<PAGE> 1
================================================================================
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, 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
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 April 24, 1998:
63,295,267, excluding 18,237,864 shares held by subsidiaries of the Registrant
and 4,001,067 shares held by TMCT, LLC, representing 80% of the shares held by
TMCT, LLC and 1,118,480 held as treasury shares.
Number of shares of Series C Common Stock outstanding at April 24, 1998:
25,436,733.
================================================================================
<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
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
REVENUES.................................................... $803,900 $773,882
COSTS AND EXPENSES:
Cost of sales............................................. 427,042 398,408
Selling, general and administrative expenses.............. 286,576 287,934
-------- --------
713,618 686,342
OPERATING PROFIT............................................ 90,282 87,540
Interest expense............................................ (19,527) (10,012)
Interest income............................................. 5,348 964
Equity income (loss)........................................ (2,794) 766
Other, net.................................................. 4,421 107
-------- --------
Income before income tax provision.......................... 77,730 79,365
Income tax provision........................................ 32,469 34,132
-------- --------
NET INCOME.................................................. 45,261 45,233
Preferred dividend requirements............................. 5,424 10,911
-------- --------
Earnings applicable to common shareholders.................. $ 39,837 $ 34,322
======== ========
Earnings per common share:
Basic..................................................... $ .45 $ .37
======== ========
Diluted................................................... $ .44 $ .36
======== ========
Weighted average shares outstanding:
Basic..................................................... 88,335 93,931
======== ========
Diluted................................................... 90,740 96,248
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 4
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 51,602 $ 56,996
Accounts receivable, less allowance for doubtful accounts
and returns of $65,202 and $66,225..................... 449,945 499,642
Inventories............................................... 76,419 76,531
Deferred income taxes..................................... 79,864 58,807
Prepaid expenses.......................................... 44,016 34,205
Other current assets...................................... 13,720 37,763
---------- ----------
Total current assets................................... 715,566 763,944
Property, plant and equipment, net.......................... 989,612 997,430
Goodwill, net............................................... 562,428 554,854
Other intangibles, net...................................... 115,548 118,677
Deferred charges............................................ 158,231 158,996
Equity investments.......................................... 344,585 350,571
Other assets................................................ 526,932 471,121
---------- ----------
Total assets........................................... $3,412,902 $3,415,593
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 5
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 272,880 $ 328,203
Short-term debt........................................... 182,087 139,067
Employees' compensation................................... 81,651 119,164
Unearned income........................................... 231,935 229,457
Other current liabilities................................. 87,927 105,892
----------- -----------
Total current liabilities.............................. 856,480 921,783
Long-term debt.............................................. 917,822 925,404
Deferred income taxes....................................... 166,631 149,561
Other liabilities........................................... 536,736 529,246
----------- -----------
Total liabilities...................................... 2,477,669 2,525,994
Common stock subject to put options......................... 25,575 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; 86,617,000 and
86,552,000 shares issued and outstanding.............. 86,617 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; 25,472,000 and
25,503,000 shares issued and
outstanding.......................................... 25,472 25,503
Additional paid-in capital................................ 1,242,664 1,253,142
Retained earnings......................................... 386,100 384,503
Accumulated other comprehensive income.................... 12,923 12,804
----------- -----------
2,478,596 2,487,324
Less treasury stock at cost:
Series A common stock: 23,383,000 and 24,151,000 shares;
and Series A preferred stock: 735,000 shares........... (1,568,938) (1,611,325)
----------- -----------
Total shareholders' equity............................. 909,658 875,999
----------- -----------
Total liabilities and shareholders' equity............. $ 3,412,902 $ 3,415,593
=========== ===========
</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>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities................. $50,959 $ 30,698
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired........................ (12,819) (7,565)
Proceeds from sales of assets............................. 5,253 4,646
Capital expenditures...................................... (25,593) (22,016)
Capitalization of product costs........................... (3,926) (6,323)
Note receivable........................................... (47,600)
Other, net................................................ (14,339) 2,723
------- ---------
Net cash used in investing activities.................. (99,024) (28,535)
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of commercial paper............ 82,684 108,980
Proceeds from exercise of stock options................... 20,669 15,208
Repayments of other debt.................................. (39,621) (3)
Dividends paid............................................ (21,338) (20,130)
Repurchase of common stock................................ (320) (201,622)
Other, net................................................ 597 (711)
------- ---------
Net cash provided by (used in) financing activities.... 42,671 (98,278)
------- ---------
Decrease in cash and cash equivalents....................... (5,394) (96,115)
Cash and cash equivalents at beginning of year.............. 56,996 145,105
------- ---------
Cash and cash equivalents at end of period.................. $51,602 $ 48,990
======= =========
</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.
