,071,598,000 and $66,343,000 for
the third quarters of 1998 and 1997, respectively, and $1,164,955,000 and
$136,473,000 for the year to date periods ended September 30, 1998 and 1997,
respectively. In both 1998 and 1997, comprehensive income differs from net
income primarily due to realized gains recognized in net income, which were
previously included as part of comprehensive income.
NOTE 3 -- DISCONTINUED OPERATIONS
The Company signed definitive agreements with Reed Elsevier plc on April
27, 1998 for the disposition of Matthew Bender & Company, Incorporated (Matthew
Bender), the Company's legal publisher, in a tax-free reorganization and the
sale of Times Mirror's 50% ownership interest in Shepard's. The two transactions
were valued at $1.65 billion in the aggregate and were completed on July 31,
1998. The disposition of Matthew Bender was accomplished through the merger of
an affiliate of Reed Elsevier with and into Matthew Bender with Matthew Bender
as the surviving corporation in the merger. As a result of the merger, TMD,
Inc., a wholly owned subsidiary of Times Mirror, received all of the issued and
outstanding common stock of CBM Acquisition Parent Co. (MB Parent). MB Parent is
a holding company that owns controlling voting preferred stock of Matthew Bender
with a stated value of $61,616,000 and participating stock of Matthew Bender. MB
Parent is also the sole member of Eagle New Media Investments, LLC (Eagle New
Media) (formerly Liberty Bell I, LLC). Affiliates of Reed Elsevier own voting
preferred stock of MB Parent with a stated value of $68,750,000 which affords
them voting control over MB Parent, subject to certain rights held by Times
Mirror with respect to Eagle New Media. Concurrently, with the closing of the
merger, the Company became the sole manager of Eagle New Media and controls its
operations and assets. At September 30, 1998, the assets of Eagle New Media were
$949,599,000 of cash and cash equivalents, $384,812,000 (6,528,000 shares)
7
<PAGE> 8
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
of Times Mirror stock, $49,509,000 of marketable securities and $2,697,000 of
other assets. The consolidated financial statements of the Company include the
accounts of Eagle New Media.
The disposition of the Company's 50% interest in Shepard's was also
consummated on July 31, 1998 by a transfer of the respective partnership
interests owned by two subsidiaries of the Company to affiliates of Reed
Elsevier for cash consideration of $274,650,000.
The Company recorded a net gain on these two transactions in the amount of
$1,108,452,000, net of expenses and $163,585,000 of deferred taxes.
The Company signed definitive agreements with Harcourt General, Inc. on May
6, 1998, which were amended on October 8, 1998, for the disposition of Mosby,
Inc. (Mosby), the Company's health science/medical publisher, in a tax-free
reorganization. The transaction, which will result in a gain in the fourth
quarter, was valued at $415,000,000 and was completed on October 9, 1998. The
disposition of Mosby was accomplished through the merger of an affiliate of
Harcourt General, Inc. with and into Mosby, with Mosby as the surviving
corporation in the merger. As a result of the merger, the Company received all
of the issued and outstanding common stock of Mosby Parent Corp. (Mosby Parent).
Mosby Parent is a holding company that owns controlling voting preferred stock
of Mosby with a stated value of $48,333,000 and participating stock of Mosby.
Mosby Parent is also the sole member of Eagle Publishing Investments, LLC (Eagle
Publishing). An affiliate of Harcourt General, Inc. owns voting preferred stock
of Mosby Parent with a stated value of $50,000,000 which affords it voting
control over Mosby Parent, subject to certain rights held by the Company with
respect to Eagle Publishing. Concurrently with the closing of the merger, the
Company became the sole manager of Eagle Publishing and controls its operations
and assets. At the time of closing, the principal assets of Eagle Publishing
were $415,000,000 of cash and cash equivalents. The consolidated financial
statements of the Company will include the accounts of Eagle Publishing.
On August 26, 1998, the Company determined that Apartment Search, Inc., its
apartment location business, would be discontinued. The Company anticipates
selling the business in the first half of 1999 and has recorded an estimated
loss on disposal including a provision for operating losses during the phase-out
period. The total estimated loss is included in discontinued operations in net
gain on disposal, net of income taxes.
Prior year financial statements have been restated for discontinued
operations. Results for discontinued operations for the periods shown primarily
include Matthew Bender, Mosby, the Shepard's joint venture and Apartment Search,
Inc. Income from discontinued operations is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenues................................... $ 88,343 $115,411 $ 278,156 $309,547
---------- -------- ---------- --------
Income before income tax provision......... 14,328 21,584 21,331 31,401
Income tax provision....................... 2,343 8,722 6,686 12,685
---------- -------- ---------- --------
Income from discontinued operations........ $ 11,985 $ 12,862 $ 14,645 $ 18,716
========== ======== ========== ========
Net gain on disposal, net of income
taxes.................................... $1,084,136 $1,084,136
========== ==========
</TABLE>
8
<PAGE> 9
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The remaining assets and liabilities of discontinued operations, primarily
relating to Mosby which was divested on October 9, 1998, have been classified in
the condensed consolidated balance sheets as net assets of discontinued
operations and consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Accounts receivable, net.................................... $ 39,055 $138,932
Other current assets........................................ 53,732 67,039
Property, plant and equipment, net.......................... 25,406 62,730
Equity investments.......................................... 2,548 249,123
Other assets................................................ 76,521 112,655
-------- --------
Total assets........................................... 197,262 630,479
Current liabilities......................................... 81,166 196,796
Non-current liabilities..................................... 4,174 5,961
-------- --------
Total liabilities...................................... 85,340 202,757
-------- --------
Net assets of discontinued operations.................. $111,922 $427,722
======== ========
</TABLE>
NOTE 4 -- RESTRUCTURING AND ONE-TIME CHARGES
In the second quarter of 1998, the Company, in anticipation of the expected
impact of divestitures, began a comprehensive review of its business
configurations, operating systems and other investments to determine
economically attractive actions it could take to prepare for future growth. The
1998 third quarter restructuring, one-time and other special charges represent
additional charges under this program, which will continue through the balance
of the year. Total restructuring and one-time charges of $80,012,000 primarily
consist of $49,727,000 of goodwill impairment which is nondeductible for tax
purposes, $8,567,000 for office closures and $7,601,000 for the buyout of
magazine business contracts. In aggregate, the Company expects restructuring,
one-time and other special charges in 1998 to be between $200,000,000 and
$225,000,000 and anticipates future annual expense reductions of approximately
$25,000,000 beginning in 1999.
The balance sheet classification of the remaining restructuring liabilities
is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Other current liabilities:
1995 Restructuring....................................... $16,243 $18,534
1996 Restructuring....................................... 128
1998 Restructuring....................................... 26,681
Other liabilities:
1995 Restructuring....................................... 16,695 30,304
1998 Restructuring....................................... 11,384
------- -------
$71,003 $48,966
======= =======
</TABLE>
The restructuring liabilities relate primarily to lease payments, severance
costs and contract buyout costs. During the year to date ended September 30,
1998, cash spent on severance payments related to restructuring efforts totaled
$3,533,000. At September 30, 1998, the remaining liability for severance costs
aggregated $6,019,000.
