<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, 1999
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 95-4481525
STATE OF INCORPORATION 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 May 7, 1999:
46,799,726, 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; 14,560,402 shares held by Eagle New Media Investments, LLC and 3,405,685
shares held as treasury shares.
Number of shares of Series C Common Stock outstanding at May 7, 1999:
25,115,620.
- --------------------------------------------------------------------------------
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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 INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
REVENUES.................................................... $746,043 $714,130
COSTS AND EXPENSES:
Cost of sales............................................. 408,955 383,603
Selling, general and administrative expenses.............. 244,350 240,580
-------- --------
653,305 624,183
OPERATING PROFIT............................................ 92,738 89,947
Interest expense............................................ (21,364) (15,521)
Interest income............................................. 13,582 5,226
Other, net.................................................. 997 (484)
-------- --------
Income from continuing operations before income tax
provision................................................. 85,953 79,168
Income tax provision........................................ 37,140 33,201
-------- --------
Income from continuing operations........................... 48,813 45,967
Loss from discontinued operations, net of income tax
benefit................................................... -- 706
-------- --------
NET INCOME.................................................. 48,813 45,261
Preferred dividend requirements............................. 5,424 5,424
-------- --------
Earnings applicable to common shareholders.................. $ 43,389 $ 39,837
======== ========
Basic earnings (loss) per share:
Continuing operations..................................... $ 0.59 $ 0.46
Discontinued operations................................... -- (0.01)
-------- --------
Basic earnings per share.................................... $ 0.59 $ 0.45
======== ========
Diluted earnings (loss) per share:
Continuing operations..................................... $ 0.58 $ 0.45
Discontinued operations................................... -- (0.01)
-------- --------
Diluted earnings per share.................................. $ 0.58 $ 0.44
======== ========
Weighted average shares outstanding:
Basic..................................................... 73,076 88,335
======== ========
Diluted................................................... 77,434 90,740
======== ========
</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,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 883,438 $ 1,056,341
Marketable securities..................................... 34,540 49,438
Accounts receivable, less allowance for doubtful accounts
and returns of $49,317 and $44,988..................... 362,644 368,740
Inventories............................................... 44,690 39,282
Deferred income taxes..................................... 43,704 44,012
Prepaid expenses.......................................... 47,598 32,763
Other current assets...................................... 20,584 38,683
----------- -----------
Total current assets.............................. 1,437,198 1,629,259
Property, plant and equipment, net.......................... 930,670 915,992
Goodwill, net............................................... 594,018 564,324
Other intangibles, net...................................... 255,285 168,629
Deferred charges............................................ 133,323 131,091
Equity investments.......................................... 150,391 141,454
Prepaid pension costs....................................... 425,330 419,471
Investments and other assets................................ 302,854 248,086
----------- -----------
Total assets...................................... $ 4,229,069 $ 4,218,306
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 184,754 $ 194,224
Short-term debt........................................... 432,027 312,610
Employees' compensation................................... 82,724 102,204
Unearned income........................................... 152,984 148,997
Restructuring............................................. 53,289 98,789
Net liabilities of discontinued operations................ -- 11,605
Other current liabilities................................. 128,939 105,063
----------- -----------
Total current liabilities......................... 1,034,717 973,492
Long-term debt.............................................. 991,269 941,423
Deferred income taxes....................................... 345,139 374,679
Postretirement benefits..................................... 224,966 226,018
Unearned income............................................. 73,134 72,457
Other liabilities........................................... 260,120 265,224
----------- -----------
Total liabilities................................. 2,929,345 2,853,293
Common stock subject to put options......................... 39,740 22,560
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; 86,943,000 and
86,831,000 shares issued and outstanding.............. 86,943 86,831
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; 25,176,000 and
25,258,000 shares issued and outstanding.............. 25,176 25,258
Additional paid-in capital................................ 1,263,988 1,278,916
Retained earnings......................................... 1,661,445 1,653,736
Accumulated other comprehensive income.................... 17,673 26,491
----------- -----------
3,780,045 3,796,052
Less treasury stock at cost:
