<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NUMBER 1-13492
------------------------
THE TIMES MIRROR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4481525
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
TIMES MIRROR SQUARE
LOS ANGELES, CALIFORNIA 90053
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 237-3700
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ---------------------------------------- ---------------------------------------------------
Series A Common Stock New York Stock Exchange and Pacific Stock Exchange
Premium Equity Participating Securities New York Stock Exchange
</TABLE>
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Series C Common Stock
(TITLE OF CLASS)
------------------------
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant on March 13, 2000 was approximately $2.9
billion. (For purposes of this calculation, the market value of a share of
Series C Common Stock was assumed to be the same as a share of Series A Common
Stock, into which it is convertible.)
Number of shares of Series A Common Stock outstanding at March 13, 2000:
40,471,127, excluding 18,237,864 shares held by subsidiaries of the Registrant;
4,001,067 common shares held by TMCT, LLC, representing 80% of the common shares
held by TMCT, LLC; 12,432,973 shares held by TMCT II, LLC, representing 80% of
the shares held by TMCT II, LLC; 16,230,026 shares held by Eagle New Media
Investments, LLC and 2,589,077 shares held as treasury shares.
Number of shares of Series C Common Stock outstanding at March 13, 2000:
18,196,797.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III will be incorporated by reference from
the Registrant's definitive Proxy Statement for the Company's 2000 Annual
Meeting of Shareholders to be filed by the Company within 120 days after the end
of the Company's fiscal year or will be filed under a Form 10-K/A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
The Times Mirror Company ("Times Mirror" or the "Company") is engaged
principally in the newspaper publishing, professional information and magazine
publishing businesses. The Company publishes the Los Angeles Times, Newsday, The
Baltimore Sun, The Hartford Courant, The Morning Call, The (Stamford) Advocate,
Greenwich Time and several smaller newspapers. The Company also provides
information to the aviation market and publishes magazines.
During 1999, Times Mirror engaged in several strategic transactions
including the acquisition by an investment affiliate of Newport Media, Inc., a
publisher of shopper publications in the New York and New Jersey areas,
ValuMail, Inc., a shared mail company that distributes preprinted advertising in
Connecticut and Massachusetts, and Airspace Safety Analysis Corporation, a
provider of airspace utilization and Federal Aviation Administration compliance
services for the telecommunications and aviation industries. In addition, during
1999, the Company acquired New Mass. Media, Inc., a publisher of five weekly
alternative newspapers in Connecticut, Massachusetts and New York, and sold
Hollywood Online, Inc. and Apartment Search, Inc.
In September 1999, Times Mirror, its affiliates and its largest
stockholders, the Chandler Trusts, completed a transaction that, for financial
reporting purposes, reduced Times Mirror's outstanding common stock by 12.4
million shares and reduced Times Mirror's then outstanding Series C Preferred
Stock by 501,000 shares. In September 1999, Times Mirror also decided to sell
AchieveGlobal, Inc., its professional training company, Allen Communication, a
division of AchieveGlobal that develops and markets interactive software and
training courseware, The StayWell Company, a health improvement company, and The
Sporting News, a national sports weekly. In February 2000, Gilat Communications
Ltd. acquired Allen Communication, Vulcan Ventures Inc. agreed to acquire The
Sporting News and MediMedia USA, Inc., a subsidiary of Havas MediMedia S.A.,
agreed to acquire The StayWell Company.
In the fourth quarter of 1999, Times Mirror formed a new Internet unit,
Times Mirror interactive, focused on growing the Company's existing online
franchises and developing new businesses that leverage existing capabilities.
The Company continued to have an active share purchase program with a total of
3.2 million shares of Series A Common Stock acquired by the Company or its
affiliates during 1999, not including shares effectively retired in the
transaction with the Chandler Trusts. This more than offset the 2.0 million
shares of Series A Common Stock issued as a result of the exercise of stock
options.
On March 13, 2000, Times Mirror and Tribune Company (Tribune) signed a
definitive agreement for the merger of the two companies in a cash and stock
transaction valued at approximately $8 billion based on the closing price of
Tribune common stock on March 10, 2000. Under the terms of this agreement,
Tribune will make a cash tender offer for up to 28 million shares of the
Company's common stock, which represents approximately 48% of the shares of
common stock outstanding as of March 13, 2000, at a price of $95 per share.
Following completion of the tender offer, Times Mirror and Tribune will merge in
a transaction in which each share of Times Mirror common stock is converted into
2.5 shares of Tribune common stock. In addition, if fewer than 28 million Times
Mirror common shares are purchased in the tender offer, Times Mirror
shareholders will be permitted to elect cash, at a price of $95 per share, in
the merger, up to the balance of the 28 million shares. The merger is subject to
the approval of the shareholders of both companies and other customary
conditions, including regulatory approvals. Times Mirror expects the tender
offer to be completed in mid-April and the merger to be completed in the second
or third quarter of 2000.
NEWSPAPER PUBLISHING SEGMENT
Times Mirror publishes the Los Angeles Times, Newsday, The Baltimore Sun,
The Hartford Courant, The Morning Call, The (Stamford) Advocate, Greenwich Time
and several other daily and weekly newspapers. Local management operates each
daily newspaper substantially independently in order to most effectively meet
the needs of the area each newspaper serves. Editorial policies are also
established by local management. The Company continues to move toward
centralizing the back-office operations of its eastern
1
<PAGE> 3
newspapers and certain of its other business units. Each daily newspaper is a
member of Associated Press. The Los Angeles Times and Newsday also subscribe to
other supplementary news services. Production of Times Mirror's newspapers is
performed on presses owned by Times Mirror.
LOS ANGELES TIMES
The Los Angeles Times has been published continuously since 1881 and, in
1999, won a Pulitzer Prize for beat reporting. It is published every morning
and, for the six-month period ended September 30, 1999, as reported by the
Company to the Audit Bureau of Circulations, ranked as the largest metropolitan
newspaper in the United States in circulation. In 1999, its annual average
unaudited circulation was 1,106,749 for Monday through Friday, 1,000,140 for
Saturday and 1,381,422 for Sunday, compared with 1,097,079, 1,017,398 and
1,385,145, respectively, in 1998. Approximately 71%, 76% and 77% of the Monday
through Friday, Saturday and Sunday circulation, respectively, was
home-delivered in 1999, compared with 75%, 79% and 78% of the circulation,
respectively, in 1998.
In 1999, the Los Angeles Times recorded full-run billed advertising volume
of 3,387,845 standard advertising unit inches (hereinafter "inches"), part-run
volume of 6,333,733 inches, and preprinted inserts of 1,156.0 million pieces,
compared with 3,212,104 inches, 5,362,693 inches and 1,169.3 million pieces,
respectively, in 1998. In addition, the Los Angeles Times derived revenue from
advertising supplements distributed to non-subscribers equivalent to 1,469.2
million pieces in 1999, compared with 1,138.5 million pieces in 1998.
In addition to the daily edition covering the Los Angeles metropolitan
area, the Los Angeles Times publishes daily Orange County, San Fernando Valley
and Ventura County editions. The Los Angeles Times also publishes a daily
national edition that is distributed primarily in Northern California, New York
and Washington, D.C. In an effort to provide targeted local news coverage, the
Los Angeles Times inserts daily and semi-weekly community newspapers published
by Times Community Newspapers. In 1999, the Los Angeles Times also inserted 12
daily and weekly community news sections under the banner Our Times. In 1999,
the Los Angeles Times also established joint distribution agreements with La
Opinion, the largest Spanish-language daily newspaper in Southern California, in
which the Company owns a 50% equity interest, and other local native-language
newspapers. Through E Z Buy & E Z Sell Recycler Corporation, Times Mirror
publishes a collection of 19 alternative classified papers in Southern
California including titles such as the Recycler, AutoBuys, CycleBuys and the
Renter.
In conjunction with the Washington Post, the Los Angeles Times operates a
supplementary news service sold to newspapers in the United States and foreign
countries. The Los Angeles Times also syndicates material to other newspapers
throughout the world.
Net revenues for the Los Angeles Times, including California Community News
Corporation and E Z Buy & E Z Sell Recycler Corporation, were $1,205,665,000 in
1999, $1,137,521,000 in 1998 and $1,088,822,000 in 1997, representing 39.8%,
40.9%, and 41.2% of the Company's consolidated revenues from continuing
operations for such years.
NEWSDAY
Newsday, which is published seven days a week, circulates primarily in
Nassau and Suffolk counties on Long Island, New York and the borough of Queens
in New York City. In 1999, Newsday ranked as the sixth largest metropolitan
daily newspaper in the country for Monday through Friday circulation, and as the
eleventh largest for Sunday circulation. In 1999, Newsday's annual average
unaudited circulation was 568,697 for Monday through Friday, 450,451 for
Saturday, and 663,534 for Sunday, compared with 567,227, 459,732 and 658,351,
respectively, in 1998. Newsday also publishes Distinction, a bi-monthly magazine
designed to serve Long Island's upscale community, which is supported by
advertising revenues and paid subscriptions. In addition, Newsday's affiliated
alternate distribution company, DSA Community Publishing, operates This Week, a
free distribution shopper with 80 editions, Newport Media, a publisher of 135
pennysaver editions, and Hoy, a Spanish-language daily newspaper for the New
York metropolitan area. Newsday has won sixteen Pulitzer Prizes.
2
<PAGE> 4
In 1999, Newsday recorded full-run billed advertising volume of 1,739,541
inches, part-run volume of 1,650,799 inches, and preprinted inserts of 863.3
million pieces, compared with 1,644,283 inches, 1,495,782 inches, and 796.5
million pieces, respectively, in 1998. In addition, Newsday, together with DSA
Community Publishing, derived revenue from advertising supplements distributed
to non-subscribers equivalent to 1,122.3 million pieces in 1999, compared with
1,197.2 million pieces in 1998.
THE BALTIMORE SUN
The Baltimore Sun primarily serves the Baltimore-Annapolis metropolitan
area, including Anne Arundel, Baltimore, Carroll, Harford and Howard counties.
The Baltimore Sun publishes a morning newspaper seven days a week. In 1999, The
Sun had an annual average unaudited circulation of 319,256 for Monday through
Saturday, compared with 320,138 for 1998. Annual average unaudited circulation
for Sunday was 479,090 in 1999 compared with 475,644 in 1998.
In 1999, The Baltimore Sun newspapers recorded full-run billed advertising
volume of 2,001,999 inches, part-run volume of 505,163 inches, and preprinted
inserts of 667.0 million pieces, compared with 1,761,972 inches, 456,434 inches
and 671.9 million pieces, respectively, in 1998. In addition, The Baltimore Sun
newspapers derived revenues from advertising supplements delivered to
non-subscribers equivalent to 147.3 million pieces in 1999, compared with 110.9
million pieces in 1998.
The Baltimore Sun also publishes a variety of weekly newspapers throughout
Anne Arundel, Baltimore, Carroll, Harford and Howard counties.
THE HARTFORD COURANT
The Hartford Courant, a morning daily and Sunday newspaper that was first
published in 1764, is the oldest continuously published newspaper in the United
States. It is published in Hartford, Connecticut, and serves the state's
northern and central regions. The Hartford Courant publishes 12 regional
editions on a daily basis, which provide local news and advertising. In 1999,
the annual average unaudited circulation was 210,084 for Monday through
Saturday, and 298,510 for Sunday, compared with 212,606 and 302,493,
respectively, in 1998.
In 1999, The Hartford Courant recorded full-run billed advertising volume
of 1,423,862 inches, part-run volume of 591,946 inches, and preprinted inserts
of 456.4 million pieces, compared with 1,435,662 inches, 610,391 inches and
446.2 million pieces, respectively, in 1998. In addition, The Hartford Courant
derived revenues from advertising supplements distributed to non-subscribers
equivalent to 84.3 million pieces in 1999, compared with 80.5 million pieces in
1998.
In 1999, The Hartford Courant won a Pulitzer Price for breaking news
reporting. In addition, in 1999, The Hartford Courant acquired New Mass. Media,
Inc., a publisher of five weekly alternative newspapers in Connecticut,
Massachusetts and New York, and an investment affiliate of the Company acquired
ValuMail, Inc., a shared mail company that distributes advertising supplements
to households in Connecticut, Massachusetts and Rhode Island.
THE MORNING CALL
The Morning Call in Allentown, Pennsylvania, is published daily and
primarily services Lehigh and Northampton counties in eastern Pennsylvania. In
1999, annual average unaudited circulation was 125,498 for Monday through
Friday, 140,114 for Saturday, and 171,030 for Sunday, compared with 127,561,
142,182 and 175,722, respectively, in 1998.
In 1999, The Morning Call recorded full-run billed advertising volume of
1,291,892 inches, part-run volume of 379,782 inches, and preprinted inserts of
281.9 million pieces, compared with 1,410,190 inches, 254,436 inches and 264.2
million pieces, respectively, in 1998. In addition, The Morning Call derived
revenues from advertising supplements distributed to non-subscribers equivalent
to 21.8 million pieces in 1999, compared with 19.4 million pieces in 1998.
3
<PAGE> 5
THE (STAMFORD) ADVOCATE AND GREENWICH TIME
The (Stamford) Advocate and Greenwich Time are published every morning and
serve the southern part of Fairfield County, Connecticut. The Advocate
circulates primarily in Stamford, Connecticut and Greenwich Time circulates in
Greenwich, Connecticut. In 1999, The Advocate had an annual average unaudited
circulation of 28,002 for Monday through Saturday and 37,233 for Sunday,
compared with 28,003 and 38,604, respectively, in 1998. In 1999, Greenwich Time
had an annual average unaudited circulation of 12,416 for Monday through
Saturday and 13,866 for Sunday, compared with 12,625 and 14,071, respectively,
in 1998.
In 1999, The Advocate recorded full-run billed advertising volume of
799,047 inches, and preprinted inserts of 41.8 million pieces, compared with
801,666 inches and 43.5 million pieces, respectively, in 1998. In 1999,
Greenwich Time recorded full-run billed advertising volume of 808,609 inches and
preprinted inserts of 13.9 million pieces, compared with 801,636 inches and 14.5
million pieces, respectively, in 1998. In addition, the newspapers derived
revenues from advertising supplements distributed to non-subscribers equivalent
to 22.0 million pieces in 1999, compared with 23.0 million pieces in 1998.
ELECTRONIC PUBLISHING
Times Mirror's newspapers offer numerous Web sites. The Los Angeles Times
operates the Web site latimes.com, a leading online news and advertising
service. Newsday (newsday.com), The Hartford Courant (ctnow.com), The Baltimore
Sun (sunspot.net) and The Morning Call (mcall.com) each maintain Web sites that
provide news and other information on a daily basis. The Advocate and Greenwich
Time maintain an arts and entertainment Web site, goodtogo.com. During 1999,
Times Mirror continued to support CareerPath.com, a national employment online
service with an extensive listing of jobs on the Internet, and Classified
Ventures, a company that seeks to use the Internet to expand the founding
companies' positions as leading suppliers of classified advertising. Classified
Ventures operates business units in the apartment (apartments.com), auto
(cars.com), new home (newhomenetwork.com) and resale real estate
(homehunter.com) categories. In addition to Times Mirror, the companies
participating in Classified Ventures include Central Newspapers, Inc., Gannett
Co., Inc., Knight-Ridder, Inc., The McClatchy Company, The New York Times
Company, Tribune Company and The Washington Post Company. The Los Angeles Times,
through Recycler, also provides extensive alternative classified listings on
recycler.com.
In the fourth quarter of 1999, Times Mirror formed Times Mirror
interactive, a new business unit focused on growing and improving existing
online initiatives and building new Internet business.
COMPETITION
The Company's newspapers compete for advertising and readership with other
metropolitan, suburban and national newspapers as well as with other local and
national sales promotion media such as radio, broadcast television, cable
television, magazines, direct mail and the Internet. Competition for advertising
is based upon, among other factors, the number of, and the demographics of,
subscribers, readers or viewers, as the case may be, price, service and
advertiser results. Competition for circulation is based upon, among other
factors, the content of the medium, service and price.
In its primary circulation areas of Los Angeles, Orange, Ventura, San
Bernardino and Riverside counties, the Los Angeles Times competes for
advertising and circulation with 17 local daily newspapers, with the largest
having approximately 360,000 total average daily circulation, and three daily
regional editions of national newspapers. In addition, there are also several
hundred weekly, semiweekly and free distribution newspapers in the distribution
area. Newsday competes with three major metropolitan newspapers and several
daily regional editions of national newspapers. In addition, there are numerous
daily, weekly, semiweekly local newspapers and free distribution newspapers in
its distribution area. The Baltimore Sun competes with the Washington Post in
Anne Arundel and Howard counties, with The Annapolis Capital in Anne Arundel
County and with The Carroll County Times in Carroll County, as well as with
daily regional editions of national newspapers. In addition, there are other
daily and weekly local newspapers in its distribution area. The Hartford Courant
competes with a number of daily newspapers, especially in metropolitan areas on
the periphery of its trade area, as well as daily regional editions of national
newspapers. In addition, there are other
4
<PAGE> 6
weekly and local daily newspapers in its distribution area. The Morning Call
competes with a few smaller daily and weekly newspapers, with its principal
competitor being the Express Times in Easton, Pennsylvania. Both The Advocate
and Greenwich Time compete with a number of larger daily newspapers which serve
the New York City metropolitan area and outlying regions.
In their respective primary markets, the Company's newspapers generally
also compete for advertising and readership with hundreds of national magazines,
dozens of radio, broadcast and cable television stations, at least several local
magazines and numerous Internet content providers. The Company's newspapers
generally also compete for advertising with numerous direct mail distributors,
free-distribution shopping guides and outdoor billboard displays and Internet
advertising vehicles.
RAW MATERIALS
The primary raw material used by the newspapers is newsprint. Times Mirror
centrally purchases newsprint for all of its newspapers in order to achieve
advantageous terms from its vendors. Newsprint for all Times Mirror newspapers
is obtained from United States, Canadian and overseas sources unaffiliated with
Times Mirror. Times Mirror believes that it has adequate newsprint available
through its various suppliers and that it is not dependent on any one supplier.
Times Mirror's newsprint expense for 1999 decreased by 6.3% from 1998.
REVENUES AND SEASONALITY
The Company's newspaper revenues are derived primarily from advertising and
circulation. In 1999, the percentage of revenues attributable to advertising,
circulation and other items were 80.7%, 17.1% and 2.2%, respectively.
Advertising rates and revenues vary among the Company's newspapers depending on,
among other things, circulation, type of advertising, local market conditions,
time of publication and competition.
Quarterly revenues of the Company's Newspaper Publishing segment vary
slightly due to industry seasonality, with first and third quarters' results
generally being minimally lower than those of the second and fourth quarters. In
1999, the quarterly revenues expressed as a percentage of total annual revenues
for the Company's Newspaper Publishing segment were 22.8% for the first quarter,
25.2% for the second quarter, 24.1% for the third quarter and 27.9% for the
fourth quarter.
PROFESSIONAL INFORMATION SEGMENT
Times Mirror publishes aeronautical charts, flight information and related
information worldwide. In September 1999, Times Mirror decided to sell
AchieveGlobal, Allen Communication and StayWell. In February 2000, Gilat
Communications Ltd. acquired Allen Communication and MediMedia USA, Inc., a
subsidiary of Havas MediMedia S.A., agreed to acquire StayWell. The results of
AchieveGlobal, Allen Communication and StayWell are included in discontinued
operations for all periods presented.
JEPPESEN
Through Jeppesen Sanderson, Inc. and its European sister company, Jeppesen
& Co. GmbH, Times Mirror publishes aeronautical charts, flight information,
pilot training materials and other navigational and operational information
worldwide. Jeppesen DataPlan, Inc., a subsidiary of Jeppesen Sanderson, also
provides computerized flight plans, weather information and other flight
services. Jeppesen Sanderson offers a service called OnSight, a sophisticated
operations control workstation combining its flight planning, weather and flight
tracking display software. Jeppesen also delivers electronic aircraft
maintenance information to air carriers. The Jeppesen companies serve all U.S.
domestic airlines and the majority of airlines worldwide.
During 1999, an investment affiliate of the Company acquired Airspace
Safety Analysis Corporation, a provider of airspace utilization and Federal
Aviation Administration compliance services for the telecommunications and
aviation industries.
The Jeppesen companies compete with various airline consortiums and
governmental entities, as well as numerous vendors of training, maintenance,
weather and flight planning information.
5
<PAGE> 7
MAGAZINE PUBLISHING SEGMENT
Times Mirror publishes a number of special interest and trade magazines
through its subsidiary, Times Mirror Magazines, Inc. The approximate six-month
average paid circulation figures per issue for the magazines for 1999 were
1,550,000 for Popular Science (a consumer-oriented magazine about science and
related issues); 1,750,000 for Field & Stream (a magazine about fishing and
outdoor recreation); 1,350,000 for Outdoor Life (a magazine about hunting and
outdoor recreation that is published 10 times a year); 200,000 for Outdoor
Explorer (a magazine about accessible outdoor activities that is published 3
times a year); 950,000 for Today's Homeowner (a magazine for homeowners about
all aspects of maintaining and improving a home that is published 10 times a
year); 1,400,000 for GOLF Magazine (a magazine for golf enthusiasts); 240,000
for Senior Golfer (a magazine for mature golf enthusiasts that is published 10
times a year); 425,000 for Ski Magazine (a magazine about skiing targeted at
families that is published 8 times a year); 400,000 for Skiing (a magazine about
skiing targeted at younger skiers that is published 7 times a year); 112,300 for
TransWorld SNOWboarding (a magazine about snowboarding targeted at the 15 to 18
year old market that is published 8 times a year); 112,000 for TransWorld
SKATEboarding (a magazine about skateboarding targeted at the 15 to 18 year old
market that is published 12 times a year with 2 special editions); 40,000 for
Warp (a magazine about skateboarding, snowboarding and music targeted at the 15
to 18 year old market that is published 6 times a year); 35,000 for Snap (a
magazine about competitive racing for bike motor-cross that is published 11
times a year); 48,000 for Ride BMX (a magazine about tricks and stunts for bike
motor-cross that is published 9 times a year); 25,000 for TransWorld SURF (a
youth oriented magazine about surfing aggressively that is published 7 times a
year); 65,000 for Snowboard Life (a magazine about snowboarding targeted at the
19 to 25 year old market that is published 6 times a year); 133,000 for Yachting
(a magazine about yachting and boating); and 150,000 for Salt Water Sportsman (a
magazine about salt-water fishing). Each of these magazines is published monthly
unless otherwise noted.
In addition, Times Mirror Magazines publishes The Sporting News, a national
sports weekly that Times Mirror has agreed to sell to Vulcan Ventures Inc. The
approximate six-month average paid circulation figure per issue for The Sporting
News in 1999 was 540,000. Times Mirror Magazines also publishes Skiing Trade
News, TransWorld SNOWboarding Business, TransWorld SKATEboarding Business, BMX
Business News and Surf Business, controlled-circulation business magazines, and
other related publications. These magazines are primarily intended for
specialized markets.
In addition to print media, Times Mirror magazines offers the following Web
sites that are affiliated with its titles: GOLFOnline; TSNOnline;
fieldandstream/outdoor life online; outdoor explorer online; todayshomeowner
online; saltwatersportsman online; yachtingnet; popsci.com; skinet; snowboarding
online; skateboarding online; transworldsurf.com and freeze online.
The primary raw material used by Times Mirror Magazines is coated paper.
For 1999, the prices for the grades of papers used by the Company's magazines
decreased moderately. In 1999, Times Mirror Magazines centrally purchased coated
paper for all of its magazines to obtain more favorable terms and reduced
inventory levels due to the improved availability of coated paper. The Company
believes that it has adequate coated paper available through its various
suppliers and that it is not dependent on any one supplier.
Times Mirror Magazines competes nationally with numerous special interest
and trade magazines and related Web sites. In addition to competing with similar
national media, Times Mirror Magazines must also compete for advertising
revenues with other local and national sales promotion media such as radio,
newspapers, broadcast television, direct mail and the Internet. Competition for
advertising is based upon, among other factors, the number of, and the
demographics of, subscribers, readers or viewers, as the case may be, price,
service and advertiser results. Competition for circulation is based upon, among
other factors, the content of the medium, service and price.