9
<PAGE> 10
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5 -- DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Short-term debt:
Commercial paper at weighted average interest rates of
5.6% and 5.9%.......................................... $240,246 $ 86,448
Notes payable at 6.125% due January 2, 1998............... 39,209
Current maturities of long-term debt...................... 7,518 7,671
Other..................................................... 6,419 5,739
-------- --------
Total short-term debt.................................. $254,183 $139,067
======== ========
Long-term debt:
6.61% Debentures due September 15, 2027, net of
unamortized discount of $99 and $101................... $249,901 $249,899
4.75% Liquid Yield Option Notes due 2017, net of
unamortized discount of $290,611 and $297,845.......... 209,389 202,155
7 1/4% Debentures due March 1, 2013....................... 148,215 148,215
7 1/4% Debentures due November 15, 2096, net of
unamortized discount of $561 and $565.................. 147,439 147,435
7 1/2% Debentures due July 1, 2023........................ 98,750 98,750
Property financing obligation expiring on August 8, 2009,
net of unamortized discount of $159,975 and $165,353,
with an effective interest rate of 4.3%................ 48,986 54,743
4 1/4% Premium Equity Participating Securities due March
15, 2001; 1,088,100 securities stated at current
maturity value......................................... 23,802 31,809
Others at various interest rates, maturing through
2001................................................... 58 69
-------- --------
926,540 933,075
Less current maturities..................................... (7,518) (7,671)
-------- --------
Total long-term debt................................... $919,022 $925,404
======== ========
</TABLE>
The Company has interest rate swap agreements on the 7 1/2% Debentures and
the Liquid Yield Option Notes (LYON(TM)) for notional amounts of $100,000,000
and $170,111,000, respectively. These swaps effectively convert a portion of the
Company's long-term fixed rate debt to a variable rate obligation based on
LIBOR. As such, these interest rate swaps converted the weighted average
interest rate for these instruments from 5.6% to 4.0% for the year to date ended
September 30, 1998.
The 4 1/4% Premium Equity Participating Securities (PEPS) hedge 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 in accumulated other comprehensive income, net of
applicable income taxes. On September 28, 1998, the Company sold 216,900 shares
of Netscape stock and purchased an equal proportion of its PEPS in the open
market. The two transactions resulted in a gain of $7,744,000, previously
recorded as a separate component of shareholders' equity. At September 30, 1998
and December 31, 1997, the fair market value of Netscape common stock was
$21.875 and $24.375 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.
10
<PAGE> 11
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
At September 30, 1998, the Company had a $400,000,000 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 $240,246,000 of commercial paper
outstanding at September 30, 1998 under this credit facility.
At September 30, 1998, the Company had an uncommitted bank line of credit
which provides for unsecured borrowings up to $250,000,000 of which there were
no amounts outstanding.
NOTE 6 -- EARNINGS AND DIVIDENDS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share from continuing operations (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations........ $(19,572) $54,062 $72,230 $159,427
Preferred dividends............................. 5,424 7,879 16,272 27,057
-------- ------- ------- --------
Earnings (loss) applicable to common
shareholders for basic earnings per share.... (24,996) 46,183 55,958 132,370
LYONs interest expense, net of tax.............. 1,376
Convertible preferred stock, Series C-2......... 395 395
-------- ------- ------- --------
Earnings (loss) applicable to common
shareholders for earnings per share.......... $(24,996) $47,954 $55,958 $132,765
======== ======= ======= ========
Shares:
Weighted average shares for basic earnings per
share........................................ 84,262 91,847 86,799 94,077
Effect of dilutive securities:
Stock options................................ 2,258 2,269 2,371
Convertible preferred stock, Series C-2...... 1,301 438
LYONs convertible debt....................... 2,914
-------- ------- ------- --------
Adjusted weighted average shares for diluted
earnings per share.............................. 84,262 98,320 89,068 96,886
======== ======= ======= ========
Basic earnings (loss) per share from continuing
operations...................................... $ (.30) $ .50 $ .64 $ 1.41
======== ======= ======= ========
Diluted earnings per share from continuing
operations...................................... * $ .49 $ .63 $ 1.37
======== ======= ======= ========
</TABLE>
- ---------------
* Antidilutive
The Company has certain convertible securities which are not included in
the calculation of diluted earnings per share because the effects are
antidilutive.
Cash dividends of $.18 and $.15 per share of common stock were declared for
the third quarters of 1998 and 1997, respectively, and $.54 and $.40 per share
for the year to date ended September 30, 1998 and 1997, respectively.
NOTE 7 -- CAPITAL STOCK AND STOCK REPURCHASE PROGRAM
At September 30, 1998, the Company had 650,000 put options outstanding with
an average strike price of approximately $57.00. The put options, which have
various expiration dates in the second half of 1998, entitle the holder to sell
shares of Times Mirror common stock to the Company at the strike price on the
expiration
11
<PAGE> 12
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
date of the put option. The potential obligation under these put options has
been transferred from shareholders' equity to "Common stock subject to put
options."
The Company's stock repurchase program, which includes the issuance of put
options from time to time, is described in Note 13 to the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. The Company and its affiliates purchased 8,720,000 shares of
Series A common stock during the year to date ended September 30, 1998 for an
aggregate cost of $522,157,000. Included in the 8,720,000 shares are 6,528,000
shares of Series A common stock purchased by the Company's affiliate, Eagle New
Media. The Company believes that the purchase of shares of its common stock is
an attractive investment for Eagle New Media which will also enhance Times
Mirror shareholder value as well as offset dilution from shares of common stock
issued under the Company's stock-based employee compensation and benefit
programs.
On July 27, 1998, the Company entered into a forward purchase contract to
purchase 2,000,000 shares of Series A common stock at a price of $61.50. This
contract, which is due to mature in the fourth quarter 1998, may, at the option
of the Company, be physically settled with shares of Series A common stock or
settled on a net cash or net share basis over a period that may continue into
early 1999. Purchases by the Company and its affiliates are expected to be made
in the open market or in private transactions, depending on market conditions,
and may be discontinued at any time.
NOTE 8 -- STOCK OPTIONS
During the year to date ended September 30, 1998, the Company issued
1,881,000 shares of its common stock as a result of the exercise of stock
options.