Series A common stock: 39,822,000 and 38,708,000 shares
and Series A preferred stock: 735,000 shares.......... (2,520,061) (2,453,599)
----------- -----------
Total shareholders' equity........................ 1,259,984 1,342,453
----------- -----------
Total liabilities and shareholders' equity........ $ 4,229,069 $ 4,218,306
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE TIMES MIRROR COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
----------------------
1999 1998
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities of continuing
operations............................................. $ 4,667 $ 22,821
Net cash provided by (used in) operating activities of
discontinued
operations............................................. (2,356) 26,081
---------- --------
Net cash provided by operating activities......... 2,311 48,902
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired........................ (138,710) (8,487)
Capital expenditures...................................... (36,392) (23,588)
Purchases of investments.................................. (25,420) (3,400)
Sale of marketable securities, net........................ 14,898 --
Proceeds from sales of assets............................. 9,144 5,253
Notes receivable.......................................... -- (47,600)
Other, net................................................ (1,280) (11,921)
---------- --------
Net cash used in investing activities of continuing
operations............................................ (177,760) (89,743)
Net cash used in investing activities of discontinued
operations............................................ -- (9,281)
---------- --------
Net cash used in investing activities............. (177,760) (99,024)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of commercial paper and short-term
borrowings............................................. 119,482 82,684
Proceeds from exercise of stock options................... 19,795 20,669
Purchases of Times Mirror common stock.................... (94,639) (320)
Dividends paid............................................ (19,928) (21,338)
Exercise of put options, net of premiums received......... (11,361) 627
Principal repayments of other debt........................ (10,847) (39,621)
Other, net................................................ 44 (30)
---------- --------
Net cash provided by financing activities......... 2,546 42,671
---------- --------
Decreases in cash and cash equivalents...................... (172,903) (7,451)
Cash and cash equivalents at beginning of year.............. 1,056,341 48,659
---------- --------
Cash and cash equivalents at end of period.................. $ 883,438 $ 41,208
========== ========
</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 unaudited 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 Article
10 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. The balance
sheet at December 31, 1998 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. 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, 1998.
Certain amounts in previously issued financial statements have been
reclassified to conform to the 1999 presentation.
NOTE 2 -- COMPREHENSIVE INCOME
During the first quarters of 1999 and 1998, total comprehensive income
amounted to $39,995,000 and $45,380,000, respectively. Comprehensive income for
the 1999 first quarter differs from net income primarily due to reclassification
adjustments for realized gains that are recognized in net income, which were
previously included as part of comprehensive income.
NOTE 3 -- DISCONTINUED OPERATIONS
During 1998, the Company completed the divestitures of Matthew Bender &
Company, Incorporated, its 50% interest in the Shepard's joint venture and
Mosby, Inc. Additionally, the Company determined that Apartment Search, Inc.
would be discontinued in 1998 and subsequently sold the business on March 31,
1999. Prior year results for discontinued operations primarily include Matthew
Bender & Company, Incorporated, the Shepard's joint venture, Mosby, Inc. and
Apartment Search, Inc. The major components of cash flow for discontinued
operations are as follows (in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Loss from discontinued operations........................... $ -- $ (706)
Depreciation and amortization............................... -- 4,949
Provision for deferred income taxes......................... -- 25,930
Other, net.................................................. (2,356) (4,092)
------- -------
Net cash provided by (used in) operating activities of
discontinued operations................................ $(2,356) $26,081
======= =======
Capitalization of product costs............................. $ -- $(2,656)
Capital expenditures........................................ -- (2,005)
Other, net.................................................. -- (4,620)
------- -------
Net cash used in investing activities of discontinued
operations............................................. $ -- $(9,281)
======= =======
</TABLE>
7
<PAGE> 8
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4 -- RESTRUCTURING LIABILITY
A summary of the activity in the restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1996 1995
RESTRUCTURING RESTRUCTURING RESTRUCTURING TOTAL
------------- ------------- ------------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1998............ $ 97,264 $ 19 $24,404 $121,687
Cash payments......................... (45,314) (19) (2,971) (48,304)
-------- ---- ------- --------
Balance at March 31, 1999............... $ 51,950 $ -- $21,433 $ 73,383
======== ==== ======= ========
</TABLE>
During the quarter ended March 31, 1999, cash spent on restructuring
efforts was primarily for severance payments of $26,500,000, contract
termination costs of $17,010,000, and lease payments of $4,373,000. At March 31,
1999, the remaining liability for severance costs aggregated $27,331,000.