As the Company's magazines are distributed nationally, they generally
compete with hundreds of radio stations, cable and broadcast television
stations, direct mailers and numerous competitors on the Internet. The Company's
magazines also compete with other magazines that contain similar content.
Popular Science competes with approximately 18 other magazine titles, Field &
Stream with approximately 18 titles, Outdoor Life and Outdoor Explorer with
approximately 8 titles, Today's Homeowner with approximately 15 titles,
6
<PAGE> 8
GOLF Magazine and Senior Golfer with approximately 6 titles, Ski Magazine and
Skiing with approximately 3 titles, TransWorld SNOWboarding, TransWorld
SKATEboarding, TransWorld SURF and Snowboard Life with approximately 19 titles,
Snap and Ride BMX with approximately 6 titles, Yachting with approximately 25
titles, Salt Water Sportsman with approximately 12 titles and The Sporting News
with approximately 12 titles.
The Company's magazine operating revenues are derived primarily from
advertising and subscriptions. In 1999, the percentage of revenues attributable
to advertising, subscriptions and other items were 66.7%, 27.0% and 6.3%,
respectively. Advertising rates and revenues vary among the Company's magazines
depending on, among other things, circulation, type of advertising, time of
publication and competition.
INTELLECTUAL PROPERTY
In recognition of the fact that intellectual property (e.g., trademarks,
copyrights, licenses and the like) is an important asset, the Company has
dedicated internal resources to protect its intellectual property and develop
these rights. The Company expects that these resources will support its ongoing
efforts to grow its businesses internally, especially in the realm of electronic
and online publishing activities.
EMPLOYEES
At December 31, 1999, the Company and its consolidated affiliates had
20,229 employees, 14,726 of whom were full-time employees. Approximately 3,592
employees were represented by collective bargaining agents. The Company believes
that employee relations are good. Employees receive supplemental benefits
ranging from various forms of group insurance coverage to retirement income
programs.
ADDITIONAL INFORMATION
Prior to February 1, 1995, the Company also engaged in the ownership and
operation of cable television systems, which business was divested by the merger
of the Company's corporate predecessor ("Old Times Mirror") with and into Cox
Communications, Inc. ("Cox"), resulting in the acquisition of Old Times Mirror's
cable business by Cox (the "Cox Merger"). The Company was incorporated in the
State of Delaware in June 1994 for the purpose of owning and operating Times
Mirror's publishing and information businesses after the Cox Merger was
completed on February 1, 1995. Old Times Mirror was incorporated in 1884 in the
State of California and was reincorporated in the State of Delaware in 1986. All
references to "Times Mirror" shall include the Company and the Company's
subsidiaries, collectively, unless the context suggests otherwise.
See Selected Financial Data -- Five-Year Summary of Business Segment
Information and the Consolidated Financial Statements and notes thereto for
financial information about industry segments.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain plans, objectives, projections and other information regarding
future performance and outcomes discussed in this Annual Report on Form 10-K are
forward-looking statements that are subject to risks and uncertainties. There
can be no assurances that these future results will be achieved. Readers are
cautioned that the achievement of such expectations, and other aspects of the
Company's performance, 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 operating
unit; (f) unfavorable foreign currency fluctuations; (g) material changes in tax
liability due to unfavorable review by taxing authorities; and (h) a general
economic downturn resulting in decreased consumer and corporate spending on
discretionary items such as magazines or newspapers. It is not possible to
foresee or identify all such factors. The Company makes no commitment to update
any forward-looking
7
<PAGE> 9
statement or to disclose any facts, events, or circumstances after the date
hereof that may affect the accuracy of any forward-looking statement.
ITEM 2. PROPERTIES.
The general character, location, terms of occupancy and approximate size of
Times Mirror's principal plants and other materially important physical
properties at December 31, 1999 are listed below.
<TABLE>
<CAPTION>
APPROXIMATE AREA IN
SQUARE FEET
-------------------------
GENERAL CHARACTER OF PROPERTY OWNED LEASED(1)(2)
----------------------------- --------- ------------
<S> <C> <C>
NEWSPAPER PUBLISHING
Printing plants, business and editorial offices,
garages and warehouse space located in:
Los Angeles, California........................ 1,714,724 2,150,761
Hartford, Connecticut.......................... 161,872 382,847
Baltimore, Maryland............................ 10,000 1,223,753
Melville, New York............................. -- 1,071,107
Other locations................................ 458,189 109,794
PROFESSIONAL INFORMATION
Business offices and warehouses in California,
Colorado, New York and other locations......... 235,208 181,980
MAGAZINE PUBLISHING
Business and editorial offices in Connecticut, New
York, Missouri and other locations............. -- 220,393
CORPORATE
Corporate offices and garages located in
California and New York........................ -- 500,880
</TABLE>
- ---------------
(1) Excludes 337,640 square feet of vacant land, 419,419 square feet of space
sublet to unrelated third parties and 19,339 square feet of vacant space
which is available for subleasing.
(2) The Company's material lease agreements expire at various dates through
2011. In August 1997, the Company completed a transaction with its largest
stockholders, the Chandler Trusts, pursuant to which, among other things,
the Company contributed eight real properties with an aggregate market value
of $225,850,000, constituting 3,030,000 square feet, to a limited liability
company formed by the Company and the Chandler Trusts. The Company is
leasing such properties from the limited liability company under a lease
with an initial term of 12 years.
ITEM 3. LEGAL PROCEEDINGS.
Times Mirror and its subsidiaries are defendants in actions for various
matters arising out of their business operations. In addition, from time to
time, Times Mirror and its subsidiaries are involved as parties in various
governmental and administrative proceedings. Times Mirror does not believe that
any such proceedings currently pending will have a material adverse effect on
its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
8
<PAGE> 10
EXECUTIVE AND KEY OFFICERS OF THE REGISTRANT
The executive and key officers of the Company as of March 8, 2000 are
listed below. Executive and key officers are elected to serve until they resign
or are removed, or are otherwise disqualified to serve, or until their
successors are elected and qualified. Except as indicated below, all such
officers were employed by the Company and its predecessor company, Old Times
Mirror, for five years or more.
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITIONS AND OFFICES WITH TIMES MIRROR SINCE(1)
---- --- --------------------------------------- --------
<S> <C> <C> <C>
Mark H. Willes......... 58 Chairman of the Board, President and Chief Executive 1995(2)
Officer
Horst A. Bergmann...... 61 Executive Vice President, and Chairman, President and 1996(3)
Chief Executive Officer, Jeppesen Sanderson
Kathryn M. Downing..... 46 Executive Vice President, and Publisher, President and 1996(4)
Chief Executive Officer, Los Angeles Times
Raymond A. Jansen...... 60 Executive Vice President, Eastern Newspapers, and 1996(5)
Publisher, President and Chief Executive Officer,
Newsday
Efrem Zimbalist III.... 52 Executive Vice President and Chief Financial Officer, 1993(6)
Chairman and Chief Executive Officer, Times Mirror
Magazines and Chairman, AchieveGlobal
Roger H. Molvar........ 44 Senior Vice President and Controller 1996(7)
James R. Simpson....... 59 Senior Vice President, Human Resources 1983(8)
Michael E. Waller...... 58 Senior Vice President, and Publisher and Chief 1996(9)
Executive Officer, The Baltimore Sun
John S. Carroll........ 58 Vice President, and Editor and Senior Vice President, 1998(10)
The Baltimore Sun
Janet Clayton.......... 44 Vice President, and Editor of the Editorial Pages and 1998(11)
Vice President, Los Angeles Times
Jason E. Klein......... 39 Vice President, and President and Chief Operating 2000(12)
Officer, Times Mirror Magazines
Robert G. Magnuson..... 48 Vice President, and Senior Vice President, Regions, Los 1998(13)
Angeles Times
Anthony Marro.......... 58 Vice President, and Editor and Executive Vice 1998(14)
President, Newsday
John C. McKeon......... 43 Vice President, and Senior Vice President of 1999(15)
Advertising, Los Angeles Times
Nancy W. O'Neill....... 40 Vice President, and President and Chief Executive 1999(16)
Officer, The StayWell Company
Michael Parks.......... 56 Vice President, and Editor and Executive Vice 1998(17)
President, Los Angeles Times
Marty Petty............ 47 Vice President, and Publisher and Chief Executive 1998(18)
Officer, The Hartford Courant
William J. Rowe........ 64 Vice President, and Publisher and Chief Executive 1998(19)
Officer, The (Stamford) Advocate and Greenwich Time
Hilary A. Schneider.... 38 Vice President, and President and Chief Executive 1999(20)
Officer, Times Mirror interactive
Edward L. Blood........ 54 Vice President, Strategic Planning 1997(21)
Rajender K. Chandhok... 50 Vice President and Treasurer 1999(22)
Debra A. Gastler....... 47 Vice President, Taxes 1994(23)
Bonnie Guiton Hill..... 58 Vice President, and President and Chief Executive 1997(24)
Officer, The Times Mirror Foundation and Senior Vice
President, Community Relations, Los Angeles Times
Stephen C. Meier....... 49 Vice President, Public and Government Affairs, and 1989(25)
Corporate Secretary
William A. Niese....... 63 Vice President, General Counsel and Assistant Secretary 1990(26)
</TABLE>
9
<PAGE> 11
- ---------------
(1) The date indicated relates to the year in which such person first became an
officer of Old Times Mirror unless the context suggests otherwise.
(2) Mark H. Willes was elected as President and Chief Executive Officer of the
Company effective June 1995 and Chairman of the Board effective January
1996. From September 1997 to June 1999, he was Publisher of the Los Angeles
Times. Prior to joining the Company, Mr. Willes was an executive of General
Mills, Inc. from 1980 to 1995, serving as Vice Chairman upon his departure.
(3) Horst A. Bergmann was elected as an executive officer of the Company
effective May 1996. After joining Jeppesen Sanderson in 1963, he was named
Flight Information Services Director in 1974 and Managing Director,
Jeppesen & Co. GmbH in 1977. In 1987, he was appointed Chairman, President
and Chief Executive Officer of Jeppesen Sanderson.
(4) Kathryn M. Downing was elected as an executive officer of the Company
effective May 1996. In March 1998, she was named President and Chief
Executive Officer of the Los Angeles Times, and, in June 1999, she was
named Publisher of the Los Angeles Times. She was named President and Chief
Executive Officer of Matthew Bender in 1995. Prior to that time, Ms.
Downing was President and Chief Executive Officer of Lawyers Cooperative
Publishing, a division of Thomson Legal Publishing, beginning in 1993.
(5) Raymond A. Jansen was elected as an officer of the Company effective May
1996 and as an executive officer effective May 1999. He was named Executive
Vice President, Eastern Newspapers, in 1999, and he was named Publisher,
President and Chief Executive Officer of Newsday in November 1994. Prior to
that time, he was Publisher and Chief Executive Officer of The Hartford
Courant since 1990.
(6) Efrem Zimbalist III was elected as an officer of Old Times Mirror effective
March 1993 and as an executive officer effective May 1999. He became Chief
Financial Officer of the Company in January 2000. From 1995 to 1999, he was
President and Chief Executive Officer of Times Mirror Magazines. Mr.
Zimbalist was Chairman and Chief Executive Officer of Correia Art Glass,
Inc. from 1978 until he joined Old Times Mirror in July 1992.
(7) Roger H. Molvar was elected as an executive officer of the Company
effective May 1996. Prior to that time, he served as Senior Vice President
and Comptroller of First Interstate Bank of California since 1989.
(8) James R. Simpson was elected as an executive officer of the Company
effective January 1995 and had served as an executive officer of Old Times
Mirror prior to that time.
(9) Michael E. Waller was elected as an officer of the Company effective May
1996. Mr. Waller was named Publisher and Chief Executive Officer of The
Baltimore Sun in May 1996. He previously served as Editor and Vice
President of The Hartford Courant since 1990, joining the newspaper in 1986
as Executive Editor and Vice President.
(10) John S. Carroll was elected as an officer of the Company effective July
1998. He has been Editor and Senior Vice President of The Baltimore Sun
since 1991.
(11) Janet Clayton was elected as an officer of the Company effective July 1998.
She has been Editor of the Editorial Pages of the Los Angeles Times since
1995 and a Vice President of the Los Angeles Times since 1997. From 1990 to
1995, she was Assistant Editor, Editorial Pages, of the Los Angeles Times.
(12) Jason E. Klein was elected as an officer of the Company effective February
2000. He has been President and Chief Operating Officer of Times Mirror
Magazines since December 1999. From February 1999 to December 1999, he was
Executive Vice President of Times Mirror Magazines and President of
Corporate Sales, The Outdoor Company and Today's Homeowner. From 1995 until
1999, he was Senior Vice President of Times Mirror Magazines.
(13) Robert G. Magnuson was elected as an officer of the Company effective July
1998. He has been Senior Vice President, Regional Editions, of the Los
Angeles Times since 1997. From 1990 to 1997, he was Vice President of the
Los Angeles Times and President of the Orange County Edition of the Los
Angeles Times.
10
<PAGE> 12
(14) Anthony Marro was elected as an officer of the Company effective July 1998.
He has been Editor of Newsday since 1987.
(15) John C. McKeon was elected as an officer of the Company effective February
1999. He has been Senior Vice President of Advertising of the Los Angeles
Times since November 1998. From 1994 to November 1998, he served as Senior
Vice President of Advertising and Chief Innovation Officer at Newsday. From
1992 to 1994, he was Vice President of Advertising at Newsday.
(16) Nancy W. O'Neill was elected as an officer of the Company effective
February 1999. She has been President and Chief Executive Officer of The
StayWell Company, the Company's health improvement unit, since February
1998. From 1997 until February 1998, she was Vice President and General
Manger of Mosby Consumer Health. From 1995 to 1997, she held a variety of
positions at Times Mirror Magazines. From 1990 to 1994, she served as
crisis manager at Argus Management Corporation.
(17) Michael Parks was elected as an officer of the Company in February 1998. He
was named editor of the Los Angeles Times in October 1997. Prior to that
time, he had been managing editor since 1996 after serving as deputy
foreign editor and as a correspondent for the Los Angeles Times.
(18) Marty Petty was elected as an officer of the Company in February 1998. She
was named Chief Executive Officer and Publisher, The Hartford Courant, in
September 1997. She had previously served as Senior Vice President and
General Manager of that paper since 1994. From 1992 to 1994, she was Vice
President, Sales and Marketing of The Hartford Courant.
(19) William J. Rowe was elected as an officer of the Company effective July
1998. He has been Publisher and Chief Executive Officer of The (Stamford)
Advocate and Greenwich Time since 1986.
(20) Hilary A. Schneider was elected as an officer of the Company effective
November 1999. From 1998 to 1999, she was general manager, The Baltimore
Sun. Prior to that time, she served in several senior management positions
at The Baltimore Sun directing a number of business activities, including
sales, marketing, advertising and new business development.
(21) Edward L. Blood was elected as an executive officer of the Company in July
1997. Prior to that time, he was Senior Vice President, Investor Relations
and Strategic Planning at Darden Restaurants since 1995. Prior to that
time, he had been Vice President, Strategic Planning and Analysis at
General Mills.
(22) Rajender K. Chandhok was elected as an executive officer of the Company
effective May 1999. From 1998 to May 1999, he was staff Vice President,
Investments and Risk Management. From 1997 to 1998, he was Assistant
Treasurer, Investments and Risk Management and from 1995 to 1997, he was
Assistant Treasurer, Pension and Investments.
(23) Debra A. Gastler was elected as an executive officer of Old Times Mirror
effective January 1994. Prior to that time, she had been Vice President,
Taxes of Pacific Enterprises since 1990 and Director of Taxes of Pacific
Enterprises since 1987.
(24) Bonnie Guiton Hill was elected as an officer of the Company effective
January 1997. From 1992 to 1996, she served as dean and professor of
commerce at the McIntyre School of Commerce at the University of Virginia.
(25) Stephen C. Meier was elected as an officer of the Company effective January
1995 and served as an officer of Old Times Mirror prior to that time.
(26) William A. Niese was elected as an executive officer of the Company in July
1997. Prior to August 1998, he had been Senior Vice President and General
Counsel of the Los Angeles Times since 1990.
11
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Series A Common Stock is traded principally on the New York
Stock Exchange ("NYSE") and is also listed on the Pacific Stock Exchange. Times
Mirror Series C Common Stock is not traded in an established public trading
market but is convertible into Times Mirror Series A Common Stock. At March 8,
2000, there were approximately 3,000 record holders of the Company's Series A
Common Stock and approximately 1,100 record holders of Series C Common Stock.
The price ranges for the Company's Series A Common Stock and the quarterly cash
dividends declared and paid on all Company Common Stock in 1999 and 1998 are
listed below.
<TABLE>
<CAPTION>
STOCK PRICE CASH DIVIDEND
------------- ----------------
HIGH LOW DECLARED PAID
---- --- -------- ----
<S> <C> <C> <C> <C>
1999
First Quarter......................... $59 15/16 $53 5/16 $.20 $.20
Second Quarter........................ 63 5/16 53 3/8 .20 .20
Third Quarter......................... 66 13/16 57 1/4 .20 .20
Fourth Quarter........................ 72 5/8 62 15/16 .20 .20
1998
First Quarter......................... $64 9/16 $56 15/16 $.18 $.18
Second Quarter........................ 65 13/16 58 1/16 .18 .18
Third Quarter......................... 63 11/16 52 5/16 .18 .18
Fourth Quarter........................ 61 7/16 48 15/16 .18 .18
</TABLE>
The payment of future dividends on common stock will depend on future
earnings, capital requirements, financial condition and other factors.
12
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data has been derived from the
consolidated financial statements that have been audited by Ernst & Young LLP,
independent auditors. The information set forth below is not necessarily
indicative of results of future operations, and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes thereto
included elsewhere in this Annual Report on Form 10-K.
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE,
FINANCIAL RATIOS AND OTHER) 1999 1998 1997 1996 1995
-------------------------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues................................... $ 3,029,249 $ 2,783,988 $ 2,645,135 $ 2,551,002 $ 2,528,673
Restructuring and one-time charges......... -- 155,681 -- -- 412,778
Operating profit (loss).................... 470,506 247,798 391,278 310,685 (268,208)
Net interest income (expense).............. (56,914) (28,595) (33,277) (13,939) 6,473
Income (loss) from continuing operations
before income taxes...................... 439,291 245,004 396,499 300,254 (253,421)
Income (loss) from continuing operations... 259,062 134,059 234,655 182,258 (209,367)
Net income(1).............................. 259,086 1,417,338 250,312 206,444 1,226,751
PER COMMON SHARE
Basic earnings (loss) from continuing
operations............................... $ 3.53 $ 1.32 $ 2.18 $ 1.36 $ (2.61)
Basic earnings............................. 3.53 16.46 2.35 1.59 10.02
Diluted earnings (loss) from continuing
operations(2)............................ 3.38 1.29 2.12 1.32 (2.61)
Diluted earnings........................... 3.38 16.06 2.29 1.54 10.02
Dividends declared(3)...................... .80 .72 .55 .30 .24
Dividends paid............................. .80 .72 .55 .36 .45
FINANCIAL DATA
Current assets(4)(5)(6).................... $ 713,558 $ 1,543,486 $ 474,833 $ 544,335 $ 745,314
Property, plant and equipment, net......... 966,095 903,483 920,995 1,080,642 1,085,341
Total assets(5)(6)......................... 3,897,371 4,157,929 3,171,828 3,179,395 3,444,641
Long-term debt(6).......................... 1,562,240 941,423 925,404 459,007 247,062
Shareholders' equity(6).................... 399,729 1,342,453 875,999 1,498,810 1,806,236
Capital expenditures(7).................... 173,484 131,548 113,081 87,326 90,819
Operating profit margin(8)................. 15.5% 15.2% 15.5% 12.2% 7.5%
Total debt as a % of adjusted
capitalization(6)........................ 82.0% 48.3% 54.9% 23.5% 12.1%
Shareholders' equity per common share(9)... $ 4.98 $ 13.45 $ 5.90 $ 9.54 $ 11.64
OTHER
Adjusted price range of common stock(10)... $ 72 5/8 to $65 13/16 to $ 61 3/4 to $ 56 to $ 35 1/4 to
53 5/16 48 15/16 46 1/8 30 5/8 17 1/4
Number of employees at end of year......... 20,229 20,619 21,567 20,803 21,877
Weighted average shares:
Basic.................................... 68,252,398 84,813,581 92,571,618 102,113,298 113,797,192
Diluted.................................. 73,090,497 86,927,815 97,013,301 105,372,495 113,797,192
Common shares outstanding at end
of year(11).............................. 59,738,144 73,381,279 87,903,444 96,729,785 105,698,043
</TABLE>
13
<PAGE> 15
- ---------------
This summary should be read in conjunction with the consolidated financial
statements and notes thereto.
(1) Includes the following after-tax gains (charges) related to discontinued
operations (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996 1995
---------- ------- -------- ----------
<S> <C> <C> <C> <C>
Restructuring, one-time and other charges......... $ (47,206) $(7,842) $(30,305) $ (210,381)
Net gain on disposal.............................. 1,316,686 -- 32,047 1,634,294
---------- ------- -------- ----------
$1,269,480 $(7,842) $ 1,742 $1,423,913
========== ======= ======== ==========
</TABLE>
(2) Includes the $.38 per share impact of the cash paid in excess of
liquidation value on Series B preferred stock repurchases in 1995.
(3) During 1996, the Company began declaring and paying common stock dividends
in the same quarter; previously, dividends were declared in the quarter
prior to payment. As a result, in the third quarter of 1996, no dividends
were declared in order to change to the new procedure.
(4) Excludes net assets of discontinued operations.
(5) Includes proceeds from reorganization in 1998 as described in Notes 4 and 5
to the consolidated financial statements.
(6) Includes reduction of $635 million in cash and cash equivalents, $600
million of debt issuance and an increase of $1 billion of treasury stock in
connection with the 1999 recapitalization as described in Note 2 to the
consolidated financial statements.
(7) Excludes capital expenditures related to discontinued operations.
(8) Excludes restructuring, one-time and other charges as follows (in
thousands): 1998 -- $174,370; 1997 -- $18,000; 1995 -- $458,607.
(9) Based on the common shares outstanding as described in (11) below.
(10) On February 1, 1995, Times Mirror common shareholders received
distributions having a value of $10.45 per Times Mirror common share. The
trading prices prior to February 1, 1995 have been adjusted to reflect
these distributions.
(11) Excludes treasury shares of 52,387,120, 38,707,883 and 24,151,014 at
December 31, 1999, 1998 and 1997, respectively.
14
<PAGE> 16
FIVE-YEAR SUMMARY OF BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997 1996 1995
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES
Newspaper Publishing....... $2,514,325 $2,308,178 $2,179,244 $2,074,692 $2,057,596
Professional Information... 235,356 211,929 195,339 185,207 170,849
Magazine Publishing........ 278,930 262,683 248,712 234,192 242,864
Corporate and Other........ 638 1,198 21,845 56,938 57,928
Intersegment Revenues...... -- -- (5) (27) (564)
---------- ---------- ---------- ---------- ----------
$3,029,249 $2,783,988 $2,645,135 $2,551,002 $2,528,673
========== ========== ========== ========== ==========
OPERATING PROFIT (LOSS)(1)
Newspaper Publishing....... $ 457,067 $ 297,433 $ 402,207 $ 307,512 $ (109,483)
Professional Information... 64,789 43,858 55,659 55,517 55,742
Magazine Publishing........ 19,184 (14,232) 18,309 8,753 (73,904)
Corporate and Other........ (70,534) (79,261) (84,897) (61,097) (140,563)
---------- ---------- ---------- ---------- ----------
$ 470,506 $ 247,798 $ 391,278 $ 310,685 $ (268,208)
========== ========== ========== ========== ==========
IDENTIFIABLE ASSETS
Newspaper Publishing....... $2,290,708 $1,999,880 $1,792,286 $1,836,158 $1,840,058
Professional Information... 125,670 96,765 87,354 85,866 77,524
Magazine Publishing........ 287,268 271,457 263,521 244,254 255,358
Corporate and Other........ 1,020,635 1,600,199 355,996 444,845 606,428
Discontinued Operations.... 173,090 189,628 672,671 568,272 665,273
---------- ---------- ---------- ---------- ----------
$3,897,371 $4,157,929 $3,171,828 $3,179,395 $3,444,641
========== ========== ========== ========== ==========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing....... $ 125,019 $ 116,116 $ 106,919 $ 104,743 $ 110,299
Professional Information... 7,454 6,852 6,648 6,675 5,307
Magazine Publishing........ 8,667 7,740 7,040 6,050 8,112
Corporate and Other........ 3,815 4,467 3,457 2,990 2,824
---------- ---------- ---------- ---------- ----------
$ 144,955 $ 135,175 $ 124,064 $ 120,458 $ 126,542
========== ========== ========== ========== ==========
CAPITAL EXPENDITURES
Newspaper Publishing....... $ 151,807 $ 107,479 $ 78,760 $ 63,698 $ 63,014
Professional Information... 12,437 15,825 9,535 7,790 10,568
Magazine Publishing........ 3,768 1,651 2,243 10,849 1,060
Corporate and Other........ 5,472 6,593 22,543 4,989 16,177
---------- ---------- ---------- ---------- ----------
$ 173,484 $ 131,548 $ 113,081 $ 87,326 $ 90,819
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Includes restructuring, one-time and other charges as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1995
---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Newspaper Publishing................. $ 116,388 $ 18,000 $ 316,216
Professional Information............. 11,889 -- 1,913
Magazine Publishing.................. 29,072 -- 71,672
Corporate and Other.................. 17,021 -- 68,806
---------- ---------- ----------
$ 174,370 $ 18,000 $ 458,607
========== ========== ==========
</TABLE>
The pretax charges in 1998 are comprised of restructuring and one-time
charges of $155,681 and other charges that did not qualify for accounting
classification as restructuring charges of $18,689.