NOTE 9 -- 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) an increase in expenses related to new initiatives
and product improvement efforts in the flight information and consumer health
information operating units; (e) unfavorable foreign currency fluctuations; and
(f) 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 10 -- 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> 13
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 11 -- ACQUISITION
On April 30, 1998, the Company acquired the Los Angeles area business of EZ
Buy & EZ Sell Recycler Corporation (Recycler), consisting primarily of the
Recycler publications in the Los Angeles, Orange, Riverside, San Bernardino and
Ventura counties and a portion of Santa Barbara county for $188,696,000. The
Company accounted for this acquisition under the purchase method with the
results of operations for Recycler included in the financial statements of Times
Mirror from the date of acquisition. A significant portion of the purchase price
was allocated to intangible assets, primarily goodwill. The Company also
invested in preferred stock and provided a term loan to Target Media Partners, a
new entity which owns all of the non-Los Angeles area assets of Recycler, for a
total amount of $34,800,000.
NOTE 12 -- FUTURE ACCOUNTING REQUIREMENT
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133)
which is required to be adopted in years beginning after June 15, 1999.
Management does not anticipate that the adoption of SFAS 133 will have a
significant effect on earnings or the financial position of the Company.
13
<PAGE> 14
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
In the third quarter of 1998, Times Mirror reported net income of $1.08
billion, or $12.71 per share, compared with $66.9 million, or $.62 per share,
for the prior year's third quarter. The results reflect:
- A $1.11 billion gain on the disposition of the legal publishing
businesses;
- Pretax charges of $80.0 million, incurred in a continuation of the
Company's restructuring program;
- Additional pretax special charges of $14.0 million at the Company's
training and consumer health businesses that did not qualify for
accounting classification as restructuring charges;
- A loss of $19.6 million from continuing operations; and
- Income from discontinued operations of $12.0 million.
On July 31, 1998, the Company completed the divestiture of Matthew Bender &
Company, Incorporated and its 50% ownership in legal citation provider Shepard's
to an affiliate of Reed Elsevier in a transaction valued at $1.65 billion.
Subsequent to the end of the third quarter, on October 9, 1998, the Company
completed the divestiture of Mosby, Inc., its health science and medical
publisher, to Harcourt General, Inc. in a transaction valued at $415.0 million.
On August 26, 1998, the Company determined that Apartment Search, Inc., its
apartment location business, would be discontinued. The Company anticipates
selling the business in the first half of 1999 and has recorded an estimated
loss on disposal including a provision for operating losses during the phase-out
period. The total estimated loss is included in discontinued operations in net
gain on disposal, net of income taxes. Results of discontinued operations
primarily include Matthew Bender, Mosby, the Shepard's joint venture and
Apartment Search, Inc.
For the third quarter, restructuring, one-time and other special charges
totaled $94.0 million. In the fourth quarter, the Company's restructuring review
will continue, with the largest steps expected to be taken at the Los Angeles
Times. Overall, the Company expects total pretax charges related to the review
program to be between $200 million and $225 million, and anticipates future
annual expense reductions of approximately $25 million, beginning in 1999.
Share repurchase activity continued with a total of 6.6 million Series A
common shares acquired during the third quarter.
14
<PAGE> 15
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes the Company's consolidated financial results
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ------------------------
1998 1997 1998 1997
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues........................... $ 729,399 $699,067 $2,199,347 $2,090,626
Restructuring and one-time
charges.......................... 80,012 119,709
Operating profit................... 3,738 97,710 178,837 295,125
Interest expense, net.............. (6,448) (11,058) (33,131) (25,365)
Other, net......................... 7,674 3,528 15,012 3,754
Income (loss) from continuing
operations, net of tax........... (19,572) 54,062 72,230 159,427
Discontinued operations:
Income from operations, net of
income taxes.................. 11,985 12,862 14,645 18,716
Net gain on disposal, net of
income taxes.................. 1,084,136 1,084,136
Net income......................... 1,076,549 66,924 1,171,011 178,143
Preferred dividend requirements.... 5,424 7,879 16,272 27,057
Earnings applicable to common
shareholders..................... $1,071,125 $ 59,045 $1,154,739 $ 151,086
Basic earnings (loss) per share:
Continuing operations............ $ (.30) $ .50 $ .64 $ 1.41
Discontinued operations.......... 13.01 .14 12.66 .20
---------- -------- ---------- ----------
Basic earnings per share........... $ 12.71 $ .64 $ 13.30 $ 1.61
========== ======== ========== ==========
Diluted earnings per share:
Continuing operations............ $ * $ .49 $ .63 $ 1.37
Discontinued operations.......... * .13 12.33 .19
---------- -------- ---------- ----------
Diluted earnings per share......... $ * $ .62 $ 12.96 $ 1.56
========== ======== ========== ==========
</TABLE>
- ---------------
* Antidilutive
Revenue growth continued in the third quarter of 1998, increasing by 4.3%
over the same period last year. The rate of growth slowed from the second
quarter, reflecting modest weakening in certain markets and advertising
categories.
Consolidated operating profit excluding restructuring, one-time and other
special charges for the 1998 third quarter totaled $96.2 million, essentially
level with the 1997 third quarter. A third quarter operating profit decline in
Newspaper Publishing and Professional Information was offset by improvements in
Magazine Publishing, as well as reduced expense levels in the Corporate and
Other segment. Restructuring, one-time and other special charges totaled $92.5
million in the quarter, reducing operating profit from continuing operations to
$3.7 million. For the year to date ended September 30, 1998, consolidated
operating profit excluding restructuring, one-time and other special charges was
$311.0 million, an increase of $15.9 million, or 5.4%, compared to the same
prior year period.
Earnings per share for 1998 benefited principally from the gain on
divestitures, as well as from lower preferred dividend requirements and a
reduction in average shares outstanding. Preferred dividend require-
15
<PAGE> 16
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ments in 1998 declined due to the Company's redemption of its Series B preferred
stock and a recapitalization in 1997.
Net interest expense for the third quarter declined due to an increase in
interest income, which is expected to continue throughout the balance of 1998.
For the year to date ended September 30, 1998 net interest expense was higher
than the prior year period primarily due to increased debt levels attributable
to common stock repurchases, new acquisitions and the recapitalization in the
third quarter of 1997.