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.
During the first quarters of 1998 and 1997, total comprehensive income
amounted to $45,380,000 and $21,000,000, respectively. Comprehensive income
differs from net income in the first quarter of 1997 primarily due to the
reclassification adjustment of realized gains that are recognized in net income,
which were previously included as part of comprehensive income.
NOTE 3 -- RESTRUCTURING
The balance sheet classification of restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
Other current liabilities:
1995 Restructuring........................................ $20,609 $22,860
1996 Restructuring........................................ 193 390
Other liabilities:
1995 Restructuring........................................ 31,503 36,856
------- -------
$52,305 $60,106
======= =======
</TABLE>
The restructuring liabilities relate primarily to severance costs and lease
payments. During the quarter ended March 31, 1998, cash spent on severance
payments related to 1995 restructuring efforts totaled $1,688,000. At March 31,
1998, the remaining liability for 1995 severance costs aggregated $5,381,000.
NOTE 4 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments during the quarters ended March 31, 1998 and 1997 included
interest of $21,260,000 and $6,851,000 and income taxes of $6,191,000 and
$51,455,000, respectively.
7
<PAGE> 8
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5 -- DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
Short-term debt:
Commercial paper at a weighted average interest rate of
5.7% and 5.9%.......................................... $169,132 $ 86,448
Notes payable at 6.125% due January 2, 1998............... 39,209
Current maturities of long-term debt...................... 7,624 7,671
Other..................................................... 5,331 5,739
-------- --------
Total short-term debt.................................. $182,087 $139,067
======== ========
Long-term debt:
6.61% Debentures due September 15, 2027, net of
unamortized discount
of $101................................................ $249,899 $249,899
4.75% Liquid Yield Option Notes due 2017, net of
unamortized discount of $295,468 and $297,845.......... 204,532 202,155
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
$563 and $565.......................................... 147,437 147,435
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 $163,611 and $165,353,
with an effective interest rate of 4.3%................ 52,813 54,743
4 1/4% Premium Equity Participating Securities due March
15, 2001; 1,305,000 securities stated at current
maturity value......................................... 23,735 31,809
Others at various interest rates, maturing through 2001... 65 69
-------- --------
925,446 933,075
Less current maturities................................... (7,624) (7,671)
-------- --------
Total long-term debt................................... $917,822 $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 from 5.7% to 4.0% for the quarter ended March 31, 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. At March 31, 1998 and December 31, 1997, the fair
market value of Netscape common stock was $18.1875 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.
8
<PAGE> 9
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 6 -- EARNINGS AND DIVIDENDS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Earnings:
Net income................................................ $45,261 $45,233
Preferred dividends....................................... (5,424) (10,911)
------- -------
Earnings applicable to common shareholders for basic and
diluted earnings
per share.............................................. $39,837 $34,322
======= =======
Shares:
Weighted average shares for basic earnings per share...... 88,335 93,931
Stock options............................................. 2,405 2,317
------- -------
Adjusted weighted average shares for diluted earnings per
share.................................................. 90,740 96,248
======= =======
Basic earnings per share.................................. $ .45 $ .37
======= =======
Diluted earnings per share................................ $ .44 $ .36
======= =======
</TABLE>
The Company has convertible securities which are not included in the
calculation of diluted earnings per share because the effects are antidilutive.
Cash dividends of $.18 and $.10 per share of common stock were declared in
the quarters ended March 31, 1998 and 1997, respectively.
NOTE 7 -- CAPITAL STOCK
At March 31, 1998, the Company had 450,000 put options outstanding with an
average strike price of approximately $56.83. The put options, which have
various expiration dates in the second and third quarters of 1998, entitle the
holder to sell shares of Times Mirror common stock to the Company at the strike
price on the expiration date of the put option. The potential obligation under
these put options has been transferred from shareholders' equity to "Common
stock subject to put options."
NOTE 8 -- STOCK OPTIONS
During the quarter ended March 31, 1998, the Company issued 770,000 shares
of its common stock as a result of the exercise of stock options.
The Company granted each eligible employee 100 stock options on February 5,
1998. This grant resulted in the issuance of approximately 1,756,000 stock
options at an option price of $58.03125 which was equal to fair value at the
date of grant. These options will be fully vested on February 6, 2001 for
employees still employed by the Company at that date.
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.
9
<PAGE> 10
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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 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.