The pretax charges in 1995 are comprised of restructuring and one-time
charges of $412,778 and other charges that did not qualify for accounting
classification as restructuring charges of $45,829.
15
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company's 1999 earnings per share from continuing operations increased
24.7% to $3.23 per share on a diluted basis from $2.59 per share in the prior
year, excluding a 1999 gain on the sale of Hollywood Online and 1998
restructuring, one-time and other charges. Including the gain on the sale and
the restructuring, one-time and other charges, earnings per share for 1999 and
1998 were $3.38 and $1.29 per share, respectively. Earnings per share for 1999
increased primarily as a result of the effective retirement of shares previously
held by the public and the Company's largest shareholders, the Chandler Trusts.
In addition, the Company's business segments each achieved double-digit gains in
operating profit for 1999 compared to the prior year, excluding the 1998
restructuring, one-time and other charges. Revenues rose 8.8% in 1999 compared
to 1998, including the effects of acquisitions, with revenue growth at each of
the Company's business segments.
On March 13, 2000, Times Mirror and Tribune Company (Tribune) signed a
definitive agreement for the merger of the two companies in a cash and stock
transaction valued at approximately $8 billion based on the closing price of
Tribune common stock on March 10, 2000. Under the terms of this agreement,
Tribune will make a cash tender offer for up to 28 million shares of the
Company's common stock, which represents approximately 48% of the shares of
common stock outstanding as of March 13, 2000, at a price of $95 per share.
Following completion of the tender offer, Times Mirror and Tribune will merge in
a transaction in which each share of Times Mirror common stock is converted into
2.5 shares of Tribune common stock. In addition, if fewer than 28 million Times
Mirror common shares are purchased in the tender offer, Times Mirror
shareholders will be permitted to elect cash, at a price of $95 per share, in
the merger, up to the balance of the 28 million shares. The merger is subject to
the approval of the shareholders of both companies and other customary
conditions, including regulatory approvals. Times Mirror expects the tender
offer to be completed in mid-April and the merger to be completed in the second
or third quarter of 2000.
DISPOSITIONS
In September 1999, Times Mirror announced its decision to sell
AchieveGlobal, Inc., a professional training company, Allen Communication, an
interactive software and training courseware developer, The StayWell Company, a
health improvement information company, and The Sporting News, a sports
magazine. The accompanying financial statements reflect AchieveGlobal, Allen
Communication and StayWell as discontinued operations for all periods presented.
The proposed sale of The Sporting News does not qualify for discontinued
operations treatment and continues to be reported in the Magazine Publishing
segment. While the Company previously expected to complete the sale of
AchieveGlobal in the first quarter of 2000, the Company now believes that
greater sales value can be realized by allowing AchieveGlobal to fully implement
certain of its strategic initiatives. Currently, the Company anticipates selling
AchieveGlobal by the end of 2000. In February 2000, the Company sold Allen
Communication to Gilat Communications Ltd. The Company also entered into
agreements in February 2000 to sell StayWell to a subsidiary of Havas MediMedia,
S.A., and to sell The Sporting News to Vulcan Ventures Inc. These dispositions
are expected to be completed in March 2000.
1999 RECAPITALIZATION
In September 1999, the Company completed a recapitalization transaction
with its largest shareholders, the Chandler Trusts, in which the Company,
including certain of its affiliates, and the Chandler Trusts each contributed
assets worth $1.24 billion to TMCT II, LLC, a newly formed limited liability
company. The 1999 recapitalization resulted in a net effective reduction, for
financial reporting purposes, in the number of shares of the Series A and C
common stocks by 12.4 million shares and in the Company's Series C-1 and C-2
preferred stocks by 501,000 shares. Also, in connection with this
recapitalization, the Company replaced the Series C-1 and C-2 preferred stocks
with new Series D-1 and D-2 preferred stocks effective January 1, 2000. The
Series D-1 and D-2 preferred stocks are identical to the Series C-1 and C-2
preferred stocks except that the increases in the dividend rate on the Series
D-1 and D-2 preferred stocks are pursuant to a fixed and
16
<PAGE> 18
certain schedule. As a result of the effective reduction of preferred stocks and
the replacement of the preferred stocks, preferred stock dividends will be
reduced to $8.1 million annually beginning in 2000. In connection with the
recapitalization, the Company issued $200.0 million of 6.65% two-year notes due
October 15, 2001 and $400.0 million of 7.45% ten-year notes due October 15, 2009
(see Note 2 to the consolidated financial statements for further information on
the 1999 recapitalization).
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes the Company's financial results (in
millions, except share and per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues............................................. $3,029.2 $2,784.0 $2,645.1
Restructuring and one-time charges................... -- 155.7 --
Operating profit..................................... 470.5 247.8 391.3
Interest expense, net................................ (56.9) (28.6) (33.3)
Other, net........................................... 25.7 25.8 38.5
Income from continuing operations.................... 259.1 134.1 234.7
Discontinued operations:
Income (loss) from operations, net of taxes........ -- (33.4) 15.7
Net gain on disposal, net of taxes................. -- 1,316.7 --
Net income........................................... 259.1 1,417.3 250.3
Preferred stock dividends............................ 18.1 21.7 32.5
Earnings applicable to common shareholders........... 241.0 1,395.6 217.8
Basic earnings per share:
Continuing operations.............................. $ 3.53 $ 1.32 $ 2.18
Discontinued operations............................ -- 15.14 .17
-------- -------- --------
Basic earnings per share............................. $ 3.53 $ 16.46 $ 2.35
======== ======== ========
Diluted earnings per share:
Continuing operations.............................. $ 3.38 $ 1.29 $ 2.12
Discontinued operations............................ -- 14.77 .17
-------- -------- --------
Diluted earnings per share........................... $ 3.38 $ 16.06 $ 2.29
======== ======== ========
Weighted average shares (in thousands):
Basic.............................................. 68,252 84,814 92,572
======== ======== ========
Diluted............................................ 73,090 86,928 97,013
======== ======== ========
</TABLE>
1999 RESULTS
Revenues for 1999 rose 8.8% compared to 1998 due to higher revenues at all
of the Company's business segments, including the effects of acquisitions (see
further discussion of segment results under the caption "Analysis by Segment").
Operating profit for 1999 increased 11.4% compared to the prior year,
excluding 1998 restructuring, one-time and other charges, due to improvements at
each of the Company's business segments (see further discussion of segment
results under the caption "Analysis by Segment"). Pretax restructuring, one-time
and other charges in 1998 were $174.4 million, or $112.4 million after
applicable taxes. Operating profit for 1999 was impacted by lower pension
income, primarily in the Newspaper Publishing segment, due to a $16.8 million
reduction in the amortization of the unrecognized pension asset that existed
upon the 1986 adoption of the Statement of Financial Accounting Standards No.
87, "Employers' Accounting for Pensions."
Income from continuing operations for 1999 was $248.4 million, or $3.23 per
share, compared to $246.5 million, or $2.59 per share, in the prior year,
excluding a 1999 pretax gain on the sale of Hollywood
17
<PAGE> 19
Online, Inc. of $17.2 million ($10.7 million after applicable taxes), or $.15
per share, and the 1998 restructuring, one-time and other charges.
Net interest expense for 1999 increased compared to the prior year due
primarily to higher debt levels resulting from the 1999 recapitalization (see
Note 2).
Earnings per share from continuing operations increased in 1999 compared to
1998 due to a reduction in the weighted average number of shares as well as
lower preferred stock dividends resulting from the 1999 recapitalization, and an
increase in operating profit, which was partially offset by the impact of higher
net interest expense.
1998 RESULTS
Revenues in 1998 increased 5.2% over the prior year due to higher revenues
at each of the Company's business segments (see further discussion of segment
results under the caption "Analysis by Segment"). The rate of growth slowed in
the second half, reflecting some weakening in certain markets and advertising
categories.
Operating profit totaled $422.2 million in 1998 compared to $409.3 million
in 1997, excluding restructuring, one-time and other charges in both years. The
increase in 1998 operating profit was due primarily to reduced expense levels in
Corporate and Other, which was partially offset by decreases in operating profit
in the Newspaper and Magazine Publishing segments (see further discussion of
segment results under the caption "Analysis by Segment"). Including
restructuring, one-time and other charges, operating profit decreased to $247.8
million in 1998.
Net interest expense declined in 1998 due to an increase in interest income
resulting from investment activity of the affiliated limited liability companies
created as a result of the divestitures of the Company's legal and medical
publishing operations. Higher interest income more than offset a rise in
interest expense due primarily to increased debt levels attributable to common
stock purchases, a recapitalization in 1997 (see Note 3) and acquisitions.
Earnings per share for 1998 benefited principally from the gains on
divestitures, as well as a reduction in the average number of common shares and
lower preferred stock dividends. Preferred stock dividends in 1998 declined due
to the 1997 recapitalization and the Company's redemption of its Series B
preferred stock.
ANALYSIS BY SEGMENT
The following sections discuss the segment results of the Company's
principal lines of business, excluding restructuring, one-time and other charges
of $174.4 million and $18.0 million for 1998 and 1997, respectively, unless
specifically stated otherwise.
NEWSPAPER PUBLISHING
Newspaper Publishing revenues and operating profit were as follows (dollars
in millions):
<TABLE>
<CAPTION>
1999 CHANGE 1998 CHANGE 1997
-------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising..................... $2,029.0 11.4% $1,821.8 7.7% $1,691.6
Circulation..................... 430.3 (1.3) 435.9 -- 435.8
Other........................... 55.0 9.0 50.5 (2.7) 51.8
-------- -------- --------
$2,514.3 8.9% $2,308.2 5.9% $2,179.2
======== ======== ========
Operating profit.................. $ 457.1 53.7% $ 297.4 (26.0)% $ 402.2
======== ======== ========
Operating profit excluding
restructuring, one-time and
other charges................... $ 457.1 10.5% $ 413.8 (1.5)% $ 420.2
======== ======== ========
</TABLE>
18
<PAGE> 20
1999 Results
Newspaper Publishing revenues rose in 1999 compared to the prior year,
including the addition of Newport Media, Inc., which was acquired in February
1999, and Recycler, acquired in April 1998. Excluding the impact of these
acquisitions, 1999 revenues rose 5.7%, with the Los Angeles Times up 4.7% and
the Eastern newspapers up 6.6% compared to 1998. Advertising revenue gains were
achieved at each of the Company's newspapers in 1999 due primarily to strong
gains in national advertising. Excluding the impact of acquisitions, advertising
revenues for 1999 rose 7.4%, with The Times up 6.6% and the Eastern newspapers
up 8.3% compared to 1998.
Circulation revenues declined slightly as marketing strategies, largely at
The Times, involving pricing and promotional discounts to stimulate circulation
volume resulted in lower overall circulation revenues. Excluding the impact of
acquisitions, 1999 circulation revenues for the Newspaper Publishing segment
declined 1.9% compared to 1998.
Segment operating profit for 1999 increased largely due to strong gains in
national advertising and declines in newsprint expense. The 1999 improvement in
operating profit was aided by a reduction in newsprint expense of 6.3% on a 7.2%
decline in average newsprint prices. Newsprint expense was only partially
affected by newsprint price declines due to the Company's use of newsprint
hedging contracts (see further information under the caption "Liquidity and
Capital Resources -- Market Risk"). Excluding newsprint and the impact of
acquisitions, other expenses rose 7.6% in 1999 compared to 1998, due primarily
to continuing circulation growth initiatives.
1998 Results
In 1998, the Eastern Newspapers, including Newsday and The Baltimore Sun,
achieved outstanding performance, but the Newspaper Publishing segment's
operating profit overall was reduced by sluggish advertising revenues and higher
expense levels at The Times related largely to ongoing growth initiatives.
Accordingly, the Newspaper Publishing's operating profit margin decreased to
17.9% in 1998 from 19.3% in 1997.
Newspaper Publishing revenues rose in 1998 due primarily to classified
advertising revenue growth at the Eastern Newspapers as well as incremental
revenues from acquisitions. Excluding the acquisitions of Recycler, Patuxent
Publishing Company acquired in September 1997 and This Week acquired in October
1997, advertising revenues rose 4.4%. Circulation revenues for 1998 were
essentially even compared to 1997 as marketing strategies involving pricing and
promotional discounts resulted in circulation volume gains but reduced
circulation revenues.
For 1998, newsprint expense rose 15.1%, as average newsprint prices
increased 8.1%. In addition, daily circulation gains at the Company's largest
newspapers and acquisitions contributed to an increase in newsprint consumption
of 6.5%. Non-newsprint expense rose 2.4% for 1998, excluding the impact of
acquisitions as well as restructuring, one-time and other charges.
In 1998, the Newspaper Publishing segment recorded $102.5 million of
restructuring and one-time charges as well as $13.9 million of additional
charges that did not qualify for accounting classification as restructuring
charges. These charges consisted primarily of termination benefits, contract
termination costs and asset write-offs. In 1997, the Newspaper Publishing
segment's operating profit was impacted by $18.0 million of charges that were
not classified as restructuring charges. These charges primarily related to the
reorganization of the circulation department and the absorption of the corporate
human resources and information systems functions by The Times.
19
<PAGE> 21
PROFESSIONAL INFORMATION
Professional Information revenues and operating profit were as follows
(dollars in millions):
<TABLE>
<CAPTION>
1999 CHANGE 1998 CHANGE 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues............................... $235.4 11.1% $211.9 8.5% $195.3
====== ====== ======
Operating profit....................... $ 64.8 47.7% $ 43.9 (21.2)% $ 55.7
====== ====== ======
Operating profit excluding
restructuring, one-time and other
charges.............................. $ 64.8 16.2% $ 55.7 .2% $ 55.7
====== ====== ======
</TABLE>
1999 Results
The operating results for the Professional Information segment consist
entirely of Jeppesen, the Company's flight information provider, after
reflecting AchieveGlobal, Allen Communication and StayWell as discontinued
operations for all periods presented. Jeppesen demonstrated outstanding
performance in 1999 as revenues and operating profit rose as a result of strong
product demand and growth in the commercial aviation market, as well as higher
flight planning revenues.
1998 Results
Revenues for 1998 increased primarily due to higher revenues for navigation
and standard airway manual services. Operating profit was consistent with the
prior year due to higher expenses related to chart revision activity and
technology initiatives.
In 1998, the Company recorded $8.2 million of restructuring and one-time
charges, which consisted primarily of termination benefits, lease termination
and other costs. The Company recorded additional charges of $3.7 million that
did not qualify for accounting classification as restructuring charges. These
charges were primarily to write-off capitalized software costs related to an
abandoned project.
MAGAZINE PUBLISHING
Magazine Publishing revenues and operating profit (loss) were as follows
(dollars in millions):
<TABLE>
<CAPTION>
1999 CHANGE 1998 CHANGE 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising......................... $185.9 8.1% $171.9 7.6% $159.7
Circulation......................... 75.3 (1.2) 76.2 1.1 75.4
Other............................... 17.7 21.8 14.6 7.3 13.6
------ ------ ------
$278.9 6.2% $262.7 5.6% $248.7
====== ====== ======
Operating profit (loss)............... $ 19.2 (100+)% $(14.2) (100+)% $ 18.3
====== ====== ======
Operating profit excluding
restructuring, one-time and other
charges............................. $ 19.2 29.3% $ 14.8 (18.9)% $ 18.3
====== ====== ======
</TABLE>
1999 Results
Magazine Publishing's 1999 operating profit increased significantly due
primarily to advertising revenue gains at most of the titles as well as lower
paper, printing and distribution costs. Excluding The Sporting News, 1999
operating profit was $25.9 million compared to $21.3 million in the prior year
and revenues in 1999 were $241.7 million compared to $227.1 million in the prior
year. Circulation revenues were consistent with the prior year. Other revenues
increased in 1999 compared to 1998 due primarily to subscription list rental
fees and television show sponsorships.
20
<PAGE> 22
1998 Results
Revenues increased in 1998 due to higher advertising revenues at most of
the magazines. The acquisitions of TransWorld SKATEboarding and Warp in April
1997, Ride BMX and SNAP in January 1998, InterZine Productions, Inc. in February
1998 and Senior Golfer in October 1998 also contributed to higher advertising
revenues. Excluding acquisitions, revenues rose 4.2%. Magazine Publishing
segment's 1998 operating profit decreased from 1997 due to investment in the
relaunch of The Sporting News, higher paper costs, as well as the acquisitions
of InterZine and Senior Golfer.
Magazine Publishing segment's 1998 restructuring and one-time charges
totaled $29.1 million, which consisted primarily of goodwill impairment related
to two titles acquired in 1977 and 1987.
CORPORATE AND OTHER
Corporate and Other revenues and operating losses were as follows (dollars
in millions):
<TABLE>
<CAPTION>
1999 CHANGE 1998 CHANGE 1997
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Revenues.................................. $ .6 (46.7)% $ 1.2 (94.5)% $21.8
===== ===== =====
Operating loss............................ $70.5 (11.0)% $79.3 (6.6)% $84.9
===== ===== =====
Operating loss excluding restructuring,
one-time and other charges.............. $70.5 13.3% $62.2 (26.7)% $84.9
===== ===== =====
</TABLE>
1999 Results
Operating loss was higher in 1999 due to implementation costs to
consolidate financial and human resource applications at a central processing
site, as well as costs related to Times Mirror interactive, the Company's
recently formed Internet unit.
1998 Results
For 1998, revenues declined due to the dispositions of Harry N. Abrams,
Incorporated and National Journal, Inc. Operating loss decreased in 1998 from
1997 due primarily to lower employee benefit costs. Additionally, information
systems costs were lower in 1998 due to substantial completion of the Company's
conversion to common financial systems in 1997.
Corporate and Other's 1998 restructuring and one-time charges totaled $15.9
million and $1.1 million for other charges that did not qualify for accounting
classification as restructuring charges. These charges consisted primarily of
termination benefits and lease termination costs.
OTHER, NET
1999 Results
The 1999 results included a net pretax gain on the sale of America Online,
Inc. (AOL) shares and the purchase of the related 4 1/4% Premium Equity
Participating Securities (PEPS), of $16.9 million, or $10.0 million after
applicable taxes. The PEPS hedge the Company's investment in AOL. Such
transactions may continue from time to time in the future. The Company also
recorded a pretax gain on the sale of Hollywood Online, Inc. of $17.2 million,
or $10.7 million after applicable taxes. In addition, the Company had other
gains on non-operating items and reduced the carrying value of certain new media
and other investments. The Company also recognized equity income of $4.1 million
in 1999 from its investment in TMCT II which could experience significant
variability in the future due to the nature of TMCT II's investments (see Note
2).
1998 Results
In the second half of 1998, the Company sold 441,900 shares of Netscape
Communications Corporation (Netscape), which was subsequently purchased by AOL,
and purchased the related PEPS, for a net pretax
21
<PAGE> 23
gain of $16.0 million, or $9.5 million after applicable taxes. Additionally, the
Company recorded gains in 1998 on the disposition of excess real estate and
other assets and recorded equity losses related to new media and other
partnership investments.
INCOME TAXES
The effective income tax rates were 41.0%, 45.3% and 40.8% in 1999, 1998
and 1997, respectively. Goodwill impairment charges for which there were no tax
benefit contributed to the higher tax rate in 1998.
RESTRUCTURING, ONE-TIME AND OTHER CHARGES
In 1998, the Company undertook a comprehensive review of its business
operations to determine areas where operational efficiencies could be achieved
through either product and/or facility consolidation, headcount reductions,
product abandonments, contract terminations or other measures. The Company began
this review in anticipation of the impact of its significant 1998 divestitures
and to better align its overall cost structure and business configurations (see
Note 7). A summary of the significant components of the 1998 restructuring
program is as follows (dollars in millions):
<TABLE>
<CAPTION>
NEWSPAPER PROFESSIONAL MAGAZINE CORPORATE
PUBLISHING INFORMATION PUBLISHING AND OTHER TOTAL
---------- ------------ ---------- --------- ------
<S> <C> <C> <C> <C> <C>
Termination benefits.......... $ 43.4 $2.0 $ .2 $10.2 $ 55.8
Contract terminations......... 51.4 -- 4.3 -- 55.7
Goodwill impairments.......... .3 -- 19.7 -- 20.0
Lease termination costs....... 2.3 2.8 1.5 3.1 9.7
Technology asset write-offs... 4.8 1.4 .1 1.5 7.8
Other costs................... .3 2.0 3.3 1.1 6.7
------ ---- ----- ----- ------
Total............... $102.5 $8.2 $29.1 $15.9 $155.7
====== ==== ===== ===== ======
</TABLE>
The following table summarizes the 1999 activity in the 1998 restructuring
liability balance as well as estimated cash flows for the following years
(dollars in millions):
<TABLE>
<CAPTION>
ESTIMATED CASH FLOWS
---------------------
DECEMBER 31, 1999 DECEMBER 31, 2001 AND
1998 CASH PAYMENTS 1999 2000 THEREAFTER
------------ ------------- ------------ ------ -----------
<S> <C> <C> <C> <C> <C>
Termination benefits...... $51.2 $(37.2) $14.0 $11.4 $2.6
Contract terminations..... 31.3 (22.7) 8.6 3.8 4.8
Lease termination costs... 6.2 (2.5) 3.7 2.6 1.1
Technology asset
write-offs.............. .6 (.5) .1 .1 --
Other costs............... .7 (.3) .4 .4 --
----- ------ ----- ----- ----
Total........... $90.0 $(63.2) $26.8 $18.3 $8.5
===== ====== ===== ===== ====
</TABLE>
As planned, annual expense reductions resulting from the 1998 restructuring
program remain in line with management's expectations. The Company believes that
cash flows from operations will be adequate to cover future cash outflows under
the restructuring program.
In addition to the 1998 charges listed above, the Company also recorded
$18.7 million for certain asset write-offs that did not meet the accounting
criteria for classification as "restructuring and one-time charges." These
charges, which principally included other operating asset write-offs, were
classified within "Selling, general and administrative expenses" in the
Consolidated Statements of Income.
In 1997, the Company recorded pretax charges of $18.0 million for
specifically identified cost reduction programs that were not classified as
restructuring charges. The Company also recorded restructuring,
22
<PAGE> 24
impairment and one-time charges in 1995. A summary of the activity with respect
to the 1995 restructuring liability is as follows (dollars in millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31,
1998 CASH PAYMENTS 1999
------------ ------------- ------------
<S> <C> <C> <C>
1995 Restructuring.......................... $22.9 $(11.0) $11.9
</TABLE>
The remaining 1995 restructuring liability relates primarily to lease
payments on unoccupied properties, 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 has been not
significant.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements are funded primarily by its
operations. Cash generated from operating activities was used primarily to fund
capital expenditures, investments in new media businesses, dividend payments
and, to a lesser extent, share purchases. In 1999, funds from the Company's
investment affiliates created as part of the 1998 divestitures of the Company's
legal and medical publishing businesses, as well as proceeds from new debt
issuances were used to finance the 1999 recapitalization and acquisitions. In
the second half of 1998, the Company utilized a portion of the investment
affiliates' resources for share purchases and acquisitions. During 2000, the
Company plans to use proceeds from the planned dispositions of The Sporting
News, StayWell, Allen Communication and AchieveGlobal to repay debt, fund
acquisitions and, to a lesser extent, purchase the Company's common stock to
offset the dilutive effect of stock option exercises.