ANALYSIS BY SEGMENT
The following sections discuss the revenues and operating results of the
Company's principal lines of business, both including and excluding the 1998
restructuring, one-time and other special charges of $94.0 million and $133.7
million for the third quarter 1998 and year to date September 30, 1998,
respectively. All comments, except where noted, apply to both the third quarter
and the year to date ended September 30, 1998 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 ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- --------------------------------
1998 1997 CHANGE 1998 1997 CHANGE
-------- -------- ------ ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Advertising.................. $427,807 $403,947 5.9% $1,298,242 $1,215,025 6.8%
Circulation.................. 108,290 107,694 0.6 324,452 325,695 (0.4)
Other........................ 20,507 13,321 53.9 62,562 38,712 61.6
-------- -------- ---------- ----------
$556,604 $524,962 6.0% $1,685,256 $1,579,432 6.7%
======== ======== ========== ==========
Operating profit............... $ 80,511 $ 90,350 (10.9)% $ 255,924 $ 300,909 (14.9)%
======== ======== ========== ==========
Operating profit excluding
restructuring and one-time
charges...................... $ 85,236 $ 90,350 (5.7)% $ 295,499 $ 300,909 (1.8)%
======== ======== ========== ==========
</TABLE>
For the 1998 third quarter, Newspaper Publishing operating profit,
excluding restructuring and one-time charges, was $85.2 million, a decline of
5.7% from $90.4 million in the prior year's quarter. Strong operating
performance at the Eastern Newspapers was more than offset by a substantial
year-to-year decline in operating profit at the Los Angeles Times, reflecting
increased expenses in anticipation of advertising revenue growth that did not
materialize in the period. Classified help-wanted advertising at The Times has
remained below last year and below expectations, particularly in the engineering
and technology categories. In addition, the operating profit decline reflects
higher newsprint expense and ongoing initiatives, particularly at the Los
Angeles Times, to generate volume growth. Including restructuring and one-time
charges of $4.7 million (including asset write-offs and severance-related
costs), Newspaper Publishing operating profit was $80.5 million in the 1998
third quarter.
In the 1998 third quarter, revenues for the Newspaper Publishing segment
rose 6.0% to $556.6 million, compared with $525.0 million in the third quarter
of 1997, reflecting advertising growth at the Eastern Newspapers as well as
acquisitions. Excluding recent acquisitions, total revenues rose 1.8 %.
Advertising revenues for the third quarter of 1998 increased 5.9% to $427.8
million from last year's $403.9 million. Advertising revenues rose 4.8% at the
Los Angeles Times and 7.1% at the Eastern Newspapers.
16
<PAGE> 17
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Excluding recent acquisitions, total advertising revenues rose 2.3%, with the
Los Angeles Times increasing by 0.5% and the Eastern Newspapers by 4.3%.
Newsprint expense rose 9.0% in the 1998 third quarter, with average
newsprint prices up approximately 4.0% and circulation and advertising volume
gains driving a 3.9% increase in consumption. Excluding newsprint and expenses
of recently acquired operations, all other costs rose 3.0% in the 1998 third
quarter -- up 4.6% at the Los Angeles Times and down 1.2% at the Eastern
Newspapers.
Total circulation averages for Times Mirror's Newspaper Publishing segment
for the six-month period ended September 30, 1998, as reported by the Company to
the Audit Bureau of Circulations, were 2,335,767 daily, an increase of 22,265,
or 1.0%, and 3,043,004 Sunday, an increase of 3,550, or 0.1%. At the Los Angeles
Times, average daily circulation was 1,067,540, an increase of 17,364, or 1.7%,
and Sunday, 1,361,201, basically even with the level reported for the six-month
period ended September 30, 1997. At Newsday, average daily circulation was
572,444, an increase of 3,603, or 0.6%, and Sunday was 671,214, an increase of
6,226, or 0.9%.
For the nine months ended September 30, 1998, Newspaper Publishing
operating profit excluding restructuring charges was $295.5 million, compared to
$300.9 million for the prior year. Including restructuring charges of $39.6
million (including contract buyout costs, asset write-offs and severance-related
costs), operating profit for the nine months ended September 30, 1998 was $255.9
million. Revenues for the nine months ended September 30, 1998, rose 6.7% to
$1.69 billion compared with $1.58 billion in the prior year.
Professional Information
Professional Information revenues and operating profit were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1998 1997 CHANGE 1998 1997 CHANGE
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $106,512 $104,880 1.6% $322,295 $306,821 5.0%
======== ======== ======== ========
Operating profit (loss)........... $(33,970) $ 19,137 (100+)% $ (4,808) $ 45,962 (100+)%
======== ======== ======== ========
Operating profit excluding
restructuring, one-time and
other special charges........... $ 18,744 $ 19,137 (2.1)% $ 52,753 $ 45,962 14.8%
======== ======== ======== ========
</TABLE>
The Professional Information segment's 1998 third quarter results reflect
the discontinuation of Matthew Bender/Shepard's and Mosby and prior year results
have been restated accordingly. The segment's 1998 third quarter operating
profit excluding restructuring, one-time and other special charges was $18.7
million, a decrease of 2.1% from the prior year's quarter. Including
restructuring, one-time and other special charges of $54.2 million (of which
$1.5 million was included in Other, net), Professional Information's operating
loss was $34.0 million in the 1998 third quarter. The restructuring and one-time
charges of $40.2 million primarily reflect goodwill impairment and facility
closures. The special charges of $14.0 million are related to product
development and other asset write-offs largely at AchieveGlobal and StayWell.
The Company anticipates related future annual expense reductions of
approximately $6 million, beginning in 1999, from both sets of charges.
The segment's 1998 third quarter revenues from continuing operations were
$106.5 million, compared with $104.9 million in the prior year.
For the nine months ended September 30, 1998, operating profit excluding
restructuring, one-time and other special charges was $52.8 million, an increase
of $6.8 million, or 14.8%, over the results in the same period in the prior
year. The increase is primarily due to a decrease in operating expenses at
StayWell and an
17
<PAGE> 18
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
increase in revenue both at StayWell and Allen Communication. Professional
Information's operating loss was $4.8 million, including restructuring, one-time
and other special charges of $59.1 million, of which $14.0 million represents
those amounts not qualifying for accounting classification as restructuring
charges. Included in this amount is $1.5 million which was reported in Other,
net. For the nine months ended September 30, 1998, Professional Information's
revenues from continuing operations were $322.3 million compared with $306.8
million in the prior year.
Magazine Publishing
Magazine Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1998 1997 CHANGE 1998 1997 CHANGE
-------- ------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $ 65,828 $65,974 (0.2)% $191,096 $183,361 4.2%
======== ======= ======== ========
Operating profit (loss).......... $(21,233) $ 5,491 (100+)% $(19,503) $ 13,350 (100+)%
======== ======= ======== ========
Operating profit excluding
restructuring and one-time
charges........................ $ 7,839 $ 5,491 42.8% $ 9,569 $ 13,350 (28.3)%
======== ======= ======== ========
</TABLE>
The Magazine Publishing segment reported 1998 third quarter operating
profit, excluding restructuring charges, of $7.8 million, an increase of 42.8%,
from $5.5 million in the prior year primarily due to a decrease in circulation
costs as compared to the prior year's quarter. Including restructuring and
one-time charges of $29.1 million, the 1998 third quarter operating loss was
$21.2 million. The restructuring charges largely reflect goodwill impairment for
two titles and the Company anticipates related future annual expense reductions
of approximately $1 million, beginning in 1999. The 1998 third quarter revenues
were $65.8 million, compared with $66.0 million in the prior year.