NOTE 11 -- FUTURE ACCOUNTING REQUIREMENTS
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131) was issued in June
1997. Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (SFAS 132) was
issued in February 1998. The disclosures required by these statements must be
reported by the Company's year end in 1998. The Company is reviewing SFAS 131
and SFAS 132 and will adopt them by the required dates. The adoption of these
statements will have no impact on the Company's consolidated results of
operations, financial position or cash flows.
NOTE 12 -- ACQUISITION AND PENDING DISPOSITION OF CERTAIN ASSETS
On April 27, 1998, Times Mirror announced that Reed Elsevier Inc. will
acquire Matthew Bender & Company, Inc., the Company's legal publisher and Times
Mirror's 50% ownership interest in Shepard's in a transaction valued at $1.65
billion. Pending the customary regulatory review, the transaction is expected to
be completed in Summer 1998. The Company is also evaluating a variety of
alternatives regarding its investment in Mosby, Inc., its health sciences
publisher, and an announcement is expected in the second quarter of 1998.
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. The Company also
acquired preferred stock of Target Media Partners, a new entity that owns all of
the non-Los Angeles area assets of Recycler. Together, these transactions value
the Recycler organization at more than $200 million.
10
<PAGE> 11
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes the Company's consolidated financial results
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST QUARTER
------------------------------
1998 1997 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues.................................................... $803,900 $773,882 3.9%
Operating profit............................................ 90,282 87,540 3.1
Interest expense, net....................................... (14,179) (9,048) 56.7
Net income.................................................. 45,261 45,233 0.1
Preferred dividend requirements............................. 5,424 10,911 (50.3)
Earnings applicable to common shareholders.................. 39,837 34,322 16.1
Earnings per common share:
Basic..................................................... $ .45 $ .37 21.6
Diluted................................................... $ .44 $ .36 22.2
</TABLE>
Growth in each of the Company's three business segments led to higher
revenues in the first quarter of 1998 compared to the first quarter of 1997.
Consolidated operating profit for the first quarter of 1998 increased from
the first quarter of 1997, reflecting improved results in the Professional
Information segment and lower Corporate and Other expenses, partially offset by
reduced operating profit in the Newspaper Publishing and Magazine Publishing
segments. Substantially higher newsprint expense, as well as softer than
expected advertising revenue and increased investments in circulation growth at
the Los Angeles Times, contributed to the decline in operating profit in
Newspaper Publishing, the Company's largest business segment. Higher newsprint
expense along with the Company's continuing spending to build advertising and
circulation volume growth, particularly at The Times, is expected to result in
newspaper operating costs rising faster in 1998 than in 1997.
Diluted earnings per share for the first quarter of 1998 benefited from
lower preferred dividend requirements and a reduction in average shares
outstanding. Preferred dividend requirements in the first quarter of 1998
declined due to the Company's redemption of its Series B preferred stock in
April 1997 and a recapitalization in August 1997.
Net interest expense for the first quarter of 1998 was higher than the
prior-year quarter due primarily to increased debt levels attributable to 1997
common stock repurchases and the recapitalization in 1997.
ANALYSIS BY SEGMENT
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
------------------------------
1998 1997 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues
Advertising............................................... $415,636 $391,203 6.2%
Circulation............................................... 106,528 108,465 (1.8)
Other..................................................... 20,757 11,844 75.3
-------- -------- ----
$542,921 $511,512 6.1%
======== ======== ====
Operating profit............................................ $ 90,154 $ 95,264 (5.4)%
======== ======== ====
</TABLE>
11
<PAGE> 12
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED)
Newspaper Publishing revenues rose in the first quarter of 1998 compared to
the first quarter of 1997 with gains in advertising and circulation volume
growth, particularly at the Company's three largest newspapers. Advertising
revenues continued to improve at all newspapers with strong gains at the Eastern
Newspapers, reflecting, in part, the results of Patuxent Publishing Company and
This Week Publications, Inc. which were acquired in the second half of 1997.
Advertising revenues increased modestly at The Times, the Company's largest
newspaper, but it experienced weaker than expected results, particularly in the
classified help-wanted category.
Circulation revenue declined slightly as marketing strategies involving
pricing and promotional discounts helped stimulate circulation volume gains but
resulted in lower overall circulation revenues. Average daily and Sunday
circulation were higher at each of the Company's three largest newspapers, The
Times, Newsday and The Baltimore Sun, for the six-month period ended March 31,
1998, as reported by the Company to the Audit Bureau of Circulations. In
addition, average daily circulation increased at The Morning Call, as well as
The (Stamford) Advocate and Greenwich Time, and average Sunday circulation rose
at The Hartford Courant, as well as The (Stamford) Advocate and Greenwich Time.