CASH FLOW
The following table sets forth certain items from the Consolidated
Statements of Cash Flows (dollars in millions):
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Net cash provided by operating activities of continuing
operations................................................ $ 349.7 $ 248.4
Capital expenditures........................................ (173.5) (131.5)
Acquisitions, net of cash acquired.......................... (173.3) (200.8)
Contribution to TMCT II, LLC................................ (1,235.3) --
Proceeds from reorganization as described in Notes 4 and
5......................................................... -- 2,022.2
Purchase of Times Mirror's common stock, including exercise
of put options, net of premiums received.................. (211.9) (964.7)
Net issuance of commercial paper, short-term borrowings and
long-term debt............................................ 491.8 141.4
</TABLE>
Cash generated by operating activities of continuing operations for 1999
was higher compared to 1998 due primarily to higher earnings.
Capital expenditures for 1999 were higher compared to 1998 due primarily to
the Company's continuing investments for future growth, which included facility
renovations within the Newspaper Publishing segment and conversion 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 approximate $180.0 million for 2000,
primarily for facility renovations and upgrading business systems.
Cash and marketable securities decreased to $144.3 million at December 31,
1999 from $1.10 billion at December 31, 1998 and total debt at December 31, 1999
rose to $1.82 billion from $1.25 billion at December 31, 1998 due primarily to
the 1999 recapitalization (see Note 2).
At December 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,
23
<PAGE> 25
which is available for short-term cash requirements. The Company had $241.4
million and $219.0 million of commercial paper outstanding at December 31, 1999
and March 8, 2000, respectively.
At December 31, 1999, the Company had $400.0 million remaining under shelf
registration statements that had not been utilized. There is no assurance that
the Company will be able to utilize the amounts remaining under these shelf
registration statements on terms acceptable to the Company.
ACQUISITIONS
In February 1999, Eagle New Media Investments, LLC acquired Newport Media,
Inc., a publisher of shopper publications in the Long Island and New Jersey
areas, for approximately $132.0 million. The Company made other acquisitions in
1999 for an aggregate consideration of $41.3 million.
In April 1998, the Company acquired the Los Angeles area business of E Z
Buy & E Z Sell Recycler Corporation (Recycler), consisting primarily of the
Recycler publications in the Los Angeles, Orange, Riverside, San Bernardino and
Ventura counties and a portion of Santa Barbara County for $188.7 million. The
Company also invested in preferred stock and provided a term loan to Target
Media Partners, a new entity that owns all of the non-Los Angeles area assets of
Recycler, for a total amount of $34.8 million. The Company made other
acquisitions in 1998 for an aggregate consideration of $12.1 million.
DISPOSITIONS
In May 1999, the Company completed an agreement to merge Hollywood Online,
Inc., and its Web site, hollywood.com, into Hollywood.com, Inc. (formerly Big
Entertainment, Inc.), in exchange for newly-issued restricted stock of
Hollywood.com, Inc. and a note with a then combined current value of
approximately $31.5 million. Additionally, the Company completed the sale of
Apartment Search, Inc. in March 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.
In July 1998, the Company completed the divestiture of Matthew Bender in a
tax-free reorganization and the sale of the Company's 50% ownership interest in
Shepard's to Reed Elsevier plc. The two transactions were valued at $1.65
billion in the aggregate. In October 1998, the Company completed the divestiture
of Mosby, Inc. to Harcourt General, Inc. in a transaction valued at $415.0
million. Concurrently with the closing of the Matthew Bender and Mosby, Inc.
transactions, the Company became the sole manager of Eagle New Media
Investments, LLC (Eagle New Media) and Eagle Publishing Investments, LLC (Eagle
Publishing). A substantial portion of the assets of Eagle New Media and Eagle
Publishing were utilized in connection with the 1999 recapitalization (see Note
2). The Company intends to deploy the assets of both Eagle New Media and Eagle
Publishing to finance acquisitions and investments, including purchases of the
Company's common stock, and does not intend to use those funds for the Company's
general working capital purposes.
COMMON SHARE PURCHASES
During 1999, the Company and Eagle New Media purchased 3.2 million shares
of the Company's Series A common stock which more than offset 2.0 million shares
issued as a result of the exercise of stock options (see Note 2 for further
information on the effective retirement of shares resulting from the 1999
recapitalization).
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. The
Company and its affiliates expect to make share purchases primarily to offset
stock option exercises, during the next two years in the open market or in
private transactions, depending on market conditions, and such purchases 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 December 31, 1999, the
Company and its affiliates are authorized to purchase 3.9 million shares of
Series A common stock.
24
<PAGE> 26
DIVIDENDS
Cash dividends of $.80 and $.72 per share of common stock were declared for
the years ended December 31, 1999 and 1998, respectively. In February 2000, the
Board of Directors approved an increase in the quarterly dividend on its common
stock to $.22 per share, from $.20 per share, beginning with the March 10, 2000
payment date.
MARKET RISK
The Company enters into contractual agreements in the ordinary course of
business to hedge its exposure to changes in interest rates, the value of
foreign currencies relative to the U.S. dollar and newsprint prices.
Counterparties to these agreements are major institutions. Such agreements are
not entered into for trading purposes.
The Company's debt portfolio is managed to maintain a balance of fixed and
variable rate obligations. The Company utilizes interest rate swap agreements to
help maintain the overall interest rate parameters set by management. As such, a
hypothetical 10% change in interest rates would not have a material impact on
the Company's results of operations or the fair values of its market risk
sensitive financial instruments.
The Company periodically enters into foreign exchange forward contracts or
uses other hedging strategies to substantially limit its exposure to changes in
foreign currency rates. As such, changes in currency rates would not have a
material impact on the Company's results of operations.
Newsprint expense represents a significant portion of the Company's
operating costs. To manage the Company's exposure to newsprint price
fluctuations, the Company has entered into newsprint hedging contracts not
exceeding five years. These hedging arrangements have the effect of locking in
for specified periods, the newsprint prices the Company will pay for the hedged
volumes. As a result, while these hedging arrangements are structured to reduce
the Company's exposure to increases in newsprint prices, they also limit the
benefit the Company might otherwise have received from any newsprint price
decreases. The Company's operating results typically can be adversely affected
to the extent that such historically volatile newsprint prices increase
materially.
IMPACT OF YEAR 2000
The Company instituted a comprehensive program to address potential Year
2000 impacts and as a result, critical systems and infrastructure operated
smoothly through the arrival of Year 2000 and leap year boundaries.
Additionally, the Company experienced no Year 2000 related disruptions in the
products and services provided by its significant suppliers or other third-party
business relationships. Many of the improvements made in preparation for the
Year 2000 are expected to provide the Company with long-term benefits. For
example, many of the advancements in technology for the Company's editorial,
advertising and circulation systems, e-mail, telephone switching, and network
infrastructure are each expected to have a significant, lasting impact.
YEAR 2000 COSTS
The Company incurred costs of $39.7 million to prepare for the arrival of
the Year 2000, excluding costs for employees working on the project, of which
$30.5 million was capitalized and $9.2 million was expensed. These costs include
1999 capital expenditures of $14.7 million and expenses of $5.4 million. During
1999, an average of 104 employees worked on the project with related costs
estimated at $8.4 million. These costs include both information technology and
non-information technology systems, including capital costs associated with
planned replacements previously budgeted which, incidentally, provided Year 2000
compliance. Year 2000 costs were funded through operating cash flows.
DISCONTINUED BUSINESSES
The above discussion of the Company's Year 2000 program does not include
information with respect to AchieveGlobal, Allen Communication or StayWell,
which are reflected as discontinued operations. However,
25
<PAGE> 27
the information provided above would not be materially different if information
regarding the discontinued businesses was included. The Company incurred costs
of $2.6 million to prepare these businesses for the arrival of the Year 2000,
excluding costs for employees working on the project, of which $1.6 million was
capitalized and $1.0 million was expensed. These costs include 1999 capital
expenditures and expenses of $.5 million each.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
In 1998, the Company divested Matthew Bender & Company, Incorporated and
Mosby, Inc. While the Company believes that these divestitures were completed on
a tax-free basis, this position may be subject to review by the Internal Revenue
Service. The Company estimated deferred taxes of $176.6 million based on its
assessment of the risks inherent in a contested challenge by the Internal
Revenue Service. To the extent that the estimate of such deferred taxes is
adjusted in the course of resolving such a challenge, the adjustment will be
recorded within discontinued operations. If it is ultimately determined that
these transactions were not completed on a tax-free basis, the Company's results
of operations, financial position and cash flow may be materially adversely
affected.
Certain statements set forth above and elsewhere in this Annual Report on
Form 10-K 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. For example,
there can be no assurances that the statements contained herein with respect to
expected dispositions of certain businesses, share purchases, capital
expenditures or the satisfactory resolution of contingent liabilities will be
achieved.
Actual results and experience may differ materially from the
forward-looking statements and 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 operating unit; (f) unfavorable foreign currency fluctuations; (g)
material changes in tax liability due to unfavorable reviews by taxing
authorities as described above; and (h) a general economic downturn resulting in
decreased consumer and corporate spending on discretionary items such as
magazines or newspapers. 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.
DISCUSSIONS EXCLUDING RESTRUCTURING, ONE-TIME AND OTHER CHARGES
Management's discussion and analysis of its results of operations presents
information regarding operating profit as well as operating profit excluding the
impact of restructuring, one-time and other charges. The Company believes that
the financial information which excludes restructuring, one-time and other
charges is necessary to an understanding of its operations and provides for a
more comparable analysis of historical results as well as indications of future
financial performance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This information is presented in Management's Discussion and Analysis of
Financial Condition and Results of Operations under the caption "Liquidity and
Capital Resources -- Market Risk."
26
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... 28
Consolidated Statements of Income -- Years Ended December
31, 1999, 1998 and 1997................................... 29
Consolidated Balance Sheets -- December 31, 1999 and
December 31, 1998......................................... 30
Consolidated Statements of Shareholders' Equity -- Years
Ended December 31, 1999, 1998 and 1997.................... 32
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1999, 1998 and 1997.......................... 34
Notes to Consolidated Financial Statements.................. 35
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts and
Reserves............................................... 65
</TABLE>
All other schedules are omitted because they are not required by the
regulations or related instructions or are not applicable.
27
<PAGE> 29
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
The Times Mirror Company
We have audited the accompanying consolidated balance sheets of The Times
Mirror Company as of December 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. Our audits also include the
financial statement schedule listed in the Index to Financial Statements and
Financial Statement Schedule. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Times
Mirror Company at December 31, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Los Angeles, California
February 2, 2000
28
<PAGE> 30
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Advertising.......................................... $2,214,902 $1,993,750 $1,855,999
Circulation.......................................... 505,598 512,090 515,941
Other................................................ 308,749 278,148 273,195
---------- ---------- ----------
Total revenues............................... 3,029,249 2,783,988 2,645,135
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales........................................ 1,615,273 1,444,523 1,395,660
Selling, general and administrative expenses......... 943,470 935,986 858,197
Restructuring and one-time charges................... -- 155,681 --
---------- ---------- ----------
Total costs and expenses..................... 2,558,743 2,536,190 2,253,857
---------- ---------- ----------
OPERATING PROFIT....................................... 470,506 247,798 391,278
Interest expense....................................... (93,368) (68,275) (35,628)
Interest income........................................ 36,454 39,680 2,351
Other, net............................................. 25,699 25,801 38,498
---------- ---------- ----------
Income from continuing operations before income
taxes................................................ 439,291 245,004 396,499
Income tax provision................................... 180,229 110,945 161,844
---------- ---------- ----------
Income from continuing operations...................... 259,062 134,059 234,655
Discontinued operations:
Income (loss) from operations, net of taxes....... 24 (33,407) 15,657
Net gain on disposal, net of taxes................ -- 1,316,686 --
---------- ---------- ----------
NET INCOME............................................. $ 259,086 $1,417,338 $ 250,312
========== ========== ==========
Preferred stock dividends.............................. $ 18,066 $ 21,697 $ 32,481
========== ========== ==========
Earnings applicable to common shareholders............. $ 241,020 $1,395,641 $ 217,831
========== ========== ==========
Basic earnings per common share:
Continuing operations............................. $ 3.53 $ 1.32 $ 2.18
Discontinued operations........................... -- 15.14 .17
---------- ---------- ----------
Basic earnings per share............................... $ 3.53 $ 16.46 $ 2.35
========== ========== ==========
Diluted earnings per common share:
Continuing operations............................. $ 3.38 $ 1.29 $ 2.12
Discontinued operations........................... -- 14.77 .17
---------- ---------- ----------
Diluted earnings per share............................. $ 3.38 $ 16.06 $ 2.29
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 31
THE TIMES MIRROR COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1999 1998
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 144,319 $1,052,999
Marketable securities.................................. -- 49,438
Accounts receivable, less allowances for doubtful
accounts and returns of $34,721 and $37,389........... 363,361 311,913
Inventories............................................ 35,082 28,438
Recoverable income taxes............................... 43,477 22,112
Deferred income taxes.................................. 33,314 32,279
Prepaid expenses....................................... 35,526 30,141
Net assets of discontinued operations.................. 173,090 189,628
Other current assets................................... 58,479 16,166
----------- ----------
Total current assets.............................. 886,648 1,733,114
Property, plant and equipment:
Land................................................... 49,937 45,065
Buildings.............................................. 454,751 433,860
Machinery and equipment................................ 1,389,855 1,321,501
Leasehold improvements................................. 37,248 27,848
Construction-in-progress............................... 42,375 41,362
----------- ----------
1,974,166 1,869,636
Less accumulated depreciation and amortization......... (1,008,071) (966,153)
----------- ----------
Property, plant and equipment, net................ 966,095 903,483
Goodwill, net of accumulated amortization of $126,875 and
$105,976............................................... 602,148 501,463
Other intangibles, net of accumulated amortization of
$74,612 and $61,657.................................... 192,593 100,373
Equity investments in TMCT I, LLC and TMCT II, LLC........ 332,846 96,416
Other investments......................................... 242,858 174,402
Prepaid pension costs..................................... 445,175 419,471
Other assets.............................................. 229,008 229,207
----------- ----------
Total assets...................................... $ 3,897,371 $4,157,929
=========== ==========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 32
THE TIMES MIRROR COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 179,461 $ 179,415
Short-term debt........................................ 254,834 312,610
Employees' compensation................................ 110,311 93,145
Unearned income........................................ 127,760 146,323
Restructuring.......................................... 25,795 91,903
Other current liabilities.............................. 167,969 98,106
----------- -----------
Total current liabilities......................... 866,130 921,502
Long-term debt............................................ 1,562,240 941,423
Deferred income taxes..................................... 482,062 373,623
Postretirement benefits................................... 221,111 226,018
Other liabilities......................................... 338,808 330,350
----------- -----------
Total liabilities................................. 3,470,351 2,792,916
Common stock subject to put options......................... 27,291 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 B: 8,439,000 shares authorized; no shares
issued or outstanding............................... -- --
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; 93,879,000 and
86,831,000 shares issued and outstanding.............. 93,879 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, 18,246,000 and
25,258,000 shares issued and outstanding.............. 18,246 25,258
Additional paid-in capital................................ 1,299,931 1,278,916
Retained earnings......................................... 1,784,793 1,653,736
Accumulated other comprehensive income.................... 26,879 26,491
Less treasury stock, at cost:
Series A common stock, 52,387,000 and 38,708,000
shares; Series A preferred stock, 735,000 shares;
Series C-1 preferred stock, 305,000 and no shares; and
Series C-2 preferred stock, 196,000 and no shares..... (3,548,819) (2,453,599)
----------- -----------
Total shareholders' equity........................ 399,729 1,342,453
----------- -----------
Total liabilities and shareholders' equity........ $ 3,897,371 $ 4,157,929
=========== ===========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE> 33
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK
--------------------------------------------- -------------------
SERIES A SERIES B SERIES C-1 SERIES C-2 SERIES A SERIES C
-------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996................................ $411,784 $164,595 $ -- $ -- $69,757 $26,973
Comprehensive income:
Net income.............................................. -- -- -- -- -- --
Other comprehensive income, net of income taxes:
Change in net unrealized losses on securities......... -- -- -- -- -- --
Minimum pension liability adjustment.................. -- -- -- -- -- --
Foreign currency translation adjustments.............. -- -- -- -- -- --
Comprehensive income...................................... -- -- -- -- -- --
Conversion to Series A common related to:
Series C common......................................... -- -- -- -- 11,127 (11,127)
Series B preferred...................................... -- (164,595) -- -- 4,446 --
Merger with Chandis Securities............................ -- -- 190,486 122,550 6,582 9,656
Issuance/Purchase of shares:
Stock options and restricted stock...................... -- -- -- -- 1,070 1
Acquisition............................................. -- -- -- -- 45 --
Stock purchase program.................................. -- -- -- -- (6,475) --
TMCT I, LLC contributed shares.......................... -- -- -- -- -- --
Put options:
Sale.................................................... -- -- -- -- -- --
Exercise................................................ -- -- -- -- -- --
Change in redemption value.............................. -- -- -- -- -- --
Dividends declared:
Common stock; $.55 per share............................ -- -- -- -- -- --
Preferred stock......................................... -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
BALANCE AT DECEMBER 31, 1997................................ 411,784 -- 190,486 122,550 86,552 25,503
Comprehensive income:
Net income.............................................. -- -- -- -- -- --
Other comprehensive income, net of income taxes:
Change in net unrealized gains on securities.......... -- -- -- -- -- --
Minimum pension liability adjustment.................. -- -- -- -- -- --
Foreign currency translation adjustments.............. -- -- -- -- -- --
Comprehensive income...................................... -- -- -- -- -- --
Conversion of Series C common to Series A common.......... -- -- -- -- 245 (245)
Issuance/Purchase of shares:
Stock options and restricted stock...................... -- -- -- -- 34 --
Purchases of common stock............................... -- -- -- -- -- --
Put options:
Sale.................................................... -- -- -- -- -- --
Exercise................................................ -- -- -- -- -- --
Change in redemption value.............................. -- -- -- -- -- --
Dividends declared:
Common stock; $.72 per share............................ -- -- -- -- -- --
Preferred stock......................................... -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
BALANCE AT DECEMBER 31, 1998................................ 411,784 -- 190,486 122,550 86,831 25,258
Comprehensive income:
Net income.............................................. -- -- -- -- -- --
Other comprehensive income, net of income taxes:
Change in net unrealized losses on securities......... -- -- -- -- -- --
Minimum pension liability adjustment.................. -- -- -- -- -- --
Foreign currency translation adjustments.............. -- -- -- -- -- --
Comprehensive income...................................... -- -- -- -- -- --
Conversion of Series C common to Series A common.......... -- -- -- -- 776 (776)
Issuance/Purchase of shares:
Stock options and restricted stock...................... -- -- -- -- 36 --
Purchases of common stock............................... -- -- -- -- -- --
TMCT II, LLC contributed shares......................... -- -- -- -- 6,236 (6,236)
Put options: --
Sale.................................................... -- -- -- -- -- --
Exercise................................................ -- -- -- -- -- --
Change in redemption value.............................. -- -- -- -- -- --
Dividends declared:
Common stock; $.80 per share............................ -- -- -- -- -- --
Preferred stock......................................... -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
BALANCE AT DECEMBER 31, 1999................................ $411,784 $ -- $190,486 $122,550 $93,879 $18,246
======== ======== ======== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 34
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER
PAID-IN RETAINED COMPREHENSIVE TREASURY
CAPITAL EARNINGS INCOME STOCK TOTAL
---------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 225,934 $ 546,881 $52,886 $ -- $1,498,810
-- 250,312 -- -- 250,312
-- -- (38,170) -- (38,170)
-- -- 1,902 -- 1,902
-- -- (3,814) -- (3,814)
----------
-- -- -- -- 210,230
-- -- -- -- --
160,119 (8) -- -- (38)
807,834 -- -- (1,125,064) 12,044
45,711 (17,509) -- 32,741 62,014
2,354 -- -- -- 2,399
(16,190) (309,734) -- (132,382) (464,781)
-- -- -- (380,093) (380,093)
3,227 -- -- -- 3,227
(419) -- -- (6,527) (6,946)
24,572 -- -- -- 24,572
-- (50,885) -- -- (50,885)
-- (34,554) -- -- (34,554)
---------- ---------- ------- ----------- ----------
1,253,142 384,503 12,804 (1,611,325) 875,999
-- 1,417,338 -- -- 1,417,338
-- -- 16,106 -- 16,106
-- -- (1,169) -- (1,169)
-- -- (1,250) -- (1,250)
----------
-- -- -- -- 1,431,025
-- -- -- -- --
31,906 (65,952) -- 125,229 91,217
-- -- -- (947,203) (947,203)
2,891 -- -- -- 2,891
(63) -- -- (20,300) (20,363)
(8,960) -- -- -- (8,960)
-- (60,456) -- -- (60,456)
-- (21,697) -- -- (21,697)
---------- ---------- ------- ----------- ----------
1,278,916 1,653,736 26,491 (2,453,599) 1,342,453
-- 259,086 -- -- 259,086
-- -- (8,864) -- (8,864)
-- -- (1,692) -- (1,692)
-- -- 10,944 -- 10,944
----------
-- -- -- -- 259,474
-- -- -- -- --
22,823 (53,265) -- 120,442 90,036
-- -- -- (196,471) (196,471)
-- -- -- (1,000,817) (1,000,817)
2,923 -- -- -- 2,923
-- -- -- (18,374) (18,374)
(4,731) -- -- -- (4,731)
-- (56,698) -- -- (56,698)
-- (18,066) -- -- (18,066)
---------- ---------- ------- ----------- ----------
$1,299,931 $1,784,793 $26,879 $(3,548,819) $ 399,729
========== ========== ======= =========== ==========
</TABLE>
33
<PAGE> 35
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1999 1998 1997
----------- ---------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations......................... $ 259,062 $ 134,059 $234,655
Adjustments to derive cash flows from continuing operating
activities:
Depreciation and amortization........................... 144,955 135,175 124,064
Restructuring and other charges:
Impairments and other asset write-offs................ -- 52,783 --
Net change in restructuring liability................. (74,228) 69,849 (15,764)
Amortization of debt discount........................... 21,466 16,998 9,299
Gain on asset sales and writedowns, net................. (21,832) (31,564) (36,302)
Provision for doubtful accounts......................... 18,643 19,240 22,307
Provision for deferred income taxes..................... 44,764 11,417 41,587
Changes in assets and liabilities:
Accounts receivable................................... (68,541) (23,302) (36,625)
Inventories........................................... (6,453) 2,755 (740)
Prepaid pension costs................................. (25,704) (52,664) (39,872)
Accounts payable...................................... (6,695) (21,557) 18,172
Income taxes.......................................... 18,777 (18,285) (31,826)
Other, net.............................................. 45,517 (46,534) 66,098
----------- ---------- --------
Net cash provided by continuing operating activities.... 349,731 248,370 355,053
Net cash provided by (used in) discontinued operating
activities............................................ 31,495 72,906 (1,702)
----------- ---------- --------
Net cash provided by operating activities............. 381,226 321,276 353,351
----------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (173,484) (131,548) (113,081)
Acquisitions, net of cash acquired........................ (173,337) (200,786) (37,580)
Purchases of investments.................................. (84,270) (57,433) (10,811)
Proceeds from sales of investments and other assets....... 71,455 38,473 120,774
Sale (purchase) of marketable securities, net............. 49,438 (49,438) --
Decreases (increases) in notes receivable, net............ 13,000 (69,120) --
Proceeds from reorganization as described in Notes 4 and
5....................................................... -- 2,022,224 --
Other, net................................................ (7,242) 10,211 8,520
----------- ---------- --------
Net cash provided by (used in) investing activities of
continuing operations................................. (304,440) 1,562,583 (32,178)
Net cash used in investing activities of discontinued
operations............................................ (10,232) (29,697) (153,335)
----------- ---------- --------
Net cash provided by (used in) investing activities... (314,672) 1,532,886 (185,513)
----------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution to TMCT II, LLC.............................. (1,235,252) -- --
Purchases of Times Mirror common stock.................... (196,471) (947,203) (464,781)
Dividends paid............................................ (74,764) (82,153) (85,439)
Net proceeds (repayments) of commercial paper and
short-term borrowings................................... (57,485) 212,983 92,187
Principal repayments of debt.............................. (46,567) (71,550) (5,769)
Exercise of put options, net of premiums received......... (15,451) (17,472) (3,719)
Proceeds from issuance of long-term debt.................. 595,896 -- 445,429
Proceeds from exercise of stock options................... 67,195 59,277 36,431
Contribution to TMCT I, LLC............................... -- -- (249,266)
Other, net................................................ (12,335) 161 (17,098)
----------- ---------- --------
Net cash used in financing activities................. (975,234) (845,957) (252,025)
----------- ---------- --------
Increase (decrease) in cash and cash equivalents.......... (908,680) 1,008,205 (84,187)
Cash and cash equivalents at beginning of year............ 1,052,999 44,794 128,981
----------- ---------- --------
Cash and cash equivalents at end of year.................. $ 144,319 $1,052,999 $ 44,794
=========== ========== ========
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 36
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its subsidiaries as well as affiliates that are
controlled by the Company, as described in Note 5, after elimination of all
significant intercompany transactions and balances. Other affiliated companies
in which the Company owns a 20% to 50% interest or has significant influence are
accounted for by the equity method.