For the nine months ended September 30, 1998, Magazine Publishing revenues
were $191.1 million compared with $183.4 million in the prior year. Magazine
Publishing operating profit for the nine months ended September 30, 1998,
excluding restructuring and one-time charges, was $9.6 million. Including $29.1
million of restructuring and one-time charges, the operating loss was $19.5
million. The decrease in operating profit is due to ongoing investment in the
relaunch of The Sporting News, higher paper costs and expenses related to new
acquisitions.
Corporate and Other
Corporate and Other revenues and operating loss were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1998 1997 CHANGE 1998 1997 CHANGE
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 289 $ 3,323 (91.3)% $ 700 $ 21,451 (96.7)%
======== ======== ======== ========
Operating loss..................... $(21,570) $(17,268) 24.9% $(52,776) $(65,096) (18.9)%
======== ======== ======== ========
Operating loss excluding
restructuring and one-time
charges.......................... $(15,573) $(17,268) (9.8)% $(46,779) $(65,096) (28.1)%
======== ======== ======== ========
</TABLE>
The Corporate and Other segment reported a 1998 third quarter operating
loss of $15.6 million, excluding $6.0 million restructuring and one-time
charges, compared with a loss of $17.3 million for the prior year's quarter.
18
<PAGE> 19
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Revenues for the 1998 third quarter are lower compared to the prior year
due to the divestiture of National Journal during the latter part of 1997. For
year to date ended September 30, 1998, revenues declined due to the disposition
of National Journal and Harry N. Abrams, Inc. Operating loss excluding
restructuring and one-time charges is lower for the third quarter and year to
date ended September 30, 1998 primarily due to lower employee benefit and
information systems costs.
OTHER INCOME
On September 28, 1998, the Company sold 216,900 shares of its holdings in
Netscape Communications Corporation (Netscape) stock and purchased an equal
proportion of its 4 1/4% Premium Equity Participating Securities (PEPS)
obligation in the open market. The PEPS hedge a significant portion of the
Company's investment in Netscape. A $7.7 million gain, previously included as a
separate component of shareholders' equity, was recognized on these two
transactions. Such transactions may continue from time to time in the future.
For the third quarter and year to date ended September 30, 1998, the
Company had gains on the disposition of incidental properties which were
partially offset by equity losses related to certain of its new media
initiatives.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements are funded primarily by its
operations. For the year to date ended September 30, 1998, cash generated from
operating activities and proceeds from borrowings have been used primarily to
fund share repurchases and acquisitions.
At September 30, 1998, 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 $240.2 million of
commercial paper outstanding at September 30, 1998 under this credit facility.
During the second quarter of 1998, the Company entered into an uncommitted
bank line of credit which provides for unsecured borrowings up to $250 million
of which there were no amounts outstanding at September 30, 1998.
Acquisition and Dispositions
On April 30, 1998, the Company acquired the Los Angeles area business of EZ
Buy & EZ Sell Recycler Corporation (Recycler), consisting primarily of the
Recycler publications in the Los Angeles, Orange, Riverside, San Bernardino and
Ventura counties and a portion of Santa Barbara county for $188.7 million. The
Company also invested in preferred stock and provided a term loan to Target
Media Partners, a new entity that owns all of the non-Los Angeles area assets of
Recycler for a total amount of $34.8 million.
On July 31, 1998, the Company completed the divestiture of Matthew Bender
in a tax-free reorganization and the sale of the Company's 50% ownership
interest in Shepard's to Reed Elsevier plc. The two transactions were valued at
$1.65 billion in the aggregate. Proceeds from the sale of Shepard's were used to
pay down commercial paper and short-term borrowings of $222.4 million.
Concurrently with the closing of the Matthew Bender transaction, the Company
became the sole manager of Eagle New Media Investments, LLC (Eagle New Media)
(formerly Liberty Bell I, LLC). At September 30, 1998, the principal assets of
Eagle New Media were $949.6 million of cash and cash equivalents, $384.8 million
of Times Mirror stock and $49.5 million of marketable securities. On October 9,
1998, the Company completed the divestiture of Mosby, Inc. to Harcourt General,
Inc. in a transaction valued at $415.0 million and will record a gain in the
fourth quarter. Concurrently with the closing of the Mosby, Inc. transaction,
the Company became the sole manager
19
<PAGE> 20
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
of Eagle Publishing Investments, LLC (Eagle Publishing) of which the principal
assets were $415.0 million of cash and cash equivalents. While the Company
believes that the Matthew Bender and Mosby transactions were completed on a
tax-free basis, this position may be subject to review by the Internal Revenue
Service. The Company intends to deploy the assets of both LLCs to finance
acquisitions and investments, including purchases of the Company's common stock,
and does not intend to use those funds for the Company's general working capital
purposes. For financial reporting purposes, Eagle New Media and Eagle Publishing
are consolidated with the financial results of the Company.
Common Share Repurchases
Share repurchases continued during the third quarter resulting in an
additional reduction of 6.6 million Series A common shares through open market
transactions, accelerated repurchases and purchases by an affiliated limited
liability company. The Company and its affiliates purchased 8.7 million and 7.9
million shares of its Series A common stock during the year to date periods
ended September 30, 1998 and 1997, respectively.
Included in the 1998 purchases are 6.5 million shares of Series A common
stock acquired by Eagle New Media. The Company believes that the purchase of
shares of its common stock is an attractive investment for Eagle New Media which
will also enhance Times Mirror shareholder value as well as offset dilution from
shares of common stock issued under the Company's stock-based employee
compensation and benefit programs. Also in the third quarter, on July 27, 1998,
as part of its share repurchase efforts, the Company entered into a forward
purchase agreement with respect to 2.0 million shares of Series A common stock
at a price of $61.50. This contract, which is due to mature in the fourth
quarter of 1998, may, at the Company's option, be physically settled with Series
A common stock or settled on a net cash or net share basis over a period that
may continue into early 1999. Purchases by the Company and its affiliates 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. At
September 30, 1998, on a consolidated basis for financial reporting purposes,
the actual shares of common stock outstanding totaled 81.1 million compared with
88.5 million at September 30, 1997.
Cash Flow
The following table sets forth certain items from the Statements of
Condensed Consolidated Cash Flows (dollars in millions):
<TABLE>
<CAPTION>
YEAR TO DATE ENDED
SEPTEMBER 30,
-------------------
1998 1997
-------- -------
<S> <C> <C>
Net cash provided by operating activities of continuing
operations................................................ $ 161.5 $ 197.1
Net proceeds from disposal of Matthew Bender/Shepard's...... 1,616.9
Acquisitions, net of cash acquired.......................... (194.4) (96.9)
Capital expenditures........................................ (93.8) (71.6)
Repurchase of common stock, including exercise of put
options................................................... (521.9) (406.9)
Net issuance of commercial paper, short-term borrowings and
long-term debt............................................ 154.5 540.1
</TABLE>
Cash generated by operating activities of continuing operations for the
year to date ended September 30, 1998 was lower compared to the same period in
1997 due to higher interest payments and restructuring expenditures, as well as
lower operating profit which was partially offset by a reduction in tax
payments. Additionally, inventory levels rose with the purchase of newsprint in
anticipation of fourth quarter newsprint price increases and lower consumption
than originally expected.