The balance sheet classification of restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
Restructuring -- current liabilities:
1995 Restructuring........................................ $15,561 $ 16,464
1996 Restructuring........................................ -- 19
1998 Restructuring........................................ 37,728 82,306
Other liabilities:
1995 Restructuring........................................ 5,872 7,940
1998 Restructuring........................................ 14,222 14,958
------- --------
$73,383 $121,687
======= ========
</TABLE>
The current portion of restructuring is comprised primarily of severance
and lease payments while the non-current portion is comprised primarily of
contract termination payments and lease payments which will be paid over lease
periods extending to 2010. The Company periodically assesses the adequacy of its
remaining restructuring liabilities and makes adjustments, if required. The net
change in the restructuring liabilities as a result of these reviews was not
significant.
8
<PAGE> 9
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5 -- DEBT
Debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
Short-term debt:
Commercial paper at weighted average interest rates of
4.9% and 5.3%.......................................... $292,940 $298,603
Short-term borrowings at a weighted average interest rate
of 5.0%................................................ 125,000 --
Current maturities of long-term debt...................... 7,375 7,440
Other notes payable at interest rates of 5.1% and 5.4%.... 6,712 6,567
-------- --------
Total short-term debt.................................. $432,027 $312,610
======== ========
Long-term debt:
6.61% Debentures due September 15, 2027, net of
unamortized discount of $97 and $98.................... $249,903 $249,902
4.75% Liquid Yield Option Notes due April 15, 2017, net of
unamortized discount of $285,638 and $288,129.......... 214,362 211,871
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 $558 and $559.................. 147,442 147,441
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 $156,128 and $158,080,
with an effective interest rate of 4.3%................ 45,206 47,088
4 1/4% PEPS due March 15, 2001; 803,100 and 863,100
securities stated at current maturity value............ 94,766 45,596
-------- --------
998,644 948,863
Less current maturities................................... (7,375) (7,440)
-------- --------
Total long-term debt................................... $991,269 $941,423
======== ========
</TABLE>
Interest rate swaps outstanding at March 31, 1999 converted the weighted
average interest rate on the 7 1/4% Debentures due November 15, 2096, the 6.61%
Debentures, the 7 1/2% Debentures and the Liquid Yield Option Notes (LYONS(TM))
from 6.3% to 5.3% for the quarter ended March 31, 1999.
The 4 1/4% Premium Equity Participating Securities (PEPS) hedge the
Company's investment in the common stock of America Online, Inc. (AOL), which
acquired Netscape Communications Corporation in the 1999 first quarter. The
amount payable at maturity is determined by reference to the fair market value
of the AOL 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, 1999, the fair market value of the PEPS was $118.00 per security
reflecting an increase in the value of the underlying securities and,
accordingly, resulted in a higher carrying value of the PEPS. During the quarter
ended March 31, 1999, the Company sold 54,000 shares of AOL stock and purchased
a proportionate share of its PEPS in the open market for a total pre-tax gain of
$3,110,000.
9
<PAGE> 10
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,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Earnings:
Income from continuing operations......................... $48,813 $45,967
Preferred stock dividends................................. (5,424) (5,424)
------- -------
Earnings applicable to common shareholders for basic
earnings per share..................................... 43,389 40,543
LYONs interest expense, net of tax........................ 1,476 --
------- -------
Earnings applicable to common shareholders for diluted
earnings per
share.................................................. $44,865 $40,543
======= =======
Shares:
Weighted average shares for basic earnings per share...... 73,076 88,335
Effect of convertible securities:
Stock options.......................................... 1,444 2,405
LYONs convertible debt................................. 2,914 --
------- -------
4,358 2,405
------- -------
Adjusted weighted average shares and assumed conversions
for diluted earnings per share......................... 77,434 90,740
======= =======
Basic earnings per share from continuing operations....... $ .59 $ .46
======= =======
Diluted earnings per share from continuing operations..... $ .58 $ .45
======= =======
</TABLE>
The Company has convertible securities that are not included in the
calculation of diluted earnings per share because the effects are antidilutive.
Cash dividends of $.20 and $.18 per share of common stock were declared for
the quarters ended March 31, 1999 and 1998, respectively.