Presentation. Certain amounts in previously issued financial statements
have been reclassified to conform to the 1999 presentation. Financial
information presented in the notes to consolidated financial statements excludes
discontinued operations, except where noted.
Use of Estimates. 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.
Changes in Accounting Principles. As of January 1, 1999, the Company
adopted the American Institute of Certified Public Accountants Statement of
Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 requires the capitalization of certain
costs incurred after the date of adoption in connection with developing or
obtaining software for internal use. In prior years, the Company's accounting
policies for internal use software were generally consistent with the
requirements of SOP 98-1. Accordingly, the adoption of this pronouncement did
not have a material effect on the Company's financial position or results of
operations.
Cash and Cash Equivalents. Cash equivalents consist of investments that are
readily convertible into cash and mature within three months from date of
purchase. Cash equivalents of $113.9 million and $997.7 million at December 31,
1999 and 1998, respectively, consist of commercial paper, money market funds or
certificates of deposit. The Company has an investment policy for short-term
investments covering eligible types of instruments, maximum investment terms,
credit quality and individual issuer limits.
Under the Company's cash management system, the bank notifies the Company
daily of checks presented for payment against its primary disbursement accounts.
The Company transfers funds from other sources such as short-term investments or
commercial paper issuance to cover the checks presented for payment. This
program results in a book cash overdraft in the primary disbursement accounts as
a result of checks outstanding. The book overdraft, which was reclassified to
accounts payable, was $27.4 million and $41.3 million at December 31, 1999 and
1998, respectively.
Marketable Securities. Marketable securities consist of investments in
commercial paper that have maturities over three months but less than one year
from date of purchase.
Inventories. Inventories are stated at the lower of cost or market.
Newsprint is valued under the last-in, first-out (LIFO) method and paper and
certain finished products are valued primarily under the weighted average cost
method.
Property, Plant and Equipment. Property, plant and equipment is stated on
the basis of cost. Maintenance and repairs are charged to expense as incurred.
Additions, improvements and replacements are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful
lives as follows:
<TABLE>
<S> <C>
Buildings.................................... 10 - 45 years
Machinery and equipment...................... 3 - 20 years
Leasehold improvements....................... Lesser of useful life or lease term
</TABLE>
Goodwill and Other Intangibles. Goodwill recognized in business
combinations accounted for as purchases is being amortized on a straight-line
basis primarily over periods of 15 to 40 years, with a weighted
35
<PAGE> 37
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
average amortization period of 35 years. Goodwill amortization expense was $22.5
million, $18.0 million and $13.9 million for the years ended December 31, 1999,
1998 and 1997, respectively.
Other intangibles arising in connection with acquisitions are being
amortized on a straight-line basis over their estimated useful lives ranging
primarily from 5 to 30 years, with a weighted average life of 27 years.
Amortization expense was $15.1 million, $9.9 million and $7.6 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
The Company assesses on an ongoing basis the recoverability of long-lived
assets, including goodwill and other intangible assets, based on estimates of
future undiscounted cash flows for the applicable business compared to net book
value. If the future undiscounted cash flows estimate were less than net book
value, net book value would then be reduced to fair value based on an estimate
of discounted cash flows. The Company also evaluates the amortization periods of
these assets to determine whether events or circumstances warrant revised
estimates of useful lives.
Deferred Charges. Magazine subscription procurement costs are charged to
expense over the same period as the related revenue is earned.
Derivative Financial Instruments. Interest rate swaps (see Note 9) are used
to manage exposure to market risk associated with changes in interest rates.
Interest rate swaps are accounted for on the accrual basis. Payments made or
received are recognized as an adjustment to interest expense. Amounts received
or paid in connection with initiating or terminating swaps are amortized on a
straight-line basis as a reduction or increase in interest expense over the term
of the swaps.
Premium equity participating debt securities (see Note 12) are used to
manage the Company's exposure to market risk associated with changes in the fair
value of the Company's investment in the common stock of America Online, Inc.
(AOL).
The Company's exposure to market risk associated with fluctuations in the
value of foreign currencies relative to the U.S. dollar may be managed with
foreign currency forward contracts, currency options, currency swaps or other
risk management instruments permitted by the Company's internal policy
guidelines. The Company's forward contracts and other risk management
instruments were not significant.
Commodity price hedging contracts (see Note 9) are used to manage the
Company's exposure to market risk associated with fluctuations in newsprint
prices. These contracts are accounted for on the accrual basis. Periodic
settlement payments made or received are recognized as an adjustment to the cost
basis of newsprint inventory. Amounts paid in connection with initiating these
contracts are amortized on a straight-line basis as an adjustment to the cost
basis of newsprint inventory over the term of the contracts.
Put options are used in conjunction with the Company's common stock
purchase program. These contracts are entered into based on market conditions as
well as other factors. The costs or benefits derived from these equity-based
financial instruments are recorded in shareholders' equity on the date of the
transaction. The potential obligation under these put options outstanding at
December 31, 1999 and 1998 has been transferred from shareholders' equity to
"Common stock subject to put options."
Revenue Recognition. Revenues from certain products sold with the right of
return, are recognized net of a provision for estimated returns. Revenues from
newspaper and magazine subscriptions and annual subscriptions for aeronautical
charts are deferred as unearned income at the time of the sale. A pro rata share
of the newspaper and magazine subscription price is included in revenue as
products are delivered to subscribers. Annual subscription revenues for
aeronautical charts are recognized on a straight-line basis over the life of the
subscription service.
36
<PAGE> 38
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Advertising and Promotion Costs. Advertising and promotion costs, which are
expensed as incurred, amounted to $70.9 million, $59.9 million and $64.8 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
Foreign Currency Translation. The assets and liabilities of foreign
operations are translated at year-end exchange rates. Results of operations are
translated at average exchange rates in effect during the year. Translation
adjustments are included in "Accumulated other comprehensive income" in the
Consolidated Balance Sheets and Statements of Shareholders' Equity.
Stock-Based Compensation. Employee stock options (see Note 14) are
accounted for under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," which requires the recognition of expense when the
option price is less than the fair value of the stock at the date of grant. The
Company awards options for a fixed number of shares at an option price equal to
the fair value at the date of grant. Accordingly, the financial statements do
not include any expense related to employee stock option awards. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
Future Accounting Requirement. In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). Subsequently, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133" which
deferred the effective date of SFAS 133 for one year. This standard is effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS
133 will require the Company to record all derivatives as assets or liabilities
at fair value. Changes in derivative fair values will either be recognized in
earnings, offset against changes in the fair value of the related hedged assets,
liabilities and firm commitments or, for forecasted transactions, recorded as a
component of accumulated other comprehensive income in shareholders' equity
until the hedged transactions occur and are recognized in earnings. The
ineffective portion of a hedging derivative's change in fair value will be
recognized in earnings immediately. The impact of SFAS 133 on the Company's
financial statements will depend on a variety of factors, including, the extent
of the Company's hedging activities, the types of hedging instruments used and
the effectiveness of such instruments. The effect of adopting SFAS 133 is
currently being evaluated, however, management does not anticipate that the
adoption of this standard will have a significant effect on earnings or the
financial position of the Company.
NOTE 2 -- 1999 RECAPITALIZATION
In September 1999, the Company completed a transaction (1999
recapitalization) involving agreements with its largest shareholders, Chandler
Trust No. 1 and Chandler Trust No. 2 (Chandler Trusts). The 1999
recapitalization resulted in the formation of a new limited liability company,
TMCT II, LLC (TMCT II).
Pursuant to the TMCT II contribution agreement, the Company, Eagle New
Media Investments, LLC and Eagle Publishing Investments, LLC (Eagle Companies)
and the Chandler Trusts made the following capital contributions to TMCT II:
1. The Company contributed preferred units issued by the operating
partnerships of 8 unrelated real estate investment trusts (OP REIT
Interests) with an aggregate purchase price of $600.0 million and
$2.0 million in cash;
2. The Eagle Companies contributed a total of $633.3 million in cash or
cash equivalents; and
3. The Chandler Trusts contributed 9.3 million shares of the Company's
Series A common stock, 6.2 million shares of the Company's Series C
common stock, 381 thousand shares of the Company's Series C-1
preferred stock and 245 thousand shares of the Company's Series C-2
preferred stock (TMCT II Contributed Shares).
37
<PAGE> 39
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's purchase of the OP REIT Interests was funded with the
proceeds of a $550.0 million short-term bank line of credit provided by Citicorp
and its commercial paper line. The Company refinanced this line of credit in
October 1999 (see Note 12). The cash contributed by the Company and the Eagle
Companies was used by TMCT II to purchase a portfolio of securities (TMCT II
Portfolio).
The Company, the Eagle Companies and the Chandler Trusts share in the cash
flow of the various assets held by TMCT II. The cash flow from the OP REIT
Interests and the TMCT II Portfolio is largely allocated to the Chandler Trusts
with the remaining portion of the cash flow from the OP REIT Interests and the
TMCT II Portfolio primarily allocated to the Eagle Companies. The cash flow from
the TMCT II Contributed Shares is largely allocated to the Company with the
remaining portion of the cash flow from the TMCT II Contributed Shares primarily
allocated to the Chandler Trusts. Due to the allocations of the economic
benefits in TMCT II, for financial reporting purposes, 80% of the TMCT II
Contributed Shares are included in treasury stock, 80% of the preferred stock
dividends on the Series C-1 and C-2 preferred stock are excluded from preferred
stock dividends and 80% of the dividends on the common stock are effectively
eliminated. The Company and the Eagle Companies account for their investment in
the TMCT II OP REIT Interests and the TMCT II Portfolio under the equity method
and this net investment was $246.8 million at December 31, 1999. During 1999,
the Company and the Eagle Companies recognized $4.1 million of equity income
related to this investment.
At December 31, 1999, the assets of TMCT II, excluding the TMCT II
Contributed Shares, consisted primarily of $600.0 million of OP REIT Interests,
$475.6 million of fixed income investments, $93.0 million of private equity
investments and $69.6 million of cash and cash equivalents. TMCT II may invest a
total of $560.0 million in venture capital or private equity investments. TMCT
II recognizes unrealized losses on its venture capital and private equity
investments and defers the recognition of unrealized gains on these investments
until realized. In the fourth quarter of 1999, the Company and Eagle New Media
Investments, LLC sold certain venture capital investments with a cost basis of
$16.2 million to TMCT II for proceeds of $31.4 million and has deferred
recognition of any gain until these investments are sold by TMCT II to third
parties unaffiliated with the Company. These proceeds are included in "Proceeds
from sales of investments and other assets" in the Consolidated Statements of
Cash Flows.
In connection with the 1999 recapitalization, the Company replaced the
Series C-1 and C-2 preferred stocks with Series D-1 and D-2 preferred stocks
effective January 1, 2000. The Series D-1 and D-2 preferred stocks are identical
to the Series C-1 and C-2 preferred stocks except that the increases in the
dividend rate on the Series D-1 and D-2 preferred stocks are pursuant to a fixed
and certain schedule.
As a result of the 1999 recapitalization, for financial reporting purposes,
the following number of shares have been included as treasury stock and excluded
from earnings per share calculations:
1. 12.4 million shares of Series A and C common stocks;
2. 305 thousand shares of Series C-1 preferred stock;
3. 196 thousand shares of Series C-2 preferred stock.
NOTE 3 -- 1997 RECAPITALIZATION
During the third quarter of 1997, the Company completed a transaction (1997
recapitalization) involving agreements with its largest shareholders, the
Chandler Trusts. The 1997 recapitalization consisted of two components: (a) the
merger of Chandis Securities Company (Chandis), a holding company owned by
Chandler Trust No. 2 and affiliated minority investors, into Chandis Acquisition
Corporation (CAC), a Delaware corporation and wholly-owned subsidiary of the
Company (Merger) and (b) the formation of a new limited liability company by the
Chandler Trusts and the Company.
38
<PAGE> 40
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On August 8, 1997, Chandis merged with and into CAC. Pursuant to the Merger
Agreement, the Chandis shareholders received 6.6 million shares of Series A
common stock, 9.7 million shares of Series C common stock, 381 thousand shares
of new Series C-1 preferred stock, and 245 thousand shares of new Series C-2
preferred stock. At the time of the Merger, Chandis owned 8.6 million shares of
Series A common stock, 9.7 million shares of Series C common stock, and 381
thousand shares of Series A preferred stock as well as an interest in
undeveloped real estate and certain other assets and liabilities. CAC is not a
"permitted transferee" as defined in the Company's Certificate of Incorporation,
therefore, the Series C common stock was converted to Series A common stock as a
result of the Merger. The Company's shares owned by CAC are reported as treasury
stock for financial reporting purposes. The Merger was a tax-free transaction.
Concurrent with the consummation of the Merger, the Company (including
certain of its subsidiaries) and the Chandler Trusts formed TMCT, LLC (TMCT I),
a Delaware limited liability company, and the following capital contributions
were made to TMCT I:
1. The Company contributed $249.3 million in cash and 8 real properties
(Real Properties) with an aggregate market value of $225.9 million;
2. The Chandler Trusts contributed 5.0 million shares of Series A common
stock and 443 thousand shares of Series A preferred stock (TMCT I
Contributed Shares).
The cash contributed by the Company was used by TMCT I to purchase a
portfolio of securities (TMCT I Portfolio). The Company has leased the Real
Properties from TMCT I under a lease with minimum lease payments equal to the
fair values and with an initial term of 12 years. During 1999 and 1998, the
Company made annual lease payments to TMCT I of $24.2 million. The lease is
accounted for as a financing arrangement and, accordingly, the Real Properties'
book value remains on the Company's consolidated balance sheet and continues to
be depreciated at the rates in effect prior to the contribution of the Real
Properties to TMCT I. The depreciation, along with a reduction of property,
plant and equipment of $168.0 million, which represents the estimated net book
value of the Real Properties at the end of the lease term, will result in a net
book value of zero for the Real Properties at August 8, 2009. At that time, the
Company has the option to purchase all the Real Properties for their fair market
value. If the Real Properties are not purchased by the Company, they will remain
the assets of TMCT I and may be leased by the Company at a fair value rent as
provided for under the terms of the lease agreement. The lease provides for two
additional 12-year lease terms with fair value purchase options at the end of
each lease term. The lease is included as a property financing in the Company's
outstanding debt obligations (see Note 12).
The Company and the Chandler Trusts share in the cash flow of the various
assets held by TMCT I. The cash flow from the Real Properties and the TMCT I
Portfolio is largely allocated to the Chandler Trusts and the cash flow from the
TMCT I Contributed Shares is largely allocated to the Company. Due to the
allocations of the economic benefits in the TMCT I, 80% of the TMCT I
Contributed Shares are included in treasury stock for financial reporting
purposes and 80% of the preferred stock dividends on the Series A preferred
stock are excluded from preferred stock dividends. The Company accounts for the
investment in the TMCT I Portfolio under the equity method. This net investment
was $86.0 million and $96.4 million at December 31, 1999 and 1998, respectively.
During 1999 and 1998, the Company recognized an equity loss of $3.5 million and
equity income of $3.7 million related to this investment, respectively. The
assets of TMCT I, excluding the TMCT I Contributed Shares, primarily consist of
Real Properties of $205.8 million and $214.0 million, fixed income investments
of $207.3 million and $213.2 million, and equity investments of $46.2 million
and $45.3 million at December 31, 1999 and 1998, respectively.
39
<PAGE> 41
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As a result of the 1997 recapitalization, for financial reporting purposes,
the following number of shares have been included as treasury stock and excluded
from earnings per share calculations:
1. 6.0 million shares of Series A common stock;
2. 735 thousand shares of Series A preferred stock.
NOTE 4 -- DISCONTINUED OPERATIONS
In September 1999, Times Mirror announced its decision to sell
AchieveGlobal, Inc., a professional training company, Allen Communication, an
interactive software and training courseware developer, and The StayWell
Company, a health improvement information company. The Company decided to sell
these businesses in order to concentrate on its core strengths in newspaper
publishing, flight information and magazine publishing. While the Company
previously expected to complete the sale of AchieveGlobal in the first quarter
of 2000, the Company now believes that greater sales value can be realized by
allowing AchieveGlobal to fully implement certain of its strategic initiatives.
Currently, the Company anticipates selling AchieveGlobal by the end of 2000. The
accompanying financial statements reflect these businesses as discontinued
operations for all periods presented.
During the second quarter of 1998, the Company reached agreements to divest
Matthew Bender & Company, Incorporated (Matthew Bender), the Company's legal
publisher, in a tax-free reorganization (see Note 5) and its 50% ownership
interest in legal citation provider Shepard's. The two transactions were valued
at $1.65 billion in the aggregate and were completed in the third quarter of
1998. The disposition of the Company's 50% interest in Shepard's was consummated
by a transfer of the respective partnership interests owned by two subsidiaries
of the Company to affiliates of Reed Elsevier plc for a cash consideration of
$274.7 million. The Company recorded a net gain on these two transactions in the
amount of $1.11 billion, net of expenses and $163.6 million of income taxes,
primarily consisting of tax reserves (see Note 11). Also during the second
quarter of 1998, the Company reached an agreement to divest Mosby, Inc. (Mosby),
the Company's health science/medical publisher, in a tax-free reorganization
(see Note 5). The transaction was valued at $415.0 million and was completed in
the fourth quarter of 1998. The Company recorded a net gain on this transaction
in the amount of $239.0 million, net of expenses and $55.6 million of income
taxes, primarily consisting of tax reserves (see Note 11). While the Company
believes that the Matthew Bender and Mosby transactions were completed on a
tax-free basis, this position may be subject to review by the Internal Revenue
Service. These divestitures represent the final dispositions of the Company's
professional and higher education publishing businesses and, as such, have been
reflected as discontinued operations in the accompanying financial statements
for all periods presented.
During the third quarter of 1998, the Company decided to discontinue
Apartment Search, Inc., its apartment location business. In 1998, the Company
recorded an estimated loss on disposal including a provision for operating
losses of $3.4 million during the phase-out period. The total estimated loss of
$47.6 million, or $28.2 million after applicable tax benefit, is included in
discontinued operations in "Net gain on disposal, net of taxes" in the
Consolidated Statements of Income. The Company completed the sale of Apartment
Search, Inc. in March 1999.
40
<PAGE> 42
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the combined results of operations and net gain on disposal
for all discontinued entities are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ---------- --------
<S> <C> <C> <C>
Revenues.......................................... $186,578 $ 507,475 $673,393
======== ========== ========
Income (loss) before income taxes(1).............. $ 2,271 $ (25,521) $ 20,808
Income tax provision.............................. 2,247 7,886 5,151
-------- ---------- --------
Income (loss) from discontinued operations........ 24 (33,407) 15,657
Net gain on disposal, net of taxes(2)............. -- 1,316,686 --
-------- ---------- --------
Total discontinued operations........... $ 24 $1,283,279 $ 15,657
======== ========== ========
</TABLE>
- ---------------
(1) It is the Company's policy to allocate interest expense among business
segments including discontinued operations. The allocation to discontinued
operations is based on the ratio of net assets of discontinued operations
plus consolidated debt, other than debt of the discontinued operations that
will be assumed by the buyer and debt that can be directly attributed to the
discontinued operations. Income (loss) before income taxes includes a charge
for interest expense of $7.6 million, $18.1 million and $17.0 million for
the years ended December 31, 1999, 1998 and 1997, respectively. The results
of discontinued operations include pretax restructuring, one-time and other
charges of $59.1 million and $12.8 million for the years ended December 31,
1998 and 1997, respectively.
(2) Net of income taxes of $198.0 million in 1998.
The assets and liabilities of discontinued operations have been classified
in the Consolidated Balance Sheets as net assets of discontinued operations and
consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1999 1998
-------- --------
<S> <C> <C>
Accounts receivable, net.................................... $ 33,373 $ 58,256
Other current assets........................................ 27,289 49,310
Property, plant and equipment, net.......................... 12,638 14,838
Goodwill, net............................................... 57,236 62,861
Other intangibles, net...................................... 65,066 68,256
Other assets................................................ 18,213 21,986
-------- --------
Total assets...................................... 213,815 275,507
-------- --------
Current liabilities......................................... 32,922 77,164
Non-current liabilities..................................... 7,803 8,715
-------- --------
Total liabilities................................. 40,725 85,879
-------- --------
Net assets of discontinued operations....................... $173,090 $189,628
======== ========
</TABLE>
41
<PAGE> 43
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The major components of cash flow for discontinued operations are as
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
Income (loss) from discontinued operations........ $ 24 $(33,407) $ 15,657
Depreciation and amortization..................... 9,620 25,572 31,319
Amortization of product costs..................... 4,796 16,550 22,655
Other, net........................................ 17,055 64,191 (71,333)
-------- -------- ---------
Net cash provided by (used in) discontinued
operating activities......................... $ 31,495 $ 72,906 $ (1,702)
======== ======== =========
Capitalization of product costs................... $ (5,994) $(16,852) $ (21,490)
Acquisitions, net of cash acquired................ -- -- (96,213)
Capital expenditures.............................. (4,256) (11,485) (16,836)
Other, net........................................ 18 (1,360) (18,796)
-------- -------- ---------
Net cash used in investing activities of
discontinued operations...................... $(10,232) $(29,697) $(153,335)
======== ======== =========
</TABLE>
NOTE 5 -- REORGANIZATION
During the third quarter of 1998, the Company completed the disposition of
Matthew Bender in a tax-free reorganization with Reed Elsevier plc. The
disposition of Matthew Bender was accomplished through the merger of an
affiliate of Reed Elsevier with and into Matthew Bender, with Matthew Bender as
the surviving corporation in the merger. As a result of the merger, TMD, Inc., a
wholly-owned subsidiary of Times Mirror, received all of the issued and
outstanding common stock of CBM Acquisition Parent Co. (MB Parent). MB Parent is
a holding company that owns controlling voting preferred stock of Matthew Bender
with a stated value of $61.6 million and participating preferred stock of
Matthew Bender. MB Parent is also the sole member of Eagle New Media
Investments, LLC (Eagle New Media). Affiliates of Reed Elsevier own voting
preferred stock of MB Parent with a stated value of $68.8 million which affords
them voting control over MB Parent, subject to certain rights held by Times
Mirror with respect to Eagle New Media. Concurrently, with the closing of the
merger, the Company became the sole manager of Eagle New Media and controls its
operations and assets. The consolidated financial statements of the Company
include the accounts of Eagle New Media.
During the fourth quarter of 1998, the Company completed the disposition of
Mosby in a tax-free reorganization with Harcourt General, Inc. The disposition
of Mosby was accomplished through the merger of an affiliate of Harcourt
General, Inc. with and into Mosby, with Mosby as the surviving corporation in
the merger. As a result of the merger, the Company received all of the issued
and outstanding common stock of Mosby Parent Corp. (Mosby Parent). Mosby Parent
is a holding company that owns controlling voting preferred stock of Mosby with
a stated value of $48.3 million and participating preferred stock of Mosby.