20
<PAGE> 21
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Capital expenditures for the year to date ended September 30, 1998 were
higher compared to the same period in 1997 due primarily to investments for
upgrades and enhancements in the Newspaper Publishing segment. Capital
expenditures for 1998 are expected to be higher than the 1997 levels due to the
Company's continuing investments for future growth, particularly in the
Newspaper Publishing segment.
Total debt at September 30, 1998 rose to $1.17 billion from $1.06 billion
at December 31, 1997 primarily due to the issuance of commercial paper.
DIVIDENDS
Cash dividends of $.18 and $.15 per share of common stock were declared for
the third quarter of 1998 and 1997, respectively, and $.54 and $.40 per share
for the year to date ended September 30, 1998 and 1997, respectively.
IMPACT OF YEAR 2000
Computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Company has instituted a comprehensive program to remediate potential
Year 2000 impacts. This program involves the following phases: inventory,
assessment/planning, remediation, contingency planning and testing. To date, the
Company has substantially completed the inventory and assessment/planning phases
and expects to fully complete these phases by the first quarter of 1999. The
Company has commenced remediation of its critical systems and plans to complete
this phase no later than mid-1999. The Company's critical systems are
applications or processes that are required for the continuation of the
Company's business and include both information technology and non-information
technology systems. Contingency plans with respect to critical systems and
critical suppliers will be developed during the second and third quarters of
1999. Completion of the testing phase for these systems is planned for third
quarter 1999. The Company has identified the majority of its significant
suppliers and vendors and has sent out questionnaires to such third parties. It
expects to complete the process of identifying other suppliers and sending out
questionnaires to other third parties by the first quarter of 1999. Risk
assessment, readiness evaluation and action plans related to these third parties
are planned to be completed by the second quarter of 1999.
Internal and external resources have been utilized to perform all phases.
Currently, total capital costs are estimated at $35 million for the purchase of
systems and total expenses are estimated at $11 million. These estimates include
all information technology and all non-information technology systems including
costs associated with planned replacements which have been accelerated due to
the Year 2000 issue. To date, the Company has capitalized $8 million and
expensed $5 million. Substantially all of these costs have been identified
within the Newspaper Publishing segment. These costs will be funded through
operating cash flows. Although priorities have been realigned, the Company
anticipates minimal negative impact to non-Year 2000 information technology
projects or budgets.
Management believes that it has an effective program in place to resolve
the Year 2000 issue in a timely manner and the necessary modifications and
replacement of critical systems will be completed by the third quarter of 1999.
As a result, the Year 2000 issue is not expected to pose significant operational
or financial problems for the Company. The Company's expectations about future
Year 2000 related costs are subject to various uncertainties that could cause
the actual results to differ materially from the Company's expectations,
including the success of the Company in identifying systems that are not Year
2000 ready, the nature and amount of programming required to upgrade or replace
each of the affected systems, the availability, rate and
21
<PAGE> 22
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
magnitude of related labor and consulting costs and the success of the Company's
vendors and suppliers in addressing the Year 2000 issue. If the Company or its
suppliers or vendors are unable to resolve the Year 2000 issue on schedule, the
Company may not be able to prepare and distribute its publications in a timely
manner, which could have a material adverse effect on the Company's results of
operations.
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 9
to the Condensed Consolidated Financial Statements.
22
<PAGE> 23
THE TIMES MIRROR COMPANY
BUSINESS SEGMENT INFORMATION (1)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------------
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Newspaper Publishing.......................... $556,604 $524,962 $1,685,256 $1,579,432
Professional Information...................... 106,512 104,880 322,295 306,821
Magazine Publishing........................... 65,828 65,974 191,096 183,361
Corporate and Other........................... 289 3,323 700 21,451
Intersegment Revenues......................... 166 (72) (439)
-------- -------- ---------- ----------
$729,399 $699,067 $2,199,347 $2,090,626
======== ======== ========== ==========
OPERATING PROFIT (LOSS)(2)
Newspaper Publishing.......................... $ 80,511 $ 90,350 $ 255,924 $ 300,909
Professional Information...................... (33,970) 19,137 (4,808) 45,962
Magazine Publishing........................... (21,233) 5,491 (19,503) 13,350
Corporate and Other........................... (21,570) (17,268) (52,776) (65,096)
-------- -------- ---------- ----------
$ 3,738 $ 97,710 $ 178,837 $ 295,125
======== ======== ========== ==========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing.......................... $ 29,426 $ 26,499 $ 88,008 $ 80,287
Professional Information...................... 4,397 4,419 14,499 13,622
Magazine Publishing........................... 1,883 1,828 5,846 5,223
Corporate and Other........................... 664 649 2,965 2,303
-------- -------- ---------- ----------
$ 36,370 $ 33,395 $ 111,318 $ 101,435
======== ======== ========== ==========
CAPITAL EXPENDITURES
Newspaper Publishing.......................... $ 31,187 $ 20,565 $ 74,292 $ 51,616
Professional Information...................... 4,595 4,537 13,628 9,951
Magazine Publishing........................... 625 384 1,471 1,307
Corporate and Other........................... 1,056 1,564 4,367 8,740
-------- -------- ---------- ----------
$ 37,463 $ 27,050 $ 93,758 $ 71,614
======== ======== ========== ==========
</TABLE>
- ---------------
(1) Represents activity from continuing operations.
(2) Includes 1998 third quarter and year to date restructuring, one-time and
other special charges as follows (in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED YEAR TO DATE ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------- ------------------
<S> <C> <C>
Newspaper Publishing............................. $ 4,725 $ 39,575
Professional Information......................... 52,714* 57,561*
Magazine Publishing.............................. 29,072 29,072
Corporate and Other.............................. 5,997 5,997
------- --------
$92,508 $132,205
======= ========
</TABLE>
- ---------------
* An additional $1.5 million of other special charges is reported in Other, net.
23
<PAGE> 24
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
12. Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred Dividends.
27. Financial Data Schedules.
(b) The Company filed a report on Form 8-K dated July 15, 1998, listing an
additional holder 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.
The Company filed a report on Form 8-K dated July 22, 1998 announcing its
earnings for the second quarter of 1998.
The Company filed a report on Form 8-K dated July 31, 1998 announcing the
completion of the acquisition by Reed Elsevier plc of the Company's legal
publisher Matthew Bender & Company, Incorporated and its 50% ownership interest
in legal citation provider Shepard's.
The Company filed a report on Form 8-K dated July 31, 1998 relating to the
disposition of Matthew Bender & Company, Incorporated and its 50% ownership
interest in Shepard's.