NOTE 7 -- CAPITAL STOCK AND STOCK PURCHASE PROGRAM
The Company's stock purchase 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, 1998. Share purchases of the Company's Series A common shares
continued in the first quarter of 1999 through a combination of a forward
purchase agreement, put options and open market purchases by Eagle New Media
Investments, LLC (Eagle New Media), an investment affiliate of the Company. The
Company and Eagle New Media purchased 1,784,000 shares of its Series A common
stock during the quarter ended March 31, 1999, which more than offset shares
issued as a result of the exercise of stock options.
At March 31, 1999, the Company had 700,000 put options outstanding with an
average strike price of approximately $56.65. The put options, which have
various expiration dates primarily in the second quarter of 1999, 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."
10
<PAGE> 11
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 8 -- STOCK OPTIONS
During the quarter ended March 31, 1999, the Company issued 666,000 shares
of its common stock as a result of the exercise of stock options.
The Company has various stock option plans under which options may be
granted to key employees to purchase shares of Series A common stock at a price
equal to the fair market value at the date of grant. During the 1999 first
quarter, the Company granted 2,276,000 options under these plans. The Company
also granted each eligible employee 100 stock options on March 1, 1999. This
grant resulted in the issuance of approximately 1,700,000 stock options at an
option price of $56.3125, which was equal to fair value at the date of grant.
These options will be fully vested on March 1, 2002 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 the Company's financial position or
reported results.
The Company's future results could be adversely affected by a number of
factors, including (a) an increase in paper, printing and distribution costs
over the levels anticipated; (b) increased consolidation among major retailers
or other events depressing the level of display advertising; (c) an economic
downturn in the Company's principal newspaper markets or other occurrences
leading to decreased circulation and diminished revenues from both display and
classified advertising; (d) an increase in the use of alternate media such as
the Internet for classified and other advertising; (e) an increase in expenses
related to new initiatives and product improvement efforts in the flight
information and health information operating units; (f) unfavorable foreign
currency fluctuations; (g) material changes in tax liability due to unfavorable
reviews by taxing authorities; (h) the inability of the Company, its vendors,
suppliers or other third parties with which the Company interacts to resolve the
Year 2000 issue in a timely manner; and (i) 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 actions for 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. 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 -- ACQUISITION AND DISPOSITIONS
On February 12, 1999, Eagle New Media acquired Newport Media, Inc., a
publisher of shopper publications in the Long Island and New Jersey areas, for
approximately $132,000,000. The acquisition was accounted for by the purchase
method with the results of operations included in the Company's financial
statements from the date of acquisition. The purchase price has been allocated
primarily to goodwill and other intangible assets based on a preliminary
valuation of Newport Media. Pro forma results for the quarters ended March 31,
1999 and 1998, assuming the acquisition occurred on January 1 of the respective
year, would not be materially different from the results reported.
11
<PAGE> 12
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Company signed a definitive agreement on January 10, 1999, to merge
Hollywood Online, Inc., and its Web site, hollywood.com into Big Entertainment,
Inc., in exchange for newly-issued restricted stock of Big Entertainment at a
value to be determined as of the closing date of the merger. This merger is
expected to be completed in the second quarter of 1999. Additionally, the
Company completed the sale of Apartment Search, Inc. on March 31, 1999. The
estimated loss on sale of Apartment Search, including a provision for operating
losses through the date of disposal was recorded in the third quarter of 1998.
NOTE 12 -- SEGMENT INFORMATION
Financial data for the Company's segments is as follows (in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
REVENUES
Newspaper Publishing...................................... $573,546 $542,921
Professional Information.................................. 103,211 105,734
Magazine Publishing....................................... 68,839 65,645
-------- --------
Total Reportable Segments......................... 745,596 714,300
Corporate and Other....................................... 525 201
Intersegment Revenues..................................... (78) (371)
-------- --------
$746,043 $714,130
======== ========
OPERATING PROFIT (LOSS)
Newspaper Publishing...................................... $ 91,672 $ 90,154
Professional Information.................................. 16,170 16,958
Magazine Publishing....................................... 3 (223)
-------- --------
Total Reportable Segments......................... 107,845 106,889
Corporate and Other....................................... (15,107) (16,942)
-------- --------
$ 92,738 $ 89,947
======== ========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing...................................... $ 31,632 $ 28,965
Professional Information.................................. 4,146 5,019
Magazine Publishing....................................... 1,992 1,945
-------- --------
Total Reportable Segments......................... 37,770 35,929
Corporate and Other....................................... 1,161 1,054
-------- --------
$ 38,931 $ 36,983
======== ========
CAPITAL EXPENDITURES
Newspaper Publishing...................................... $ 30,046 $ 17,232
Professional Information.................................. 3,662 3,982
Magazine Publishing....................................... 846 433
-------- --------
Total Reportable Segments......................... 34,554 21,647
Corporate and Other....................................... 1,838 1,941
-------- --------
$ 36,392 $ 23,588
======== ========
</TABLE>
A reconciliation of operating profit to income from continuing operations
before income taxes is set forth in the Company's Condensed Consolidated
Statements of Income on page 3.