Mosby Parent is also the sole member of Eagle Publishing Investments, LLC (Eagle
Publishing). An affiliate of Harcourt General, Inc. owns voting preferred stock
of Mosby Parent with a stated value of $50.0 million which affords it voting
control over Mosby Parent, subject to certain rights held by the Company with
respect to Eagle Publishing. Concurrently with the closing of the merger, the
Company became the sole manager of Eagle Publishing and controls its operations
and assets. The consolidated financial statements of the Company include the
accounts of Eagle Publishing.
The Company intends to deploy the assets of both Eagle New Media and Eagle
Publishing to finance acquisitions and investments, including purchases of the
Company's common stock, and does not intend to use those funds for the Company's
general working capital purposes.
42
<PAGE> 44
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- ACQUISITIONS, DISPOSITIONS AND WRITEDOWNS
Acquisitions. In February 1999, Eagle New Media acquired Newport Media,
Inc., a publisher of shopper publications in the Long Island and New Jersey
areas, for approximately $132.0 million. This acquisition resulted in goodwill
of $68.5 million and other intangible assets of $90.8 million, which are being
amortized primarily over a period of 30 years. The Company also made other
acquisitions during 1999 for an aggregate consideration of $41.3 million. These
other acquisitions resulted in goodwill of $26.8 million and other intangible
assets of $15.2 million, which are being amortized over periods of 5 to 25
years.
In April 1998, the Company acquired the Los Angeles area business of E Z
Buy & E Z Sell Recycler Corporation (Recycler), consisting primarily of the
Recycler publications in the Los Angeles, Orange, Riverside, San Bernardino and
Ventura counties and a portion of Santa Barbara county for $188.7 million. This
acquisition resulted in goodwill of $147.5 million and other intangible assets
of $69.4 million, which are being amortized primarily over 30 years. The Company
also invested in preferred stock and provided a term loan to Target Media
Partners, a new entity which owns all of the non-Los Angeles area assets of
Recycler, for a total amount of $34.8 million. The Company also made other
acquisitions during 1998 for an aggregate consideration of $12.1 million.
Goodwill of $13.8 million related to these other acquisitions is being amortized
primarily over 15 years.
In 1997, the Company acquired Patuxent Publishing Company, a publisher of
13 community weeklies in Maryland and This Week Publications, Inc., a free
weekly shopper distributed in Queens and Long Island, New York. These and other
small acquisitions resulted in goodwill of $69.5 million, which is being
amortized over periods of 15 to 30 years.
These acquisitions were accounted for by the purchase method with the
results of operations included in the Company's financial statements from the
dates of acquisition. Pro forma results for 1999, 1998 and 1997, assuming these
acquisitions occurred on January 1 of the respective year, are not materially
different from the results reported.
Dispositions and Writedowns. In September 1999, the Company announced its
decision to sell the properties of The Sporting News, a sports magazine,
including its Web site sportingnews.com. The assets and liabilities of The
Sporting News have been classified as held for sale and are included in "Other
current assets" and "Other current liabilities" in the Consolidated Balance
Sheets. The assets of The Sporting News totaled $46.6 million at December 31,
1999 and consisted primarily of accounts receivable and deferred charges. The
liabilities of The Sporting News totaled $54.0 million at December 31, 1999 and
were comprised primarily of unearned income. During 1999, The Sporting News had
revenues of $37.2 million and an operating loss of $6.7 million.
In May 1999, the Company completed an agreement to merge Hollywood Online,
Inc. and its Web site, hollywood.com, into Hollywood.com, Inc. (formerly Big
Entertainment, Inc.) in exchange for newly-issued restricted stock of
Hollywood.com, Inc. and a note with a then combined current value of
approximately $31.5 million. The Company recorded a gain of $17.2 million, or
$10.7 million after applicable income taxes, related to this disposition.
During 1999, the Company sold 316 thousand shares of its holdings in AOL
common stock and purchased an equal proportion of its 4 1/4% Premium Equity
Participating Securities (PEPS) obligation in the open market. The PEPS hedge
the Company's investment in AOL (see Note 12). These transactions resulted in a
net gain of $16.9 million, or $10.0 million after applicable income taxes.
Additionally, the Company recorded gains on other non-operating items and
reduced the carrying value of certain new media and other investments. The total
net gains of $27.1 million are included in "Other, net" in the Consolidated
Statements of Income.
43
<PAGE> 45
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1998, the Company sold 442 thousand shares of its holdings in
Netscape Communications Corporation (Netscape) common stock (subsequently
purchased by AOL) and purchased an equal proportion of its PEPS obligation in
the open market. These transactions resulted in a net gain of $16.0 million, or
$9.5 million after applicable income taxes. The Company also disposed of various
excess real estate and other assets for an aggregate gain of $16.1 million, or
$9.6 million after applicable income taxes. The total gains of $32.1 million are
included in "Other, net" in the Consolidated Statements of Income.
During 1997, the Company sold certain equity investments, including Tejon
Ranch Co., WebTV Network, Inc., Netscape, Speedvision Network, LLC and Outdoor
Life Network, LLC, for an aggregate gain of $75.6 million, or $47.7 million
after applicable income taxes. Additionally, the Company had writedowns and
expenses related to non-operating items as well as losses on the sale of Harry
N. Abrams, Inc., National Journal, Inc. and other assets of $39.3 million, or
$29.8 million after applicable income taxes. The total net gains of $36.3
million are included in "Other, net" in the Consolidated Statements of Income.
NOTE 7 -- RESTRUCTURING, ONE-TIME AND OTHER CHARGES
In 1998, the Company undertook a comprehensive review of its business
operations to determine areas where operational efficiencies could be achieved
through either product and/or facility consolidation, headcount reductions,
product abandonments, contract terminations or other measures. The Company began
this review in anticipation of the impact of its significant 1998 divestitures
and to better align its overall cost structure and business configurations. The
Company's review led to a major restructuring program that resulted in the
recording of $155.7 million in 1998.
A summary of the significant components of the 1998 restructuring program
is as follows (in thousands):
<TABLE>
<CAPTION>
NEWSPAPER PROFESSIONAL MAGAZINE CORPORATE
PUBLISHING INFORMATION PUBLISHING AND OTHER TOTAL
---------- ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Termination benefits........ $ 43,406 $2,021 $ 156 $10,270 $ 55,853
Contract terminations....... 51,386 -- 4,330 -- 55,716
Goodwill impairments........ 324 -- 19,715 -- 20,039
Lease termination costs..... 2,307 2,764 1,500 3,045 9,616
Technology asset
write-offs................ 4,772 1,378 100 1,504 7,754
Other costs................. 310 2,011 3,271 1,111 6,703
-------- ------ ------- ------- --------
$102,505 $8,174 $29,072 $15,930 $155,681
======== ====== ======= ======= ========
</TABLE>
A discussion of the specific restructuring activities follows:
Termination Benefits. Staff reductions were implemented at substantially
all operating units with the majority of these actions performed within the
Newspaper Publishing segment. The Los Angeles Times recorded severance charges
related to 358 full-time and 534 part-time employees through either voluntary or
involuntary programs, primarily occurring in the fourth quarter of 1998. The
Baltimore Sun's termination charges included 81 full-time employees and Newsday
determined that 23 full-time and 26 part-time employees would be released. The
staff reductions within the Newspaper Publishing segment were the result of
identified efficiencies from outsourcing opportunities, elimination of duplicate
functions and technological improvements to the Company's processes. In total,
termination benefits, which were largely severance costs, covered 576 full-time
and 578 part-time employees company-wide of which 189 employees had been
released by the end of 1998 with the majority of employees released by the
second quarter of 1999. Termination benefits for these employees were
substantially paid by the end of 1999. However, certain employees will receive
payments over an extended period of time.
Contract Terminations. In reviewing the Company's processes, supply
contracts and strategic alliances, the Company identified certain long-term
contracts and relationships which were no longer providing benefits
44
<PAGE> 46
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to the Company's current operations. As a result, the Company recorded charges
for contract terminations which included (i) the termination of a long-term
contract related to Newsday's pre-print distribution business for $34.3 million,
(ii) the termination of The Hartford Courant's long-standing bonus arrangement
for $12.0 million and (iii) the termination of 56 distribution contracts with
outside agents at the Los Angeles Times for $4.9 million.
Goodwill Impairments. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
impairment charges were taken related to goodwill associated with two of the
Company's magazine titles. These charges were taken as the result of
disappointing market penetration and operating results and were based on
discounted estimated cash flows from future operations.
Lease Termination Costs. In connection with the Company's downsizing and/or
relocation of offices primarily at the Los Angeles Times and at Jeppesen's
German operation, the Company recorded charges for future operating lease
payments and write-offs of leasehold improvements related to facilities it will
vacate. The total lease payment accrual for periods through 2010 is net of
estimated sublease income of $3.4 million. No amounts have been included for any
period in which the operating units will continue to occupy the premises.
Technology Asset Write-offs. During mid-1998, the Company determined that
its long standing policy of allowing each operating unit to independently
determine its technology requirements and make related equipment and software
purchases was both inefficient as well as expensive in terms of maintenance,
help desk, networking and other support costs. In connection with this decision,
the Company established common hardware and software configurations to provide
consistency across all business units. As a result, many operating units were
required to dispose of a significant amount of technology resources to conform
to the common platform. Total asset write-offs of technology-related equipment
were taken in the quarter in which the equipment was replaced.
Other Costs. In performing a review of its businesses and product
offerings, expenses were recognized for the termination of an Internet venture
in the Magazine Publishing segment, in addition to costs for the abandonment of
certain projects at Jeppesen.
Other Program Charges. In addition to the charges listed above, the Company
also recorded $18.7 million for certain asset write-offs that did not meet the
accounting criteria for classification as "restructuring and one-time charges."
These charges, which principally included other operating asset write-offs, have
been classified within "Selling, general and administrative expenses" in the
Consolidated Statements of Income.
45
<PAGE> 47
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the activity in the restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1995
RESTRUCTURING RESTRUCTURING TOTAL
------------- ------------- --------
<S> <C> <C> <C>
Balance at December 31, 1996.................... $ -- $ 58,819 $ 58,819
Cash payments................................. -- (24,483) (24,483)
Other(1)...................................... -- 8,719 8,719
-------- -------- --------
Balance at December 31, 1997.................... -- 43,055 43,055
Charged to costs and expenses................. 155,681 -- 155,681
Cash payments................................. (31,654) (19,321) (50,975)
Asset write-offs.............................. (35,204) -- (35,204)
Other......................................... 1,176 (829) 347
-------- -------- --------
Balance at December 31, 1998.................... 89,999 22,905 112,904
Cash payments................................. (63,236) (10,992) (74,228)
-------- -------- --------
Balance at December 31, 1999.................... $ 26,763 $ 11,913 $ 38,676
======== ======== ========
</TABLE>
- ---------------
(1) Includes primarily transfers from discontinued operations for restructuring
liabilities not assumed by purchasers of discontinued operations.
The balance sheet classification of restructuring liabilities is as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1999 1998
------------ --------
<S> <C> <C>
Restructuring -- current liabilities
1995 Restructuring........................................ $ 7,555 $ 15,722
1998 Restructuring........................................ 18,240 76,181
Other liabilities
1995 Restructuring........................................ 4,358 7,183
1998 Restructuring........................................ 8,523 13,818
------- --------
$38,676 $112,904
======= ========
</TABLE>
The current portion of restructuring liabilities relates primarily to
severance and lease payments while the non-current portion principally relates
to contract terminations and extended payout of severance arrangements, as well
as lease payments which will be paid over lease periods extending to 2010. The
Company made severance payments under all programs which totaled $37.8 million,
$7.5 million and $5.6 million during 1999, 1998 and 1997, respectively. At
December 31, 1999, the remaining liability for severance costs aggregated $15.1
million.
The Company periodically assesses the adequacy of its remaining
restructuring liabilities and makes adjustments if required. During 1999 and
1998, these adjustments resulted in recoveries of prior year's restructuring
reserves which were largely offset by restructuring requirements in those years.
The net change in the restructuring liabilities as a result of these reviews has
not been significant.
46
<PAGE> 48
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- ----------
<S> <C> <C> <C>
Interest paid...................................... $ 65,383 $68,571 $ 33,545
Income taxes paid.................................. 104,630 47,406 138,567
Liabilities assumed in connection with
acquisitions..................................... 53,793 9,910 17,194
Stock and notes receivable received from
divestiture...................................... 31,503 -- --
Merger with Chandis:
Times Mirror stock received...................... -- -- 1,116,058
Other assets received............................ -- -- 21,050
Times Mirror stock issued........................ -- -- 1,137,108
Fair value of properties contributed to TMCT I..... -- -- 225,850
Property financing obligation, net of original issue discount... -- -- 57,829
Notes issued in connection with an acquisition..... -- -- 39,209
</TABLE>
NOTE 9 -- FINANCIAL INSTRUMENTS
Financial instruments consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------
1999 1998
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Short-term assets....................... $ 507,680 $ 507,680 $1,414,350 $1,414,350
Long-term investments................... 185,299 185,299 129,364 129,364
Notes receivable........................ 91,056 91,056 74,082 74,082
Short-term liabilities.................. 434,295 434,295 492,025 492,025
Long-term debt.......................... 1,562,240 1,711,004 941,423 1,017,245
Unrealized net gain on interest rate
swaps................................. -- 12,959 -- 43,246
</TABLE>
Short-Term Assets and Liabilities. The fair values of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
short-term debt approximate their carrying values due to the short-term nature
of these financial instruments.
Long-Term Investments. Investments in publicly traded securities are
classified as available-for-sale and are stated at fair value based on quoted
market prices. All other investments are recorded at the lower of cost or
estimated net realizable value. The cost of the investments was $81.1 million
and $42.2 million at December 31, 1999 and 1998, respectively. Unrealized gains
are included in "Accumulated other comprehensive income" (see Note 18).
Notes Receivable. The carrying value of notes receivable is estimated to
approximate fair values. Although there are no quoted market prices available
for these instruments, the fair value estimates were based on the changes in
interest rates and risk related interest rate spreads since the notes
origination dates.
Long-Term Debt. The fair value of long-term debt is based primarily on the
Company's current refinancing rates for publicly issued fixed rate debt with
comparable maturities, except for the PEPS whose fair value is based on the open
market (see Note 12).
Interest Rate Swaps. Interest rate swap agreements outstanding at December
31, 1999 were for notional amounts of $200.0 million, $170.1 million and $100.0
million expiring in 2001, 2002 and 2023, respectively, with $170.1 million and
$100.0 million notional amounts also outstanding at December 31, 1998. In 1999,
two
47
<PAGE> 49
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
swaps which were outstanding as of December 31, 1998 with notional amounts of
$148.0 million and $250.0 million expired during the year. The Company's swaps
effectively convert a portion of the long-term fixed rate debt to a variable
rate obligation based on LIBOR or the Commercial Paper rate. The fair values of
the interest rate swaps are the amounts at which they could be settled based on
estimates of market rates.
Commodity Price Hedging Contracts. The Company enters into various
commodity hedging contracts to manage the Company's exposure to fluctuations in
newsprint prices. As of December 31, 1999, the Company had newsprint swap
agreements for a total notional amount of 261 thousand metric tons per year
expiring in 2001, 2002 and 2003 at a weighted average contract price of $609 per
metric ton. Also, the Company has a newsprint option contract for a total
notional amount of 30 thousand metric tons per year expiring in 2001 at a
contract price of $585 per metric ton. This option contract limits the maximum
payment to $115 per metric ton above the contract price on an annual basis. At
December 31, 1999, the index rate used for these contracts was $515 per metric
ton. In addition to the newsprint hedging contracts, the Company has a swap
contract for coated paper used in its Magazine Publishing operations for a total
notional amount of 5 thousand short tons per year expiring in 2000 at a contract
price of $1,047 per short ton. As no liquid forward market for newsprint or
coated paper exists, it was not practicable to estimate the fair value of the
commodity hedging contracts.
NOTE 10 -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1999 1998
------- -------
<S> <C> <C>
Newsprint, paper and other raw materials.................... $28,125 $23,404
Finished products........................................... 5,894 4,051
Work-in-progress............................................ 1,063 983
------- -------
$35,082 $28,438
======= =======
</TABLE>
Inventories determined by the last-in, first-out method were $18.1 million
and $13.7 million at December 31, 1999 and 1998, respectively, and would have
been higher by $15.6 million in 1999 and $16.1 million in 1998 had the first-in,
first-out method (which approximates current cost) been used.
NOTE 11 -- INCOME TAXES
Income tax expense from continuing operations consists of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.......................................... $ 89,117 $ 77,412 $ 94,422
State............................................ 33,499 9,515 13,099
Foreign.......................................... 12,849 12,601 12,736
Deferred:
Federal.......................................... 42,764 (716) 29,898
State............................................ 2,000 12,133 11,689
-------- -------- --------
$180,229 $110,945 $161,844
======== ======== ========
</TABLE>
48
<PAGE> 50
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The difference between actual income tax expense and the U.S. Federal
statutory income tax expense for continuing operations is reconciled as follows
(in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income from continuing operations before income
taxes:
United States.................................... $409,028 $220,235 $369,596
Foreign.......................................... 30,263 24,769 26,903
-------- -------- --------
$439,291 $245,004 $396,499
======== ======== ========
Federal statutory income tax rate.................. 35% 35% 35%
Federal statutory income tax expense............... $153,752 $ 85,751 $138,775
Increase (decrease) in income taxes resulting from:
State and local income tax expense, net of
Federal effect................................ 23,074 14,071 16,112
Goodwill amortization not deductible for tax
purposes...................................... 6,007 5,979 4,424
Foreign tax differentials........................ 1,327 (1,474) 1,439
Basis difference in asset sales.................. (420) (2,193) 5,249
Writedown of assets.............................. -- 6,900 --
Other............................................ (3,511) 1,911 (4,155)
-------- -------- --------
$180,229 $110,945 $161,844
======== ======== ========
</TABLE>
The tax effect of temporary differences results in deferred income tax
assets (liabilities) and balance sheet classifications as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1999 1998
--------- ---------
<S> <C> <C>
TEMPORARY DIFFERENCES
Postretirement benefits..................................... $ 84,656 $ 86,534
Other employee benefits..................................... 65,873 54,872
State and local income taxes................................ 26,484 25,801
Restructuring and one-time charges.......................... 9,035 26,374
Valuation and other reserves................................ 5,657 6,092
Other deferred tax assets................................... 9,781 5,782
--------- ---------
Total deferred tax assets.............................. 201,486 205,455
--------- ---------
Transaction tax reserve..................................... (176,585) (176,585)
Retirement and health benefits.............................. (176,505) (153,572)
Depreciation and other property, plant and equipment
differences............................................... (146,546) (158,950)
Intangible asset differences................................ (73,313) (2,378)
Unrealized investment gains................................. (25,946) (33,055)
Other deferred tax liabilities.............................. (51,339) (22,259)
--------- ---------
Total deferred tax liabilities......................... (650,234) (546,799)
--------- ---------
$(448,748) $(341,344)
========= =========
BALANCE SHEET CLASSIFICATIONS
Current deferred tax assets................................. $ 33,314 $ 32,279
Noncurrent deferred tax liabilities......................... (482,062) (373,623)
--------- ---------
$(448,748) $(341,344)
========= =========
</TABLE>
In connection with the dispositions of Matthew Bender and Mosby as
discussed in Notes 4 and 5, the Company has recorded a tax reserve of $176.6
million. While the Company believes that these transactions
49
<PAGE> 51
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
were completed on a tax-free basis, this position may be subject to review by
the Internal Revenue Service. The results of such a review are unpredictable and
could result in a tax liability that is significantly higher or lower than that
which has been provided by the Company.
NOTE 12 -- DEBT
Debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1999 1998
---------- --------
<S> <C> <C>
Short-term debt:
Commercial paper at weighted average interest rates of
5.9% and 5.3%.......................................... $ 241,381 $298,603
Current maturities of long-term debt...................... 7,149 7,440
Other notes payable at interest rates of 6.4% and 5.4%.... 6,304 6,567
---------- --------
Total short-term debt.................................. $ 254,834 $312,610
========== ========
Long-term debt:
7.45% Notes due October 15, 2009, net of unamortized
discount of $513....................................... $ 399,487 $ --
6.61% Debentures due September 15, 2027, net of
unamortized discount of $95 and $98.................... 249,905 249,902
4.75% Liquid Yield Option Notes due April 15, 2017, net of
unamortized discount of $277,946 and $288,129.......... 222,054 211,871
6.65% Notes due October 15, 2001, net of unamortized
discount of $123....................................... 199,877 --
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 $553 and $559.................. 147,447 147,441
7 1/2% Debentures due July 1, 2023........................ 98,750 98,750
4 1/4% PEPS due March 15, 2001; 512,050 and 863,100
securities stated at fair value........................ 64,006 45,596
Property financing obligation expiring on August 8, 2009,
net of unamortized discount of $149,932 and $158,080,
with an effective interest rate of 4.3%................ 39,648 47,088
---------- --------
1,569,389 948,863
Less current maturities..................................... (7,149) (7,440)
---------- --------
Total long-term debt................................... $1,562,240 $941,423
========== ========
</TABLE>
Interest rate swaps converted the weighted average interest rate on the
6.61% Debentures, the Liquid Yield Option Notes (LYONs(TM)), the 6.65% Notes,
the 7 1/4% Debentures due 2096, and the 7 1/2% Debentures from 6.4% to 6.0% for
the year ended December 31, 1999.
In connection with the 1999 recapitalization, the Company issued $200.0
million of 6.65% two-year notes maturing on October 15, 2001 and $400.0 million
of 7.45% ten-year notes maturing on October 15, 2009. The Company also entered
into a two-year interest rate swap agreement for a notional amount of $200.0
million expiring in October 2001. The swap agreement effectively converts the
Company's $200.0 million fixed rate debt at 6.65% to a variable rate obligation
based on LIBOR.
In September 1997, the Company issued $250.0 million of 6.61% Debentures
due September 15, 2027 (Debentures) with interest payable semiannually
commencing March 15, 1998. The Debentures are redeemable at the option of the
Company, in whole or in part, at any time after September 15, 2004 at a
50
<PAGE> 52
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
redemption price equal to the greater of (a) 100% of the principal amount or (b)
the sum of the present values of the remaining scheduled payments of principal
and interest discounted to the redemption date. The Debentures may be put to the
Company on September 15, 2004 at 100% of face value plus accrued interest.
In April 1997, the Company received gross proceeds of $195.5 million from
the issuance of the LYONs. The LYONs are zero coupon subordinated notes with an
aggregate face value of $500.0 million and a yield to maturity of 4.75%. Each
LYON has a $1,000 face value and is convertible at the option of the holder any
time prior to maturity. If conversion is elected, the Company will, at its
option, deliver (a) 5.828 shares of Series A common stock per each LYON or (b)
cash equal to the market value of such shares. On or after April 15, 2002, the
LYONs may be redeemed at any time by the Company for cash equal to the issuance
price plus accrued original discount through the date of redemption. In
addition, each LYON may be redeemed for cash at the option of the holder on
April 15, 2002, 2007 or 2012. The cash payable for each LYON at these redemption
dates is approximately $495, $625 and $791, respectively, which is equal to the
issuance price plus accrued original discount through the date of redemption.
The Company has an interest rate swap agreement for a notional amount of $170.1
million, expiring April 15, 2002, to exchange a fixed interest rate of 4.75% for
a variable rate based on six-month LIBOR less 2.458%.
The 4 1/4% PEPS hedge the Company's investment in the common stock of AOL.
The amount payable at maturity with respect to each PEPS will equal 1.8 times
the average market price of one share of AOL common stock for the ten trading
days ending on the second business day prior to the maturity date, subject to
adjustment as a result of certain dilution events involving AOL. Holders of the
PEPS bear the full risk of a decline in the value of AOL. The Company is not
obligated to hold the AOL stock for any period or sell the AOL stock prior to
the PEPS maturity or redemption date.