24
<PAGE> 25
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
Executive Vice President and
Chief Financial Officer
Date: November 16, 1998
25
<PAGE> 1
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, EXCEPT RATIO)
<TABLE>
<CAPTION>
YEAR TO DATE ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
Fixed charges:
Interest expense.......................................... $ 54,744
Portion of rents deemed to be interest.................... 10,241
Amortization of debt expense.............................. 1,405
--------
Total fixed charges.................................... 66,390
Preferred dividends......................................... 36,207
--------
Fixed charges and preferred dividends..................... $102,597
========
Earnings:
Income from continuing operations before income tax
provision.............................................. $160,718
Fixed charges............................................. 66,390
Amortization of capitalized interest...................... 2,953
Add: Equity loss from less than 50% owned unconsolidated
affiliates............................................. 10,598
--------
Total earnings......................................... $240,659
========
Ratio of earnings to fixed charges.......................... 3.6x
Ratio of earnings to fixed charges and preferred
dividends................................................. 2.3x
</TABLE>
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 995,459
<SECURITIES> 49,509
<RECEIVABLES> 393,289
<ALLOWANCES> 45,379
<INVENTORY> 63,356
<CURRENT-ASSETS> 1,680,929
<PP&E> 1,928,087
<DEPRECIATION> 1,001,346
<TOTAL-ASSETS> 4,134,460
<CURRENT-LIABILITIES> 818,226
<BONDS> 919,022
0
724,820
<COMMON> 112,090
<OTHER-SE> 654,137
<TOTAL-LIABILITY-AND-EQUITY> 4,134,460
<SALES> 2,199,347
<TOTAL-REVENUES> 2,199,347
<CGS> 1,157,622
<TOTAL-COSTS> 1,157,622
<OTHER-EXPENSES> 119,709
<LOSS-PROVISION> 16,613
<INTEREST-EXPENSE> 54,680
<INCOME-PRETAX> 160,718
<INCOME-TAX> 88,488
<INCOME-CONTINUING> 72,230
<DISCONTINUED> 1,098,781
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,171,011
<EPS-PRIMARY> 13.30<F1>
<EPS-DILUTED> 12.96
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1998 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 64,119
<SECURITIES> 0
<RECEIVABLES> 395,362
<ALLOWANCES> 43,015
<INVENTORY> 48,604
<CURRENT-ASSETS> 989,669
<PP&E> 1,916,151
<DEPRECIATION> 986,285
<TOTAL-ASSETS> 3,493,846
<CURRENT-LIABILITIES> 1,052,441
<BONDS> 929,958
0
724,820
<COMMON> 112,090
<OTHER-SE> (31,274)
<TOTAL-LIABILITY-AND-EQUITY> 3,493,846
<SALES> 1,469,948
<TOTAL-REVENUES> 1,469,948
<CGS> 772,373
<TOTAL-COSTS> 772,373
<OTHER-EXPENSES> 39,697
<LOSS-PROVISION> 12,426
<INTEREST-EXPENSE> 34,360
<INCOME-PRETAX> 155,754
<INCOME-TAX> 63,952
<INCOME-CONTINUING> 91,802
<DISCONTINUED> 2,660
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,462
<EPS-PRIMARY> 0.95<F1>
<EPS-DILUTED> 0.92
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1998 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 41,208
<SECURITIES> 0
<RECEIVABLES> 388,952
<ALLOWANCES> 43,736
<INVENTORY> 46,453
<CURRENT-ASSETS> 944,327
<PP&E> 1,888,800
<DEPRECIATION> 960,673
<TOTAL-ASSETS> 3,230,865
<CURRENT-LIABILITIES> 693,868
<BONDS> 917,822
0
724,820
<COMMON> 112,089
<OTHER-SE> 72,749
<TOTAL-LIABILITY-AND-EQUITY> 3,230,865
<SALES> 714,130
<TOTAL-REVENUES> 714,130
<CGS> 383,603
<TOTAL-COSTS> 383,603
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,620
<INTEREST-EXPENSE> 15,521
<INCOME-PRETAX> 79,168
<INCOME-TAX> 33,201
<INCOME-CONTINUING> 45,967
<DISCONTINUED> (706)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,261
<EPS-PRIMARY> .45<F1>
<EPS-DILUTED> .44
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1997 QUARTERLY REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 48,659
<SECURITIES> 0
<RECEIVABLES> 406,021
<ALLOWANCES> 42,769
<INVENTORY> 44,896
<CURRENT-ASSETS> 1,001,226
<PP&E> 1,876,761
<DEPRECIATION> 942,061
<TOTAL-ASSETS> 3,238,620
<CURRENT-LIABILITIES> 740,518
<BONDS> 925,404
0
724,820
<COMMON> 112,055
<OTHER-SE> 39,124
<TOTAL-LIABILITY-AND-EQUITY> 3,238,620
<SALES> 2,882,017
<TOTAL-REVENUES> 2,882,017
<CGS> 1,476,348
<TOTAL-COSTS> 1,476,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,428
<INTEREST-EXPENSE> 41,681
<INCOME-PRETAX> 365,865
<INCOME-TAX> 144,965
<INCOME-CONTINUING> 220,900
<DISCONTINUED> 29,412
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 250,312
<EPS-PRIMARY> 2.35<F1>
<EPS-DILUTED> 2.29
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<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>
<RESTATED>
<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> 51,494
<SECURITIES> 0
<RECEIVABLES> 376,371
<ALLOWANCES> 42,124
<INVENTORY> 42,624
<CURRENT-ASSETS> 919,551
<PP&E> 1,865,244
<DEPRECIATION> 941,883
<TOTAL-ASSETS> 3,124,589
<CURRENT-LIABILITIES> 675,785
<BONDS> 940,132
0
724,820
<COMMON> 112,054
<OTHER-SE> (1,896)
<TOTAL-LIABILITY-AND-EQUITY> 3,124,589
<SALES> 2,090,626
<TOTAL-REVENUES> 2,090,626
<CGS> 1,080,077
<TOTAL-COSTS> 1,080,077
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,527
<INTEREST-EXPENSE> 27,187
<INCOME-PRETAX> 273,514
<INCOME-TAX> 114,087
<INCOME-CONTINUING> 159,427
<DISCONTINUED> 18,716
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178,143
<EPS-PRIMARY> 1.61<F1>
<EPS-DILUTED> 1.56
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1997 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 41,033