12
<PAGE> 13
THE TIMES MIRROR COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Identifiable assets of the Company's segments are as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Newspaper Publishing....................................... $2,162,265 $1,999,880
Professional Information................................... 328,822 344,636
Magazine Publishing........................................ 278,511 271,457
---------- ----------
Total Reportable Segments........................ 2,769,598 2,615,973
Corporate and Other........................................ 1,459,471 1,602,333
---------- ----------
$4,229,069 $4,218,306
========== ==========
</TABLE>
13
<PAGE> 14
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 ENDED MARCH 31,
------------------------------
1999 1998 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues............................................. $746,043 $714,130 4.5%
Operating profit..................................... 92,738 89,947 3.1
Interest expense, net................................ 7,782 10,295 (24.4)
Other, net........................................... 997 (484) (100.0)+
Income from continuing operations.................... 48,813 45,967 6.2
Loss from discontinued operations, net of income tax
benefit............................................ -- 706 100.0+
Net income........................................... 48,813 45,261 7.8
Preferred dividend requirements...................... 5,424 5,424 --
Earnings applicable to common shareholders........... $ 43,389 $ 39,837 8.9
Basic earnings (loss) per share:
Continuing operations.............................. $ 0.59 $ 0.46 28.3
Discontinued operations............................ -- (0.01) (100.0)+
-------- --------
Basic earnings per share............................. $ 0.59 $ 0.45 31.1
======== ========
Diluted earnings (loss) per share:
Continuing operations.............................. $ 0.58 $ 0.45 28.9
Discontinued operations............................ -- (0.01) (100.0)+
-------- --------
Diluted earnings per share........................... $ 0.58 $ 0.44 31.8
======== ========
Weighted average shares:
Basic.............................................. 73,076 88,335 (17.3)
======== ========
Diluted............................................ 77,434 90,740 (14.7)
======== ========
</TABLE>
Revenues for the 1999 first quarter rose compared to the prior year first
quarter due primarily to higher advertising revenues in the Newspaper and
Magazine Publishing segments, including the effects of acquisitions.
Operating profit for the 1999 first quarter was higher compared to the 1998
first quarter, reflecting a modest increase in the Newspaper Publishing segment
and lower Corporate and Other expenses, partially offset by a decrease in
operating profit in the Professional Information segment. The 1999 first quarter
operating profit was affected by lower pension income as a result of a $4.5
million reduction in the amortization of the transition asset.
Earnings per share for the first quarter of 1999 increased compared to the
first quarter of 1998 due to a reduction in the weighted average number of
shares outstanding, higher operating profit and lower net interest expense.
Net interest expense declined for the first quarter of 1999 compared to the
prior year first quarter due to an increase in interest income resulting from
investment activity of the Company's affiliated limited liability companies.
Higher interest income more than offset a rise in interest expense primarily due
to higher debt levels for share purchases and prior year acquisitions.
14
<PAGE> 15
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ANALYSIS BY SEGMENT
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
------------------------------
1999 1998 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues
Advertising......................................... $455,851 $424,353 7.4%
Circulation......................................... 105,505 106,853 (1.3)
Other............................................... 12,190 11,715 4.1
-------- --------
$573,546 $542,921 5.6%
======== ========
Operating profit...................................... $ 91,672 $ 90,154 1.7%
======== ========
</TABLE>
Newspaper Publishing operating profit increased in the 1999 first quarter
compared to the prior year first quarter due largely to strong gains at the
Company's Eastern newspapers, including the effects of acquisitions.
Double-digit operating profit gains at Newsday and The Baltimore Sun more than
offset a small expected decline in operating profit at the Los Angeles Times,
where all the expected annual expense reductions contemplated in the 1998
restructuring program have not yet been realized.