The PEPS are redeemable at the option of the Company, in whole or in part,
at any time after December 15, 2000. The redemption value of each PEPS is the
product of (a) the redemption ratio, as defined below, (b) 1.8 and (c) the
average market price of one share of AOL common stock for the ten trading days
ending on the second business day prior to the redemption date, plus cash in an
amount equal to all unpaid interest, whether or not accrued, that would have
been payable on the PEPS through the maturity date. The redemption ratio will
equal (a) 1.0, if the market value of one share of AOL common stock is less than
$21.81, or (b) a fraction, the numerator of which is $21.81 and the denominator
of which is the market value of AOL common stock, if such market value is equal
to or exceeds $21.81 but less than or equal to $25.08, or (c) .8696, if the
market value of AOL common stock exceeds $25.08.
The PEPS are recorded at fair market value as determined in the open market
and will generally move in tandem with changes in the fair market value of AOL
common stock. The net unrealized loss on the PEPS at December 31, 1999 and 1998
is $26.0 million and $6.9 million, respectively, net of applicable income taxes,
and is included in "Accumulated other comprehensive income." During 1999, the
Company sold 316 thousand shares of AOL stock and purchased a proportionate
share of its PEPS in the open market (see Note 6).
The Company has an agreement with several domestic and foreign banks for
unsecured long-term revolving lines of credit that expire in April 2002. This
agreement provides for borrowings up to $400.0 million at interest rates based
on, at the Company's option, the banks' base rates, Eurodollar rates or
competitive bid rates. The commitment fee is approximately 0.065% per annum. The
lines of credit are used to support a commercial paper program. The Company's
revolving lines of credit contain restrictive provisions relating primarily to
interest expense coverage. The Company's earnings before interest expense,
income taxes, depreciation and amortization, divided by interest expense, must
be greater than or equal to 5.0.
The Company has $5.9 million of undrawn standby letters of credit at
December 31, 1999.
51
<PAGE> 53
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1999, the aggregate principal maturities of the Company's
debt are as follows (in thousands):
<TABLE>
<S> <C>
2000..................................................... $ 7,149
2001..................................................... 270,654
2002..................................................... 6,292
2003..................................................... 5,699
2004..................................................... 4,975
Thereafter............................................... 1,274,620
----------
$1,569,389
==========
</TABLE>
NOTE 13 -- CAPITAL STOCK AND STOCK PURCHASE PROGRAM
Preferred Stocks. Series A, Series C-1 and Series C-2 preferred stocks are
cumulative, non-voting stocks with annual dividends of 8%, 5.8% and 5.8%,
respectively, based on liquidation value. Series A preferred stock was entitled
to dividends effective March 1, 1995. In connection with the 1999
recapitalization, the Company replaced the Series C-1 and C-2 preferred stocks
with Series D-1 and D-2 preferred stocks effective January 1, 2000. Dividends on
Series D-1 and Series D-2 preferred stocks will increase pursuant to a fixed and
certain schedule. Series A, Series D-1 and Series D-2 preferred stocks are
convertible into Series A common stock in 2025 at the earliest. The conversion
factor is calculated by dividing $500 plus accrued and unpaid dividends by the
average closing prices of Series A common stock for the 20 trading days
immediately preceding the conversion date. The maximum number of shares of
Series A common stock into which Series D-2 preferred stock can be converted is
limited to 3.0 million shares.
On February 28, 1997, the Series B preferred stock was called for
redemption and was redeemed on April 2, 1997 for 4.4 million shares of Series A
common stock. The conversion ratio, determined pursuant to the original terms of
the Series B preferred stock, was .57083 of a share of Series A common stock. At
the redemption date, the Company had forward purchase contracts for 3.9 million
shares of Series B preferred stock with a weighted average forward price of
$28.475 per share. These contracts provided for early termination and, in May
1997, the termination of the contract resulted in the purchase by the Company of
2.2 million shares of Series A common stock for an aggregate cost of $111.5
million.
Preferred stock is issuable in series under such terms and conditions as
the Board of Directors may determine.
Common Stocks. Shares of Series A and Series C common stock are identical,
except with respect to voting rights, restrictions on transfer of Series C
common shares and the right to convert Series C common shares into Series A
common shares. Series A common shares are entitled to one vote per share and
Series C common shares are entitled to ten votes per share. Series C common
shares are subject to mandatory conversion into Series A common shares upon
transfer to any person other than a "Permitted Transferee" as defined in the
Company's Certificate of Incorporation or upon the occurrence of certain
regulatory events. Series B common stock is entitled to one-tenth vote per share
and is available for common stock issuance transactions, such as underwritten
public offerings and acquisitions.
Cash dividends of $.80 and $.72 per share of common stock were declared for
the years ended December 31, 1999 and 1998, respectively. In February 2000, the
Board of Directors approved an increase in the quarterly dividend on its common
stock to $.22 per share, from $.20 per share, beginning with the March 10, 2000
payment date.
Treasury Stock. Treasury stock includes shares of Series A common stock and
Series A, Series C-1 and Series C-2 preferred stock owned by affiliates as well
as Series A common stock purchased by the Company as part of the stock purchase
program. At December 31, 1999, 15.2 million, 4.0 million, 18.2 million and
52
<PAGE> 54
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12.4 million shares of Series A common stock included in treasury stock are
owned by Eagle New Media, TMCT I, CAC and TMCT II, respectively. Also, 354
thousand and 381 thousand shares of Series A preferred stock, which are owned by
TMCT I and CAC, respectively, and 305 thousand and 196 thousand shares of Series
C-1 and C-2 preferred stock, respectively, which are owned by TMCT II, are
included in treasury stock at December 31, 1999.
At December 31, 1998, 13.3 million, 4.0 million and 18.2 million shares of
Series A common stock included in treasury stock are owned by Eagle New Media,
TMCT I and CAC, respectively, and 354 thousand and 381 thousand shares of Series
A preferred stock, which are owned by TMCT I and CAC, respectively, are included
in treasury stock.
Stock Purchases. During 1999, the Company and Eagle New Media purchased 2.9
million common shares for a total cost of $196.5 million. An additional 325
thousand common shares were purchased for $15.5 million, net of premiums
received, as a result of the exercise of put options. At December 31, 1999, the
Company had 400 thousand put options outstanding with a weighted average strike
price of $68.23 per common share. The cash received from the issuance of put
options during 1999 and 1998 was not significant. The put options entitle the
holder to sell shares of Times Mirror Series A common stock to the Company at
the strike price on the expiration date of the put option. The unexpired put
options are at strike prices ranging from $67.09 to $69.69. These put options
expire on various dates through March 2000.
During 1998, the Company and Eagle New Media purchased 16.4 million common
shares for a total cost of $947.2 million. An additional 350 thousand common
shares were purchased for $17.5 million, net of premiums received, as a result
of the exercise of put options. Included in the 1998 share purchases were 4.0
million shares that were purchased in the fourth quarter of 1998 as part of an
accelerated purchase agreement. The shares were purchased at the closing price
on the date of the agreement for $54.69 per share. The agreement provides for a
purchase price adjustment based on a pro-rata settlement over a one-year period
and was settled in December 1999.
During 1997, the Company purchased 8.9 million shares of Series A common
stock for a total cost of $464.8 million. An additional 120 thousand shares of
Series A common stock were purchased for $3.7 million, net of premiums received,
as a result of the exercise of put options.
The aggregate remaining shares authorized for purchase at December 31, 1999
was approximately 3.9 million shares. 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.
NOTE 14 -- STOCK OPTION AND AWARD PLANS
The Company has various stock option plans under which options may be
granted to purchase shares of Series A common stock at a price equal to the fair
market value at the date of grant. Options that are not exercised expire ten
years from the date of grant. Options granted to key employees generally vest
over a four-year period. Grants made under a broad-based stock option plan, for
employees not eligible for other stock option grants, are fully vested three
years after the date of grant. Restricted stock is also awarded to key
employees. The number of restricted stock awards, including matching awards in
connection with the annual incentive bonus program, is not material.
53
<PAGE> 55
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Options granted, exercised and forfeited were as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
---------- --------
<S> <C> <C>
Options outstanding December 31, 1996....................... 7,771,489 $26.12
Granted................................................... 4,686,643 47.85
Exercised................................................. (1,617,045) 22.47
Forfeited................................................. (571,732) 34.03
---------- ------
Options outstanding December 31, 1997....................... 10,269,355 36.17
Granted................................................... 4,370,240 59.58
Exercised................................................. (2,145,260) 27.58
Forfeited................................................. (1,084,989) 50.00
---------- ------
Options outstanding December 31, 1998....................... 11,409,346 45.44
Granted................................................... 4,739,378 55.46
Exercised................................................. (1,964,992) 34.08
Forfeited................................................. (1,520,628) 50.76
---------- ------
Options outstanding December 31, 1999....................... 12,663,104 $50.31
========== ======
</TABLE>
Information regarding stock options outstanding and exercisable as of
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
PRICE RANGE
-------------------------------------------------------------
$11.43 $18.06 $30.06 $46.56 $58.03
TO $17.29 TO $23.94 TO $44.94 TO $57.94 TO $69.13
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Options outstanding:
Number..................... 37,510 687,081 1,354,985 6,686,343 3,897,185
Weighted average exercise
price................... $16.63 $18.51 $34.35 $52.11 $58.71
Weighted average remaining
contractual life........ 2 years 4 years 6 years 8 years 8 years
Options exercisable:
Number..................... 37,510 687,081 1,307,569 986,416 613,425
Weighted average exercise
price................... $16.63 $18.51 $34.11 $48.11 $58.52
</TABLE>
At December 31, 1999 and 1998 shares reserved for future grants and awards
were 6.4 million and 9.7 million, respectively.
If the Company recognized employee stock option-related compensation
expense in accordance with SFAS 123 and used the Black-Scholes option valuation
model for determining the weighted average fair value of options granted after
December 31, 1994, its net income and earnings per share would have been as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ---------- --------
<S> <C> <C> <C>
Net income -- as reported......................... $259,086 $1,417,338 $250,312
Pro forma stock compensation expense, net......... (23,207) (18,709) (13,000)
-------- ---------- --------
Pro forma net income.............................. $235,879 $1,398,629 $237,312
======== ========== ========
Pro forma basic earnings per share................ $ 3.19 $ 16.23 $ 2.21
======== ========== ========
Pro forma diluted earnings per share.............. $ 3.07 $ 15.89 $ 2.16
======== ========== ========
</TABLE>
54
<PAGE> 56
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For purposes of the pro forma expense, the weighted average fair value of
the options is amortized over the vesting period. The pro forma effect on net
income through 1998 may not be representative of future years' impact because
options granted prior to 1995 are excluded from the pro forma calculations.
Options are granted every year and the pro forma expense in future years will
grow due to the added layers of amortization for succeeding grants. In 1999,
however, the pro forma results include a full four years' worth of option
grants.
The weighted average fair value of stock options on the date of grant, and
the assumptions used to estimate the fair value using the Black-Scholes option
valuation model, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Weighted average fair value of stock options granted.... $ 13.14 $ 12.78 $ 11.90
Risk-free interest rate................................. 5.2% 5.5% 6.2%
Expected life........................................... 5 years 5 years 5 years
Expected volatility..................................... .23 .20 .22
Expected dividend yield................................. 2.33% 2.33% 2.33%
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options. The Company's employee stock
options have characteristics significantly different from those of traded
options such as vesting restrictions and lack of transferability. In addition,
the assumptions used in option valuation models are highly subjective,
particularly with respect to the expected stock price volatility for the
underlying stock. Because changes in these subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not provide a reliable single measure of the fair value of its
employee stock options.
NOTE 15 -- PENSION PLANS AND POSTRETIREMENT BENEFITS
The Company has defined benefit pension plans and various other
contributory and noncontributory retirement plans covering substantially all
employees. In general, benefits under the defined benefit plans are based on
years of service and the employee's compensation during the last five years of
employment. The majority of the Company's employees are covered by one defined
benefit plan. Funding for this plan is not expected to be required in the near
future as the plan is overfunded.
Postretirement health care benefits provided by the Company are unfunded
and cover certain employees hired before January 1, 1993. The various plans have
significantly different provisions for lifetime maximums, retiree cost-sharing,
health care providers, prescription drug coverage and other benefits.
Postretirement life insurance benefits are generally insured by life insurance
policies and cover employees who retired on or before December 31, 1993. Life
insurance benefits vary by plan, ranging from $1,000 to $250,000. Certain
employees become eligible for the postretirement health care benefits if they
meet minimum age and service requirements and retire from full-time, active
service.
55
<PAGE> 57
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following information regarding pension and postretirement benefit
plans includes discontinued operations. Changes in benefit obligations and in
plan assets and the funded status of the plans are as follows (in thousands):
<TABLE>
<CAPTION>
PENSION PLANS POSTRETIREMENT BENEFITS
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations at January 1...... $ 787,091 $ 662,385 $ 141,678 $ 132,601
Service cost.......................... 40,683 37,377 3,331 3,052
Interest cost......................... 52,610 49,367 7,623 7,909
Plan amendments....................... -- 2,813 -- --
Participant contributions............. -- -- 2,042 2,073
Actuarial losses (gains)(1)........... (57,128) 86,647 (18,672) 4,996
Curtailment gains..................... -- (8,898) -- (327)
Dispositions.......................... (7,000) -- -- --
Special termination benefits.......... -- -- 365 --
Benefits paid......................... (47,500) (42,600) (8,453) (8,626)
---------- ---------- --------- ---------
Benefit obligations at December 31.... $ 768,756 $ 787,091 $ 127,914 $ 141,678
========== ========== ========= =========
CHANGE IN PLAN ASSETS
Fair value of plan assets at January
1................................... $1,146,168 $1,080,160 $ -- $ --
Actual return on plan assets.......... 277,703 102,355 -- --
Acquisitions.......................... 1,509 3,310 -- --
Dispositions.......................... (7,000) -- -- --
Company contributions................. 2,630 2,943 6,411 6,553
Participant contributions............. -- -- 2,042 2,073
Benefits paid......................... (47,500) (42,600) (8,453) (8,626)
---------- ---------- --------- ---------
Fair value of plan assets at December
31.................................. $1,373,510 $1,146,168 $ -- $ --
========== ========== ========= =========
FUNDED STATUS
Funded status (underfunded) at
December 31......................... $ 604,754 $ 359,077 $(127,914) $(141,678)
Unrecognized net actuarial losses
(gains)(2).......................... (185,134) 40,896 (50,739) (34,984)
Unrecognized prior service cost....... (4,886) (4,309) (42,458) (49,356)
Unrecognized net transition asset..... (869) (3,656) -- --
---------- ---------- --------- ---------
Net amount recognized................. $ 413,865 $ 392,008 $(221,111) $(226,018)
========== ========== ========= =========
</TABLE>
- ---------------
(1) The actuarial gains relate primarily to changes in the assumed discount
rate.
(2) The unrecognized net actuarial gains relate primarily to the higher actual
return on plan assets than was assumed and changes in the assumed discount
rate.
Amounts applicable to the Company's pension plans with accumulated benefit
obligations in excess of plan assets are (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1999 1998
------- -------
<S> <C> <C>
Projected benefit obligations............................... $62,353 $61,044
Accumulated benefit obligations............................. 56,138 51,134
Fair value of plan assets................................... 13,420 13,348
</TABLE>
56
<PAGE> 58
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following sets forth the amounts recognized in the Consolidated Balance
Sheets (in thousands):
<TABLE>
<CAPTION>
PENSION PLANS POSTRETIREMENT BENEFITS
-------------------- ------------------------
DECEMBER 31 DECEMBER 31
-------------------- ------------------------
1999 1998 1999 1998
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Prepaid pension cost.................. $445,175 $419,471 $ -- $ --
Accrued benefit liability............. (45,941) (40,319) (221,111) (226,018)
Intangible asset...................... 4,593 5,545 -- --
Deferred income taxes................. 3,950 2,915 -- --
Accumulated other comprehensive
income.............................. 6,088 4,396 -- --
-------- -------- --------- ---------
Net amount recognized................. $413,865 $392,008 $(221,111) $(226,018)
======== ======== ========= =========
</TABLE>
Net periodic benefit cost (income) is as follows (in thousands):
<TABLE>
<CAPTION>
PENSION PLANS POSTRETIREMENT BENEFITS
-------------------------------- ---------------------------
1999 1998 1997 1999 1998 1997
--------- --------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost................. $ 40,683 $ 37,377 $ 33,164 $ 3,331 $ 3,052 $ 2,732
Interest cost................ 52,610 49,367 47,287 7,623 7,909 8,204
Expected return on plan
assets..................... (110,815) (103,857) (93,753) -- -- --
Amortization of transition
asset...................... (2,787) (21,560) (21,560) -- -- --
Amortization of prior service
cost....................... 577 620 (44) (6,898) (6,992) (6,992)
Recognized net actuarial loss
(gain)..................... 528 241 (47) (2,918) (5,446) (3,218)
Special termination
benefits................... -- -- -- 365 -- --
--------- --------- -------- ------- ------- -------
Benefit cost (income)........ (19,204) (37,812) (34,953) 1,503 (1,477) 726
Curtailment gains............ -- (8,898) -- -- (327) --
--------- --------- -------- ------- ------- -------
Benefit cost (income) after
curtailments............... $ (19,204) $ (46,710) $(34,953) $ 1,503 $(1,804) $ 726
========= ========= ======== ======= ======= =======
</TABLE>
Assumptions used in the actuarial computations were as follows:
<TABLE>
<CAPTION>
PENSION PLANS POSTRETIREMENT BENEFITS
-------------------- -----------------------
DECEMBER 31 DECEMBER 31
-------------------- -----------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Discount rate............................ 7.25% 6.75% 7.50% 7.25% 6.75% 7.50%
Expected return on plan assets........... 9.75% 9.75% 9.75% N/A N/A N/A
Rate of compensation increase............ 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
</TABLE>
At December 31, 1999, the health care trend rate of 8.0% was assumed to
ratably decline to 4.75% by 2009 and remain at that level. The assumed health
care cost trend rate can significantly affect postretirement expense and
liabilities. A change of 1% in the health care cost trend rate would have the
following effects (in thousands):
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total service and interest cost component...... $ 1,323 $(1,099)
Effect on postretirement benefit obligation.............. 10,934 (9,372)
</TABLE>
57
<PAGE> 59
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Benefits provided by the Employee Stock Option Plan (ESOP) are coordinated
with certain pension benefits and, as a result, the defined benefit plan
obligations are net of the actuarially equivalent value of the benefits earned
under the ESOP, with the maximum offset equal to the value of the benefits
earned under the defined benefit plan. The fair value of the ESOP assets was
$291.3 million and $264.7 million as of December 31, 1999 and 1998,
respectively. At December 31, 1999, the ESOP held 2.9 million shares of Series A
common stock and 1.4 million shares of Series C common stock. The final
contribution to the ESOP was in 1994 and the ESOP has been amended to
discontinue contributions by the Company. There are no unallocated shares in the
ESOP at December 31, 1999.
Substantially all employees over age 21 with one year of service are
eligible to participate in the Company's Savings Plus Plan. Eligible employees
may contribute from 1% to 15% of their basic compensation. The Company makes
matching contributions equal to 50% of employee before-tax contributions from 1%
to 6%. Employees may choose among twelve investment options, including a Company
common stock fund, for investing their contributions and the Company's matching
contribution. Defined contribution plan expense, primarily related to the
Savings Plus Plan, was $15.1 million, $15.1 million and $15.5 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
NOTE 16 -- SEGMENT INFORMATION
The Company has three reportable business segments, Newspaper Publishing,
Professional Information and Magazine Publishing. The reportable segments are
each managed separately because they provide different products and services.
The Newspaper Publishing segment publishes daily metropolitan newspapers in the
east coast and west coast regions of the United States, as well as several
weekly newspapers. The Professional Information segment publishes aeronautical
charts and flight information. The Magazine Publishing segment publishes special
interest and trade magazines.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see Note 1). The Company
evaluates performance based on several factors, of which the primary financial
measure is segment operating profit. Total revenue by industry segment includes
sales to unaffiliated customers and intersegment sales, which are recorded at
market price. Revenues are attributed to geographic areas based on the location
of the assets producing the revenues.
Corporate and Other includes operations not directly related to the
operating segments and general corporate activities including corporate overhead
expenses, corporate investment income, interest expense on corporate debt and
the activities of the Company's affiliates, Eagle New Media and Eagle
Publishing. The Corporate and Other assets are principally comprised of cash and
cash equivalents, marketable securities and other investments. Substantially all
of the Company's investments accounted for under the equity method are in
Corporate and Other.
58
<PAGE> 60
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Financial data for the Company's segments is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Newspaper Publishing......................... $2,514,325 $2,308,178 $2,179,244
Professional Information..................... 235,356 211,929 195,339
Magazine Publishing.......................... 278,930 262,683 248,712
---------- ---------- ----------
Total reportable segments................. 3,028,611 2,782,790 2,623,295
Corporate and Other.......................... 638 1,198 21,845
Intersegment Revenues........................ -- -- (5)
---------- ---------- ----------
$3,029,249 $2,783,988 $2,645,135
========== ========== ==========
OPERATING PROFIT (LOSS)(1)
Newspaper Publishing......................... $ 457,067 $ 297,433 $ 402,207
Professional Information..................... 64,789 43,858 55,659
Magazine Publishing.......................... 19,184 (14,232) 18,309
---------- ---------- ----------
Total reportable segments................. 541,040 327,059 476,175
Corporate and Other.......................... (70,534) (79,261) (84,897)
---------- ---------- ----------
$ 470,506 $ 247,798 $ 391,278
========== ========== ==========
IDENTIFIABLE ASSETS
Newspaper Publishing......................... $2,290,708 $1,999,880 $1,792,286
Professional Information..................... 125,670 96,765 87,354
Magazine Publishing.......................... 287,268 271,457 263,521
---------- ---------- ----------
Total reportable segments................. 2,703,646 2,368,102 2,143,161
Corporate and Other.......................... 1,020,635 1,600,199 355,996
Discontinued Operations...................... 173,090 189,628 672,671
---------- ---------- ----------
$3,897,371 $4,157,929 $3,171,828
========== ========== ==========
DEPRECIATION AND AMORTIZATION
Newspaper Publishing......................... $ 125,019 $ 116,116 $ 106,919
Professional Information..................... 7,454 6,852 6,648
Magazine Publishing.......................... 8,667 7,740 7,040
---------- ---------- ----------
Total reportable segments................. 141,140 130,708 120,607
Corporate and Other.......................... 3,815 4,467 3,457
---------- ---------- ----------
$ 144,955 $ 135,175 $ 124,064
========== ========== ==========
CAPITAL EXPENDITURES
Newspaper Publishing......................... $ 151,807 $ 107,479 $ 78,760
Professional Information..................... 12,437 15,825 9,535
Magazine Publishing.......................... 3,768 1,651 2,243
---------- ---------- ----------
Total reportable segments................. 168,012 124,955 90,538
Corporate and Other.......................... 5,472 6,593 22,543
---------- ---------- ----------
$ 173,484 $ 131,548 $ 113,081
========== ========== ==========
</TABLE>
59
<PAGE> 61
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- ---------------
(1) Includes restructuring, one-time and other charges as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Newspaper Publishing........................................ $116,388 $18,000
Professional Information.................................... 11,889 --
Magazine Publishing......................................... 29,072 --
-------- -------
Total reportable segments................................. 157,349 18,000
Corporate and Other......................................... 17,021 --
-------- -------
$174,370 $18,000
======== =======
</TABLE>
The pretax charges in 1998 are comprised of restructuring and one-time
charges of $155.7 million and other charges that did not qualify for
accounting classification as restructuring charges of $18.7 million.
Substantially all revenues and assets of the Company's reportable segments
are attributed to or located in the United States. Non-U.S. revenues represent
less than 3% of total revenues and are principally related to the Company's
flight information business in Germany.
The Company does not have a single external customer who represents 10% or
more of its revenue.
Significant non-cash items excluding depreciation and amortization, were
non-cash restructuring, one-time and other charges in 1998 as follows (in
thousands):
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Newspaper Publishing....................................... $19,043
Professional Information................................... 6,967
Magazine Publishing........................................ 20,718
-------
Total reportable segments................................ 46,728
Corporate and Other........................................ 6,055
-------
$52,783
=======
</TABLE>
A reconciliation of operating profit to income from continuing operations
before income taxes is set forth in the Consolidated Statements of Income.