<SECURITIES> 0
<RECEIVABLES> 354,091
<ALLOWANCES> 38,722
<INVENTORY> 43,356
<CURRENT-ASSETS> 914,869
<PP&E> 1,999,736
<DEPRECIATION> 915,139
<TOTAL-ASSETS> 3,074,556
<CURRENT-LIABILITIES> 529,852
<BONDS> 633,740
0
411,784
<COMMON> 95,737
<OTHER-SE> 713,042
<TOTAL-LIABILITY-AND-EQUITY> 3,074,556
<SALES> 1,391,559
<TOTAL-REVENUES> 1,391,559
<CGS> 711,938
<TOTAL-COSTS> 711,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,287
<INTEREST-EXPENSE> 15,685
<INCOME-PRETAX> 183,334
<INCOME-TAX> 77,969
<INCOME-CONTINUING> 105,365
<DISCONTINUED> 5,854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,219
<EPS-PRIMARY> 0.97<F1>
<EPS-DILUTED> 0.94
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<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>
<RESTATED>
<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> 43,600
<SECURITIES> 14,213
<RECEIVABLES> 356,205
<ALLOWANCES> 42,631
<INVENTORY> 60,329
<CURRENT-ASSETS> 939,612
<PP&E> 1,985,220
<DEPRECIATION> 896,414
<TOTAL-ASSETS> 3,105,076
<CURRENT-LIABILITIES> 636,182
<BONDS> 433,693
0
576,379
<COMMON> 93,620
<OTHER-SE> 668,873
<TOTAL-LIABILITY-AND-EQUITY> 3,105,076
<SALES> 677,322
<TOTAL-REVENUES> 677,322
<CGS> 352,892
<TOTAL-COSTS> 352,892
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,034
<INTEREST-EXPENSE> 7,738
<INCOME-PRETAX> 76,488
<INCOME-TAX> 32,978
<INCOME-CONTINUING> 43,510
<DISCONTINUED> 1,723
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,233
<EPS-PRIMARY> 0.37<F1>
<EPS-DILUTED> 0.36
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1996 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 140,224
<SECURITIES> 0
<RECEIVABLES> 387,899
<ALLOWANCES> 42,621
<INVENTORY> 60,256
<CURRENT-ASSETS> 1,005,312
<PP&E> 1,978,788
<DEPRECIATION> 876,926
<TOTAL-ASSETS> 3,225,409
<CURRENT-LIABILITIES> 533,387
<BONDS> 459,007
0
576,379
<COMMON> 96,730
<OTHER-SE> 825,701
<TOTAL-LIABILITY-AND-EQUITY> 3,225,409
<SALES> 2,775,820
<TOTAL-REVENUES> 2,775,820
<CGS> 1,495,566
<TOTAL-COSTS> 1,495,566
<OTHER-EXPENSES> 17,348
<LOSS-PROVISION> 24,187
<INTEREST-EXPENSE> 20,153
<INCOME-PRETAX> 280,167
<INCOME-TAX> 110,964
<INCOME-CONTINUING> 169,203
<DISCONTINUED> 37,241
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206,444
<EPS-PRIMARY> 1.59<F1>
<EPS-DILUTED> 1.54
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 56,718
<SECURITIES> 0
<RECEIVABLES> 365,118
<ALLOWANCES> 39,316
<INVENTORY> 69,194
<CURRENT-ASSETS> 1,122,501
<PP&E> 1,986,956
<DEPRECIATION> 890,589
<TOTAL-ASSETS> 3,337,621
<CURRENT-LIABILITIES> 800,100
<BONDS> 299,666
0
576,379
<COMMON> 98,987
<OTHER-SE> 854,966
<TOTAL-LIABILITY-AND-EQUITY> 3,337,621
<SALES> 2,028,967
<TOTAL-REVENUES> 2,028,967
<CGS> 1,107,084
<TOTAL-COSTS> 1,107,084
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,301
<INTEREST-EXPENSE> 21,529
<INCOME-PRETAX> 178,301
<INCOME-TAX> 78,671
<INCOME-CONTINUING> 99,630
<DISCONTINUED> 28,135
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,765
<EPS-PRIMARY> 0.92<F1>
<EPS-DILUTED> 0.89
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 54,182
<SECURITIES> 10,204
<RECEIVABLES> 334,227
<ALLOWANCES> 34,834
<INVENTORY> 67,270
<CURRENT-ASSETS> 1,047,337
<PP&E> 1,965,152
<DEPRECIATION> 871,450
<TOTAL-ASSETS> 3,270,363
<CURRENT-LIABILITIES> 607,455
<BONDS> 317,685
0
576,379
<COMMON> 102,627
<OTHER-SE> 981,483
<TOTAL-LIABILITY-AND-EQUITY> 3,270,363
<SALES> 1,349,089
<TOTAL-REVENUES> 1,349,089
<CGS> 742,536
<TOTAL-COSTS> 742,536
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,350
<INTEREST-EXPENSE> 12,092
<INCOME-PRETAX> 121,444
<INCOME-TAX> 52,979
<INCOME-CONTINUING> 68,465
<DISCONTINUED> 3,595
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,060
<EPS-PRIMARY> .48<F1>
<EPS-DILUTED> .47
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1996 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 99,523
<SECURITIES> 19,271
<RECEIVABLES> 347,327
<ALLOWANCES> 35,475
<INVENTORY> 79,209
<CURRENT-ASSETS> 1,124,381
<PP&E> 1,947,100
<DEPRECIATION> 854,473
<TOTAL-ASSETS> 3,279,461
<CURRENT-LIABILITIES> 555,242
<BONDS> 298,258
0
576,379
<COMMON> 104,691
<OTHER-SE> 1,053,107
<TOTAL-LIABILITY-AND-EQUITY> 3,279,461
<SALES> 666,682
<TOTAL-REVENUES> 666,682
<CGS> 378,919
<TOTAL-COSTS> 378,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,175
<INTEREST-EXPENSE> 5,724
<INCOME-PRETAX> 51,200
<INCOME-TAX> 23,320
<INCOME-CONTINUING> 27,880
<DISCONTINUED> (1,843)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,037
<EPS-PRIMARY> .14<F1>
<EPS-DILUTED> .14
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1995 ANNUAL REPORT ON 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 174,648
<SECURITIES> 72,805
<RECEIVABLES> 370,511
<ALLOWANCES> 36,708
<INVENTORY> 70,010
<CURRENT-ASSETS> 1,314,069
<PP&E> 1,939,689
<DEPRECIATION> 842,401
<TOTAL-ASSETS> 3,496,296
<CURRENT-LIABILITIES> 741,618
<BONDS> 247,062
0
576,379
<COMMON> 105,698
<OTHER-SE> 1,124,159
<TOTAL-LIABILITY-AND-EQUITY> 3,496,296
<SALES> 2,728,497
<TOTAL-REVENUES> 2,728,497
<CGS> 1,502,803
<TOTAL-COSTS> 1,502,803
<OTHER-EXPENSES> 498,409
<LOSS-PROVISION> 20,498
<INTEREST-EXPENSE> 22,305
<INCOME-PRETAX> (288,638)
<INCOME-TAX> (54,846)
<INCOME-CONTINUING> (233,792)
<DISCONTINUED> 1,473,267
<EXTRAORDINARY> 0
<CHANGES> (12,724)
<NET-INCOME> 1,226,751
<EPS-PRIMARY> 10.02<F1>
<EPS-DILUTED> 10.02
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