Newspaper Publishing revenues rose in the 1999 first quarter compared to
the 1998 first quarter reflecting the additions of the Recycler, acquired in
April 1998; Newport Media, Inc., acquired in February 1999; and ValuMail,
acquired in March 1999. Excluding acquisitions, revenues in the 1999 first
quarter rose 2.0%, with Eastern newspapers up 2.8% and The Times up 1.1% from
the prior year's quarter. Advertising revenues increased in the 1999 first
quarter compared to the prior year first quarter, led by the Eastern newspapers.
Excluding acquisitions, 1999 first quarter advertising revenues rose 3.3%, with
Eastern newspapers up 4.3% and The Times up 2.3%. For The Times, growth in
national advertising as well as real estate and automotive classified
advertising helped offset continued weakness in the classified help-wanted
category.
The Newspaper Publishing segment achieved steady improvements in both
average daily and Sunday circulations at the Company's largest newspapers,
according to the six-month period ended March 31, 1999 publisher's statements to
the Audit Bureau of Circulations. Circulation revenue, however, declined
slightly as marketing strategies involving pricing and promotional discounts,
largely at The Times, helped stimulate circulation volume gains but resulted in
lower overall circulation revenues. Excluding acquisitions, circulation revenues
declined 3.2% for the first quarter of 1999 compared to the first quarter of
1998.
Newsprint expense for the 1999 first quarter remained level with the prior
year first quarter as price declines offset consumption increases due to higher
circulation and advertising volume. Additionally, newsprint expense was only
partially affected by newsprint price declines due to the Company's use of
newsprint hedging contracts. For the remainder of 1999, increases in newsprint
consumption from higher circulation and advertising volume are expected to be
modestly offset by less consumption due to the conversion of The Times printing
presses from a 54-inch newsprint web to a 50-inch newsprint web. The Times will
convert its printing presses throughout the year, which is expected to reduce
its newsprint consumption by as much as 7.0% on an annual basis. Including the
effects of acquisitions, other expenses for the segment were up 8.1%. Excluding
newsprint and acquisitions, other expenses for the segment rose 3.1%, due in
part to higher benefit costs and increased information technology expense.
15
<PAGE> 16
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
------------------------------
1999 1998 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues............................................. $103,211 $105,734 (2.4)%
======== ========
Operating profit..................................... $ 16,170 $ 16,958 (4.6)%
======== ========
</TABLE>
Professional Information's results declined in the 1999 first quarter
largely due to lower revenues and reduced profitability at AchieveGlobal, the
Company's training business, which were partially offset by outstanding
performance at Jeppesen Sanderson, the Company's flight information business. At
StayWell, the Company's health improvement business, operating profit was
essentially flat with the prior year's first quarter.
MAGAZINE PUBLISHING
Magazine Publishing revenues and operating profit (loss) were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
------------------------------
1999 1998 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues............................................. $ 68,839 $ 65,645 4.9%
======== ========
Operating profit (loss).............................. $ 3 $ (223) (100.0+)%
======== ========
</TABLE>
Magazine Publishing achieved advertising revenue gains at most of the
magazines in the first quarter of 1999. The acquisition of Senior Golfer in
October 1998 and the special publication of The Best Things in Golf, also
contributed to higher revenues. The Magazine Publishing segment's first quarter
operating profit improved slightly to break-even compared to the prior year's
modest first quarter operating loss. In the 1999 first quarter, the segment
incurred expenses related to two new publications, Outdoor Explorer and
TransWorld SURF, in addition to ongoing investments in the relaunch of The
Sporting News and Today's Homeowner.
CORPORATE AND OTHER
Corporate and Other revenues and operating loss were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
------------------------------
1999 1998 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Revenues............................................. $ 525 $ 201 100.0+%
======== ========
Operating loss....................................... $(15,107) $(16,942) (10.8)%
======== ========
</TABLE>
Operating loss for the 1999 first quarter decreased from the 1998 first
quarter due primarily to lower employee related costs.