For The Times, average daily circulation rose over 2%, or 26,195, to 1,095,007
and average Sunday circulation rose almost 2%, or 23,385, to 1,385,373 for the
six-month period ended March 31, 1998, with strong growth achieved in the 1998
first quarter. At Newsday, average daily circulation for the six-month period
ended March 31, 1998 increased over 2%, or 12,050, to 571,283 and average Sunday
circulation increased almost 2%, or 11,113, to 657,559, the largest March gains
for Long Island's Newsday since 1987.
Segment operating profit declined due primarily to a 26% rise in newsprint
expense, as both average newsprint price and consumption increased in the first
quarter of 1998 compared to the prior-year quarter. Non-newsprint costs rose 5%
in the 1998 first quarter, reflecting, in part, the 1997 second-half
acquisitions of weeklies and shoppers.
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
------------------------------
1998 1997 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues.................................................... $191,600 $190,862 0.4%
======== ========
Operating profit............................................ $ 20,876 $ 17,527 19.1%
======== ========
</TABLE>
Professional Information's operating profit rose in the first quarter of
1998 due to improved performance at AchieveGlobal, the Company's integrated
training company, and the third quarter 1997 acquisition of Krames
Communications Incorporated, a publisher of consumer-oriented health education
information.
MAGAZINE PUBLISHING
Magazine Publishing revenues and operating profit (loss) were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
----------------------------
1998 1997 CHANGE
------- ------- ------
<S> <C> <C> <C>
Revenues.................................................... $65,645 $57,876 13.4%
======= =======
Operating profit (loss)..................................... $ (223) $ 2,591 (100)+%
======= =======
</TABLE>
Magazine Publishing achieved advertising revenue gains at nearly all
magazines in the first quarter of 1998. The acquisitions of TransWorld
Skateboarding and Warp in April 1997, as well as Ride BMX, SNAP
12
<PAGE> 13
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED)
and InterZine Productions, Inc. in the first quarter of 1998, also contributed
to higher revenues. Operating profit for the segment declined, however, due to
the substantial investment related to the relaunch of The Sporting News and
higher paper costs.
CORPORATE AND OTHER
Corporate and Other revenues and operating loss were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
------------------------------
1998 1997 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues.................................................... $ 4,050 $ 13,835 (70.7)%
======== ========
Operating loss.............................................. $(20,525) $(27,842) (26.3)%
======== ========
</TABLE>
Corporate and Other includes the results of Apartment Search, Hollywood
Online, Auction Universe and ListingLink. The 1997 segment results have been
restated to include Apartment Search and Hollywood Online, which were formerly
included in the Newspaper Publishing segment. The decline in revenues for the
first quarter of 1998 was attributable to the divestitures of two publishing
operations in mid-1997. Operating loss for the 1998 first quarter decreased from
the prior year due to the absence of certain information systems costs incurred
in 1997, as well as operating losses of the divested businesses.
OTHER INCOME
For the first quarter of 1998, the Company had equity income from the
Shepard's joint venture of $2.8 million which was offset by an equity loss
related to MD Consult, an investment in a start-up medical online joint venture,
and equity losses from the Company's other new media initiatives. In addition,
the Company realized gains on the disposition of certain incidental properties.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements are funded primarily by its
operations. Total debt at March 31, 1998 rose to $1.10 billion from $1.06
billion at December 31, 1997 due to the issuance of commercial paper. At March
31, 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 $169.1 million of commercial paper
outstanding at March 31, 1998 under this credit facility.
CASH FLOW
The following table sets forth certain items from the Statements of
Condensed Consolidated Cash Flows (dollars in millions):
<TABLE>
<CAPTION>
FIRST QUARTER
---------------
1998 1997
----- ------
<S> <C> <C>
Net cash provided by operating activities................... $51.0 $ 30.7
Capital expenditures........................................ (25.6) (22.0)
Issuance of commercial paper................................ 82.7 109.0
</TABLE>
Cash generated by operating activities in the first quarter of 1998 was
higher compared to the same period in 1997 due primarily to lower tax payments
which were partially offset by higher interest payments.
13
<PAGE> 14
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED)
Capital expenditures for the first quarter of 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 consistent with the 1997 levels.
On April 27, 1998, Times Mirror announced that Reed Elsevier Inc. will
acquire Matthew Bender & Company, Inc., the Company's legal publisher and Times
Mirror's 50% ownership interest in Shepard's in a transaction valued at $1.65
billion. Pending the customary regulatory review, the transaction is expected to
be completed in Summer 1998. The Company is also evaluating a variety of
alternatives regarding its investment in Mosby, Inc., its health sciences
publisher, and an announcement is expected in the second quarter of 1998.
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. The Company also
acquired preferred stock of Target Media Partners, a new entity that owns all of
the non-Los Angeles area assets of Recycler. Together, these transactions value
the Recycler organization at more than $200 million.
DIVIDENDS
Cash dividends of $.18 and $.10 per share of common stock were declared for
the quarters ended March 31, 1998 and 1997, respectively.
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.
14
<PAGE> 15
THE TIMES MIRROR COMPANY
BUSINESS SEGMENT INFORMATION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
REVENUES
Newspaper Publishing(a)................................... $542,921 $511,512
Professional Information.................................. 191,600 190,862
Magazine Publishing....................................... 65,645 57,876
Corporate and Other(a).................................... 4,050 13,835
Intersegment Revenues..................................... (316) (203)
-------- --------
$803,900 $773,882
======== ========
OPERATING PROFIT (LOSS)
Newspaper Publishing(a)................................... $ 90,154 $ 95,264
Professional Information.................................. 20,876 17,527
Magazine Publishing....................................... (223) 2,591
Corporate and Other(a).................................... (20,525) (27,842)
-------- --------
$ 90,282 $ 87,540
======== ========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing(a)................................... $ 28,965 $ 26,532
Professional Information.................................. 9,349 9,303
Magazine Publishing....................................... 1,945 1,620
Corporate and Other(a).................................... 1,673 1,265
-------- --------
$ 41,932 $ 38,720
======== ========
CAPITAL EXPENDITURES
Newspaper Publishing(a)................................... $ 17,232 $ 10,827
Professional Information.................................. 5,353 6,447
Magazine Publishing....................................... 433 562
Corporate and Other(a).................................... 2,575 4,180
-------- --------
$ 25,593 $ 22,016
======== ========
</TABLE>
- ---------------
(a) The Corporate and Other segment includes operating results of Apartment
Search, Hollywood Online, Auction Universe and ListingLink. The 1997 segment
results have been restated to include Apartment Search and Hollywood Online,
which were formerly included in the Newspaper Publishing segment.
15
<PAGE> 16
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 Schedule.
(b) The Company filed a report on Form 8-K dated March 19, 1998 announcing
that the Company had entered into an agreement for the acquisition of the Los
Angeles area business of EZ Buy & EZ Sell Recycler Corporation, consisting
primarily of the Recycler Publications in the Los Angeles, Orange, Riverside,
San Bernardino and Ventura counties and a portion of Santa Barbara county.
16
<PAGE> 17
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
Executive Vice President and
Chief Financial Officer
Date: May 4, 1998
17
<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 OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31, 1998
-------------------
<S> <C>
Fixed Charges:
Interest expense.......................................... $ 19,539
Portion of rents deemed to be interest.................... 4,385
Amortization of debt expense.............................. 505
--------
Total fixed charges.................................... 24,429
Preferred dividends......................................... 9,315
--------
Fixed charges and preferred dividends..................... $ 33,744
========
Earnings:
Income before income tax provision........................ $ 77,730
Fixed charges............................................. 24,429
Amortization of capitalized interest...................... 3,638
Subtract: Equity income from less than 50% owned
unconsolidated affiliates.............................. (9)
Add: Equity loss from less than 50% owned unconsolidated
affiliates............................................. 6,548
--------
Total earnings......................................... $112,336
========
Ratio of earnings to fixed charges.......................... 4.6x
Ratio of earnings to fixed charges and preferred
dividends................................................. 3.3x
</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>
<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> 51,602
<SECURITIES> 0
<RECEIVABLES> 515,147
<ALLOWANCES> 65,202
<INVENTORY> 76,419
<CURRENT-ASSETS> 715,566
<PP&E> 2,021,631
<DEPRECIATION> 1,032,019
<TOTAL-ASSETS> 3,412,902
<CURRENT-LIABILITIES> 856,480
<BONDS> 917,822
0
724,820
<COMMON> 112,089
<OTHER-SE> 72,749
<TOTAL-LIABILITY-AND-EQUITY> 3,412,902
<SALES> 803,900
<TOTAL-REVENUES> 803,900
<CGS> 427,042
<TOTAL-COSTS> 427,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,312
<INTEREST-EXPENSE> 19,527
<INCOME-PRETAX> 77,730
<INCOME-TAX> 32,469
<INCOME-CONTINUING> 45,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,261
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.44
</TABLE>