16
<PAGE> 17
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESTRUCTURING LIABILITY
A summary of the activity in restructuring liabilities is as follows (in
thousands):
<TABLE>
<CAPTION>
BALANCE 1999 CASH BALANCE
DESCRIPTION 12/31/98 PAYMENTS 3/31/99
----------- -------- --------- -------
<S> <C> <C> <C>
1998 Restructuring:
Termination benefits................................. $52,114 $(26,352) $25,762
Contract terminations................................ 31,264 (17,010) 14,254
Lease termination costs.............................. 8,192 (1,763) 6,429
Technology asset costs............................... 671 (151) 520
Business exit and other costs........................ 5,023 (38) 4,985
------- -------- -------
Total........................................ $97,264 $(45,314) $51,950
======= ======== =======
1995 Restructuring..................................... $24,404 $ (2,971) $21,433
======= ======== =======
</TABLE>
The remaining 1998 restructuring liability is expected to be substantially
paid by the end of 1999. Annual expense reductions resulting from the 1998
restructuring program are in line with management's expectations. The 1995
restructuring liability relates primarily to lease payments on unoccupied
properties. The Company believes that cash flows from operations will be
adequate to cover future cash outflows under the restructuring programs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements are funded primarily by its
operations. Proceeds from borrowings have been used primarily to fund capital
expenditures and share purchases. At March 31, 1999, the Company had a $400.0
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 that is available for short-term cash requirements. The Company had
$292.9 million and $278.5 million of commercial paper outstanding at March 31,
1999 and May 7, 1999, respectively. Additionally, the Company has a shelf
registration statement for $300.0 million of securities which has not been
utilized.
The Company also has an uncommitted bank line of credit, which provides for
unsecured borrowings up to $250.0 million, of which $125.0 million was
outstanding at March 31, 1999. At May 7, 1999, borrowings outstanding under this
line of credit remained unchanged from March 31, 1999.
ACQUISITION AND DISPOSITIONS
On February 12, 1999, Eagle New Media Investments, LLC (Eagle New Media),
an investment affiliate of the Company, acquired Newport Media, Inc., a
publisher of shopper publications in the Long Island and New Jersey areas for
approximately $132.0 million.
The Company signed a definitive agreement on January 10, 1999, to merge
Hollywood Online, Inc., and its Web site, hollywood.com into Big Entertainment,
Inc., in exchange for newly-issued restricted stock of Big Entertainment at a
value to be determined as of the closing date of the merger. This merger is
expected to be completed in the second quarter of 1999. Additionally, the
Company completed the sale of Apartment Search, Inc. on March 31, 1999. The
estimated loss on sale of Apartment Search, including a provision for operating
losses through the date of disposal was recorded in the third quarter of 1998.
17
<PAGE> 18
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
COMMON SHARE PURCHASES
Share purchases of the Company's Series A common shares continued in the
first quarter of 1999 through a combination of a forward purchase agreement, put
options and open market purchases by Eagle New Media. The Company and Eagle New
Media purchased 1.8 million shares of its Series A common stock during the
quarter ended March 31, 1999, which more than offset 0.7 million shares issued
as a result of the exercise of stock options.
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.
Purchases by the Company and its affiliates are expected to be made during the
next two years 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. As
of March 31, 1999, the Company and its affiliates are authorized to purchase 5.3
million shares of Series A common stock. On a consolidated basis for financial
reporting purposes, the number of shares of common stock outstanding totaled
72.3 million at March 31, 1999 compared with 88.7 million at March 31, 1998.
CASH FLOW
The following table sets forth certain items from the Condensed
Consolidated Statements of Cash Flows (in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
MARCH 31,
---------------------
1999 1998
--------- --------
<S> <C> <C>
Net cash provided by operating activities of continuing
operations................................................ $ 4,667 $ 22,821
Acquisitions, net of cash acquired.......................... (138,710) (8,487)
Capital expenditures........................................ (36,392) (23,588)
Purchase of Times Mirror common stock, including exercise of
put options, net of premiums received..................... (106,000) 307
Net issuance of commercial paper and short-term
borrowings................................................ 119,482 82,684
</TABLE>
Cash generated by operating activities of continuing operations for the
first quarter of 1999 was lower compared to the first quarter of 1998 due
primarily to restructuring payments which were accrued in 1998.
On February 12, 1999, Eagle New Media acquired Newport Media, Inc. for
approximately $132.0 million.
Capital expenditures for the first quarter of 1999 were higher compared to
the same period in 1998 due primarily to the Company's continuing investments
for future growth which included facility renovations within the Newspaper
Publishing segment and commencement of a conversion project to a 50-inch web at
The Times. Additionally, the Company increased capital spending related to
information technology projects, including Year 2000 requirements. Capital
expenditures are currently expected to reach approximately $200.0 million for
1999.
Total debt at March 31, 1999 rose to $1.42 billion from $1.25 billion at
December 31, 1998 due primarily to short-term borrowings.
18
<PAGE> 19
THE TIMES MIRROR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
IMPACT OF YEAR 2000
As more fully described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, the Company is modifying or replacing significant
portions of its software as well as certain hardware to enable continued
operations beyond December 31, 1999. As of March 31, 1999, the Company estimates
its progress toward completion of its Year 2000 remediation plan as follows:
<TABLE>
<CAPTION>
PERCENT COMPLETE AS OF TARGETED DATE FOR
PROJECT PHASE MARCH 31, 1999 SUBSTANTIAL COMPLETION
------------- ---------------------- ----------------------
<S> <C> <C>
Inventory.................................. 99% March 1999
Assessment/Planning........................ 96% March 1999
Remediation................................ 86% June 1999
Testing.................................... 61% September 1999
Contingency Planning....................... 59% September 1999
</TABLE>
To date, the Company has incurred costs of $24.2 million for the Year 2000
project, of which $18.6 million was capitalized and $5.6 million was expensed.
These costs include 1999 first quarter capital expenditures of $1.7 million and
expenses of $1.3 million. Total project costs are estimated to be $46.2 million,
excluding internal costs for employees working on the project. Except as noted
above, management's assessment of the status of the Year 2000 project and its
contingency plans are unchanged from that described in the Company's 1998 Annual
Report on Form 10-K.
The Company's plans to address the Year 2000 issue are based on
management's current estimates and are subject to various uncertainties that
could cause the actual results to differ materially from these plans. These
uncertainties include, but are not limited to, 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 magnitude of related labor and consulting costs; and the
success of vendors, suppliers and other third parties with which the Company
interacts in addressing the Year 2000 issue. If the Company, its vendors,
suppliers or such other parties are unable to resolve the Year 2000 issue on
schedule, the Company may not be able to prepare and distribute its publications
or provide its services in a timely manner, which may have a material adverse
effect on the Company's results of operations.
DIVIDENDS
Cash dividends of $.20 and $.18 per share of common stock were declared for
the quarters ended March 31, 1999 and 1998, respectively. In February 1999, the
Board of Directors approved an increase in quarterly cash dividends to $.20 per
share for an annualized rate of $.80 per share, representing the fourth
consecutive year of dividend increases for common shareholders.
FORWARD-LOOKING STATEMENTS
Certain statements set forth above and elsewhere in this Quarterly Report
on Form 10-Q are forward-looking in nature and related to trends and events that
may affect the Company's future financial position and operating results. Such
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The term "expect," "anticipate," and
"intend" and similar words or expressions are intended to identify
forward-looking statements. These statements speak only as of the date of this
report. These statements are based on current expectations, are inherently
uncertain, are subject to risks, and should be viewed with caution. Actual
results and experience may differ materially from the forward-looking statements
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. It
is not possible to foresee or identify all such factors. The Company makes no
commitment to update any forward-looking statement or to disclose any facts,
events, or circumstances after the date hereof that may affect the accuracy of
any forward-looking statement.
19
<PAGE> 20
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
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed for the quarter ended March 31, 1999.
20
<PAGE> 21
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 14, 1999
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 883,438
<SECURITIES> 34,540
<RECEIVABLES> 411,961
<ALLOWANCES> 49,317
<INVENTORY> 44,690
<CURRENT-ASSETS> 1,437,198
<PP&E> 1,933,639
<DEPRECIATION> 1,002,969
<TOTAL-ASSETS> 4,229,069
<CURRENT-LIABILITIES> 1,034,717
<BONDS> 991,269
0
724,820
<COMMON> 112,119
<OTHER-SE> 423,045
<TOTAL-LIABILITY-AND-EQUITY> 4,229,069
<SALES> 746,043
<TOTAL-REVENUES> 746,043
<CGS> 408,955
<TOTAL-COSTS> 408,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,119
<INTEREST-EXPENSE> 21,364
<INCOME-PRETAX> 85,953
<INCOME-TAX> 37,140
<INCOME-CONTINUING> 48,813
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,813
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.58
</TABLE>