60
<PAGE> 62
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17 -- EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Earnings:
Income from continuing operations................ $259,062 $134,059 $234,655
Preferred stock dividends........................ (18,066) (21,697) (32,481)
-------- -------- --------
Earnings applicable to common shareholders for
basic earnings per share...................... 240,996 112,362 202,174
Effect of dilutive securities:
LYONs interest expense, net of tax............ 6,076 -- 3,925
-------- -------- --------
Earnings applicable to common shareholders for
diluted earnings per share.................... $247,072 $112,362 $206,099
======== ======== ========
Shares:
Weighted average shares for basic earnings per
share......................................... 68,252 84,814 92,572
Effect of dilutive securities:
Stock options................................. 1,924 2,114 2,358
LYONs convertible debt........................ 2,914 -- 2,083
-------- -------- --------
4,838 2,114 4,441
-------- -------- --------
Adjusted weighted average shares and assumed
conversions for diluted earnings per share.... 73,090 86,928 97,013
======== ======== ========
Basic earnings per share from continuing
operations....................................... $ 3.53 $ 1.32 $ 2.18
======== ======== ========
Diluted earnings per share from continuing
operations....................................... $ 3.38 $ 1.29 $ 2.12
======== ======== ========
</TABLE>
The Company has convertible preferred stock and certain stock options
outstanding which are not included in the calculation of diluted earnings per
share because the effects are antidilutive. The convertible preferred stock,
stock options and the LYONs are described in Note 13, Note 14 and Note 12,
respectively.
NOTE 18 -- OTHER COMPREHENSIVE INCOME
Other comprehensive income primarily consists of unrealized gains (losses)
on available-for-sale securities as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Unrealized gains (losses) arising during period, net
of taxes of $3,555, $17,712 and $(12,929)......... $ 5,421 $25,753 $(18,850)
Reclassification adjustments for gains realized in
net income, net of taxes of $9,825, $6,703 and
$13,398........................................... (14,285) (9,647) (19,320)
-------- ------- --------
Change in net unrealized gains (losses) on
securities........................................ $ (8,864) $16,106 $(38,170)
======== ======= ========
</TABLE>
Accumulated other comprehensive income for each classification is as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
------- --------
<S> <C> <C>
Net unrealized gains on securities, net of the change in
PEPS fair value
(see Note 12)............................................. $35,708 $ 44,572
Minimum pension liability adjustment........................ (6,088) (4,396)
Foreign currency translation adjustments.................... (2,741) (13,685)
------- --------
$26,879 $ 26,491
======= ========
</TABLE>
61
<PAGE> 63
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 19 -- COMMITMENTS AND CONTINGENCIES
The future net minimum lease payments as of December 31, 1999 for all
noncancelable operating leases, excluding future obligations included in the
restructuring liabilities on the Consolidated Balance Sheets, are as follows (in
thousands):
<TABLE>
<S> <C>
2000...................................................... $ 28,916
2001...................................................... 26,566
2002...................................................... 23,051
2003...................................................... 19,586
2004...................................................... 17,095
Thereafter................................................ 65,384
--------
Total........................................... $180,598
========
</TABLE>
Rental expense under operating leases was $38.5 million, $34.2 million and
$36.9 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Capital leases, contingent rentals and sublease income are not
significant.
To assure a long-term supply of newsprint, the Company has certain
agreements with suppliers to purchase specified quantities of newsprint over
terms not exceeding five years at prevailing market prices.
The Company and its subsidiaries are defendants in various 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 20 -- SUBSEQUENT EVENTS (UNAUDITED)
In February 2000, Gilat Communications Ltd. acquired Allen Communication.
The Company also entered into agreements in February 2000 to sell StayWell to a
subsidiary of Havas MediMedia S.A., and to sell The Sporting News to Vulcan
Ventures Inc. These dispositions are expected to be completed in March 2000.
On March 13, 2000, Times Mirror and Tribune Company (Tribune) signed a
definitive agreement for the merger of the two companies in a cash and stock
transaction valued at approximately $8 billion based on the closing price of
Tribune common stock on March 10, 2000. Under the terms of this agreement,
Tribune will make a cash tender offer for up to 28 million shares of the
Company's common stock, which represents approximately 48% of the shares of
common stock outstanding as of March 13, 2000, at a price of $95 per share.
Following completion of the tender offer, Times Mirror and Tribune will merge in
a transaction in which each share of Times Mirror common stock is converted into
2.5 shares of Tribune common stock. In addition, if fewer than 28 million Times
Mirror common shares are purchased in the tender offer, Times Mirror
shareholders will be permitted to elect cash, at a price of $95 per share, in
the merger, up to the balance of the 28 million shares. The merger is subject to
the approval of the shareholders of both companies and other customary
conditions, including regulatory approvals. Times Mirror expects the tender
offer to be completed in mid-April and the merger to be completed in the second
or third quarter of 2000.
62
<PAGE> 64
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 21 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations is as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 QUARTERS ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues.................................. $699,207 $753,751 $739,730 $836,561
Costs and expenses:
Cost of sales........................... 391,037 417,759 393,432 413,045
Selling, general and administrative
expenses............................. 215,869 202,483 238,157 286,961
-------- -------- -------- --------
Operating profit.......................... 92,301 133,509 108,141 136,555
Interest expense, net..................... (6,301) (10,428) (13,910) (26,275)
Other, net................................ 1,035 20,983 2,070 1,611
-------- -------- -------- --------
Income from continuing operations before
income taxes............................ 87,035 144,064 96,301 111,891
Income tax provision...................... 36,986 59,505 39,366 44,372
-------- -------- -------- --------
Income from continuing operations......... 50,049 84,559 56,935 67,519
Discontinued operations, net.............. (1,236) 755 130 375
-------- -------- -------- --------
Net income................................ $ 48,813 $ 85,314 $ 57,065 $ 67,894
======== ======== ======== ========
Basic earnings (loss) per common share(1):
Continuing operations................... $ .61 $ 1.10 $ .76 $ 1.10
Discontinued operations................. (.02) .01 -- --
-------- -------- -------- --------
Basic earnings per share.................. $ .59 $ 1.11 $ .76 $ 1.10
======== ======== ======== ========
Diluted earnings (loss) per common
share(1):
Continuing operations................... $ .60 $ 1.04 $ .73 $ 1.03
Discontinued operations................. (.02) .01 -- --
-------- -------- -------- --------
Diluted earnings per share................ $ .58 $ 1.05 $ .73 $ 1.03
======== ======== ======== ========
</TABLE>
63
<PAGE> 65
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998 QUARTERS ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues.................................. $658,767 $698,007 $ 677,128 $750,086
Costs and expenses:
Cost of sales........................... 366,130 369,804 368,140 340,449
Selling, general and administrative
expenses............................. 206,812 206,789 216,303 306,082
Restructuring and one-time charges...... -- 34,850 46,262 74,569
-------- -------- ---------- --------
Operating profit.......................... 85,825 86,564 46,423 28,986
Interest expense, net..................... (8,001) (13,831) (5,008) (1,755)
Other, net................................ (487) 7,811 9,173 9,304
-------- -------- ---------- --------
Income from continuing operations before
income taxes............................ 77,337 80,544 50,588 36,535
Income tax provision...................... 31,915 31,928 31,293 15,809
-------- -------- ---------- --------
Income from continuing operations......... 45,422 48,616 19,295 20,726
Discontinued operations, net.............. (161) 585 1,057,254 225,601
-------- -------- ---------- --------
Net income................................ $ 45,261 $ 49,201 $1,076,549 $246,327
======== ======== ========== ========
Basic earnings per common share(1):
Continuing operations................... $ .45 $ .49 $ .16 $ .19
Discontinued operations................. -- .01 12.55 2.86
-------- -------- ---------- --------
Basic earnings per share.................. $ .45 $ .50 $ 12.71 $ 3.05
======== ======== ========== ========
Diluted earnings per common share(1):
Continuing operations................... $ .44 $ .48 $ .16 $ .19
Discontinued operations................. -- .01 12.26 2.80
-------- -------- ---------- --------
Diluted earnings per share................ $ .44 $ .49 $ 12.42 $ 2.99
======== ======== ========== ========
</TABLE>
- ---------------
(1) Quarterly and annual earnings per share amounts are calculated independently
based on the weighted average number of shares outstanding for each period.
64
<PAGE> 66
THE TIMES MIRROR COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT COSTS AND CHARGED DEDUCTIONS BALANCE AT
BEGINNING EXPENSES OR TO OTHER FROM END OF
OF PERIOD REVENUES ACCOUNTS RESERVES PERIOD
---------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Allowance for doubtful accounts...... $25,956 $18,643 $ 2,423 $(20,741) $26,281
Allowance for returns................ 11,433 61,885 (2,160) (62,718) 8,440
------- ------- -------- -------- -------
$37,389 $80,528 $ 263(A) $(83,459) $34,721
======= ======= ======== ======== =======
Year ended December 31, 1998
Allowance for doubtful accounts...... $27,708 $19,240 $ 1,610 $(22,602) $25,956
Allowance for returns................ 11,131 59,191 (15) (58,874) 11,433
------- ------- -------- -------- -------
$38,839 $78,431 $ 1,595(A) $(81,476) $37,389
======= ======= ======== ======== =======
Year ended December 31, 1997
Allowance for doubtful accounts...... $25,659 $22,307 $ 836 $(21,094) $27,708
Allowance for returns................ 13,699 53,905 (1,506) (54,967) 11,131
------- ------- -------- -------- -------
$39,358 $76,212 $ (670)(A) $(76,061) $38,839
======= ======= ======== ======== =======
</TABLE>
- ---------------
(A) Primarily allowances of businesses acquired and sold.
Note: A detailed schedule of restructuring liabilities has been provided in Note
7 to the consolidated financial statements.
65
<PAGE> 67
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item will be provided pursuant to General
Instruction G(3) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be provided pursuant to General
Instruction G(3) of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be provided pursuant to General
Instruction G(3) of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be provided pursuant to General
Instruction G(3) of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (a)(2) Financial Statements and Financial Statement Schedules
filed as part of this report:
As listed in the Index to Financial Statements and Financial Statement
Schedule on page 27 hereof.
(a)(3) Exhibits filed as part of this report:
As listed in the Exhibit Index beginning on page 69 hereof.
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K dated October 12, 1999
filing a Statement of Eligibility of Trustee on Form T-1 of Citibank,
N.A.
The Company filed a Current Report on Form 8-K dated October 19, 1999
relating to the issuance of $200,000,000 of Times Mirror's 6.65% Notes
due October 15, 2001 and of $400,000,000 of Times Mirror's 7.45% Notes
due October 15, 2009.
66
<PAGE> 68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ MARK H. WILLES
------------------------------------
Mark H. Willes
Chairman of the Board, President
and Chief Executive Officer
Dated: March 2, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARK H. WILLES Chairman of the Board, March 2, 2000
- ----------------------------------------------------- President, Chief Executive
Mark H. Willes Officer and Director (Principal
Executive Officer)
/s/ EFREM ZIMBALIST III Executive Vice President and March 2, 2000
- ----------------------------------------------------- Chief Financial Officer
Efrem Zimbalist III (Principal Financial and
Accounting Officer)
Director March 2, 2000
- -----------------------------------------------------
Susan Babcock
/s/ DONALD R. BEALL Director March 2, 2000
- -----------------------------------------------------
Donald R. Beall
/s/ JOHN E. BRYSON Director March 2, 2000
- -----------------------------------------------------
John E. Bryson
Director March 2, 2000
- -----------------------------------------------------
Bruce Chandler
/s/ CLAYTON W. FRYE, JR. Director March 2, 2000
- -----------------------------------------------------
Clayton W. Frye, Jr.
/s/ ROGER GOODAN Director March 2, 2000
- -----------------------------------------------------
Roger Goodan
/s/ SHERRY LANSING Director March 2, 2000
- -----------------------------------------------------
Sherry Lansing
/s/ DAWN GOULD LEPORE Director March 2, 2000
- -----------------------------------------------------
Dawn Gould Lepore
/s/ ALFRED E. OSBORNE, JR. Director March 2, 2000
- -----------------------------------------------------
Alfred E. Osborne, Jr.
/s/ ROBERT W. SCHULT Director March 2, 2000
- -----------------------------------------------------
Robert W. Schult
</TABLE>
67
<PAGE> 69
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM STINEHART, JR. Director March 2, 2000
- -----------------------------------------------------
William Stinehart, Jr.
/s/ WARREN B. WILLIAMSON Director March 2, 2000
- -----------------------------------------------------
Warren B. Williamson
/s/ EDWARD ZAPANTA Director March 2, 2000
- -----------------------------------------------------
Edward Zapanta
</TABLE>
68
<PAGE> 70
EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by reference to
documents previously filed by Times Mirror, or its predecessor Old Times Mirror,
with the Securities and Exchange Commission, as indicated. All other documents
listed are filed with this report, unless otherwise indicated.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
*2.1 Contribution Agreement among Times Mirror, certain
subsidiaries thereof, Chandler Trust No. 1 and Chandler
Trust No. 2, dated August 8, 1997 (Exhibit 10.2 to Current
Report on Form 8-K, dated August 8, 1997)
*2.2 Amended and Restated Agreement and Plan of Merger, dated as
of April 27, 1998, by and among Reed Elsevier U.S. Holdings
Inc., Reed Elsevier Overseas BV, CBM Acquisition Parent Co.,
CBM MergerSub Corp., Times Mirror, TMD, Inc. and Matthew
Bender Company, Incorporated (Exhibit 2.1 to Times Mirror's
Current Report on Form 8-K, dated July 31, 1998)
*2.3 Partnership Interest Purchase Agreement, dated as of April
26, 1998, by and among Times Mirror, Shepard's Inc., TM
ShepCo, Inc., Reed Elsevier Inc. and Reed Books Inc.
(Exhibit 2.2 to Times Mirror's Current Report on Form 8-K
dated July 31, 1998)
*2.4 Amended and Restated Agreement and Plan of Merger, dated as
of October 8, 1998 by and among Harcourt Brace & Company,
Mosby Parent Corp., Mosby Acquisition Corp., Times Mirror
and Mosby, Inc. (Exhibit 2.1 to Times Mirror's Current
Report on Form 8-K, dated October 9, 1998)
*2.5 Contribution Agreement among Times Mirror, certain
subsidiaries thereof, Eagle New Media Investments, LLC,
Eagle Publishing Investments, LLC and Chandler Trust No. 1
and Chandler Trust No. 2, dated September 3, 1999 (Exhibit
10.2 to Times Mirror's Current Report on Form 8-K, dated
September 3, 1999 and filed with the Securities and Exchange
Commission on September 7, 1999)
*2.6 Agreement and Plan of Merger dated as of March 13, 2000
between Tribune Company and Times Mirror (Exhibit 2.1 to
Times Mirror's Current Report on Form 8-K, dated October 13,
2000)
*2.7 Voting Agreement dated as of March 13, 2000 by and among
Tribune Company and the other parties set forth on the
signature pages thereto (Exhibit 2.2 to Times Mirror's
Current Report on Form 8-K, dated October 13, 2000)
*3.1 Restated Certificate of Incorporation of Times Mirror, as
filed with the Secretary of State of the State of Delaware
on January 23, 1995 (Exhibit to Times Mirror's Registration
Statement on Form S-4 (File No. 33-87482))
*3.2 Certificate of Amendment to Certificate of Incorporation of
Times Mirror, as filed with the Secretary of State of the
State of Delaware on February 1, 1995 (Exhibit to Times
Mirror's Registration Statement on Form S-4 (File No.
33-87482))
*3.3 Certificate of Designations of Series C Common Stock, as
filed with the Secretary of State of the State of Delaware
on January 23, 1995 (Exhibit to Times Mirror's Registration
Statement on Form S-4 (File No. 33-87482))
*3.4 Amended and Restated Bylaws of Times Mirror (Exhibit 3.4 to
Times Mirror's 1998 Annual Report on Form 10-K)
*3.5 Certificate of Designations of Series A Preferred Stock
(Exhibit 3.5 to Times Mirror's 1995 Annual Report on Form
10-K)
*3.6 Certificate of Designations of Series B Preferred Stock
(Exhibit 3.6 to Times Mirror's 1995 Annual Report on Form
10-K)
*3.7 Certificate of Designation of Series C-1 Preferred Stock
(Exhibit 4.1 to Times Mirror's Current Report on Form 8-K,
dated August 8, 1997)
</TABLE>
69
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
*3.8 Certificate of Designation of Series C-2 Preferred Stock
(Exhibit 4.2 to Times Mirror's Current Report on Form 8-K,
dated August 8, 1997)
3.9 Certificate of Designation of Series D-1 Preferred Stock
3.10 Certificate of Designation of Series D-2 Preferred Stock
*4.1 Indenture by and between New TMC Inc. (subsequently changed
to The Times Mirror Company) and Wells Fargo Bank (successor
to First Interstate Bank of California), as Trustee for the
7 1/4% Debentures due 2013 and 7 1/2% Debentures due 2023,
dated January 30, 1995 (Exhibit 4.1 to Times Mirror's 1995
Annual Report on Form 10-K)
*4.2 Specimen Note for 7 1/4% Debenture due March 1, 2013 (New
TMC Inc., subsequently changed to The Times Mirror Company)
(Exhibit 4.2 to Times Mirror's 1995 Annual Report on Form
10-K)
*4.3 Specimen Note for 7 1/2% Debenture due July 1, 2023 (New TMC
Inc., subsequently changed to The Times Mirror Company)
(Exhibit 4.3 to Times Mirror's 1995 Annual Report on Form
10-K)
*4.4 Indenture dated March 19, 1996, by and between The Times
Mirror Company and Citibank, N.A., as Trustee for the 4 1/4%
PEPS due March 15, 2001 and the 7 1/4% Debentures due
November 15, 2096 (Exhibit 4.1 to Times Mirror's Current
Report on Form 8-K, dated March 19, 1996)
*4.5 Officers' Certificate dated as of March 19, 1996
establishing the terms of the PEPS and attaching the
Specimen Certificate for the 4 1/4% PEPS due March 15, 2001
and the Specimen Certificate of Global PEPS (Exhibit 4.2 to
Times Mirror's Current Report on Form 8-K, dated March 19,
1996)
*4.6 Officers' Certificate dated November 13, 1996 establishing
the terms of the 7 1/4% Debentures due November 15, 2096 and
attaching the specimen Form of Debenture (Exhibit 4.2 to
Times Mirror's Current Report on Form 8-K, dated November
13, 1996)
*4.7 Indenture dated April 15, 1997 between Times Mirror and
Citibank, N.A., as trustee (Exhibit 4.1 to Times Mirror's
Current Report on Form 8-K, dated April 9, 1997)
*4.8 Officer's Certificate dated September 9, 1997 establishing
the terms of the 6.61% Debentures due September 15, 2027 and
attaching the specimen Form of Debenture (Exhibit 4.2 to
Times Mirror's Current Report on Form 8-K, dated September
9, 1997)
*4.9 Officers' Certificate dated October 19, 1999 establishing
the terms of the 6.65% Notes due October 15, 2001 and the
7.45% Notes due October 15, 2009 and attaching specimen
Forms of Notes (Exhibit 4.2 to Times Mirror's Current Report
on Form 8-K, dated October 19, 1999)
*4.10 First Supplemental Indenture dated as October 19, 1999
between Times Mirror and Citibank, N.A., as trustee (Exhibit
4.3 to Times Mirror's Current Report on Form 8-K, dated
October 19, 1999)
*10.1 Deferred Compensation Plan for Executives (Exhibit 10.1 to
Times Mirror's 1994 Annual Report on Form 10-K)
*10.2 1987 Restricted Stock Plan (Exhibit II to Old Times Mirror's
definitive Proxy Statement, dated March 27, 1987)
*10.3 1984 Executive Stock Option Plan (Exhibit A to Old Times
Mirror's definitive Proxy Statement, dated April 23, 1984)
*10.4 1988 Executive Stock Option Plan (Exhibit A to Old Times
Mirror's Proxy Statement, dated March 30, 1988)
</TABLE>
70
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
*10.5 Deferral Plan for Directors' Fees (Exhibit 10.8 to Old Times
Mirror's 1981 Annual Report on Form 10-K)
*10.6 The Times Mirror Pension Plan for Directors, as Amended and
Restated on March 5, 1987 (Exhibit 10.11 to Old Times
Mirror's 1986 Annual Report on Form 10-K)
*10.7 Deferred Compensation Plan for Non-Employee Directors
(Exhibit 10.7 to Times Mirror's 1994 Annual Report on Form
10-K)
*10.8 Non-Employee Director Stock Option Plan (Appendix A to Old
Times Mirror's definitive Proxy Statement, dated March 21,
1994)
*10.9 Agreement dated April 29, 1985 between Old Times Mirror and
Otis Chandler (Exhibit 10.10 to Old Times Mirror's 1985
Annual Report on Form 10-K)
*10.10 Letter Agreement amended and restated as of August 28, 1995
between Times Mirror and Mark H. Willes (Exhibit 10.10 to
Times Mirror's 1995 Annual Report on Form 10-K)
*10.11 1992 Key Employee Long-Term Incentive Plan (Appendix A to
Old Times Mirror's Proxy Statement, dated March 20, 1992)
*10.12 1996 Management Incentive Plan (Exhibit 10.12 to Times
Mirror's 1995 Annual Report on Form 10-K)
*10.13 Non-Employee Directors Stock Plan (Exhibit 10.13 to Times
Mirror's 1995 Annual Report on Form 10-K)
*10.14 The Times Mirror Company Non-Employee Directors Stock Plan
as amended and restated effective January 1, 1997 (Exhibit
10.14 to Times Mirror's 1996 Annual Report on Form 10-K)
*10.15 The Times Mirror Company 1997 Directors Stock Option Plan
(Exhibit 10.15 to Times Mirror's 1996 Annual Report on Form
10-K)
*10.16 Limited Liability Company Agreement of TMCT, LLC, dated
August 8, 1997 (Exhibit 10.1 to Times Mirror's Current
Report on Form 8-K, dated August 8, 1997)
*10.17 Lease Agreement between TMCT, LLC and Times Mirror, dated
August 8, 1997 (Exhibit 10.4 to Times Mirror's Current
Report on Form 8-K, dated August 8, 1997)
*10.18 Amended and Restated Limited Liability Company Agreement of
TMCT II, LLC, dated September 3, 1999 (Exhibit 10.1 to Times
Mirror's Current Report on Form 8-K, dated September 3, 1999
and filed with the Securities and Exchange Commission on
September 7, 1999)
10.19 Letter Agreement between Times Mirror and Mary E. Junck
dated April 5, 1999
10.20 Letter Agreement between Times Mirror and Thomas Unterman
dated December 22, 1999
11 Computation of Earnings Per Share
12 Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Fixed Charges and Preferred Stock Dividends
21 Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP, Independent Auditors
27 Financial Data Schedule
</TABLE>
71
<PAGE> 1
CERTIFICATE OF DESIGNATION
OF THE
PREFERRED STOCK, SERIES D-1
(PAR VALUE $1.00 PER SHARE)
OF
THE TIMES MIRROR COMPANY
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
The undersigned duly authorized officer of The Times Mirror Company, a
corporation organized and existing under the General Corporation Law (the
"DGCL") of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the Company, the Board of Directors
of the Company (the "Board" or "Board of Directors") on October 28, 1999 adopted
the following resolution creating 380,972 shares of Preferred Stock, Series D-1
(in addition to the shares of Preferred Stock, Series D-2, which were also
created on such date), par value $1.00 per share, each designated as set forth
below:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors by provisions of the Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), and the DGCL,
the issuance of a series of the Company's preferred stock, par value $1.00 per
share (the "Preferred Stock"), which shall consist of 380,972 shares of
Preferred Stock, be, and the same hereby is, authorized, and the Board of
Directors hereby fixes the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions, set forth
in the Certificate of Incorporation that may be applicable to the Preferred
Stock) as follows:
1. Designation and Rank. The designation of such series of the Preferred
Stock authorized by this resolution shall be the Preferred Stock, Series D-1
(the "Series D-1 Preferred Stock"). The number of shares of Series D-1 Preferred
Stock shall be 380,972. The Series D-1 Preferred Stock shall rank prior to the
Common Stock (as hereinafter defined) of the Company and to all other classes
and series of equity securities of the Company now or hereafter
1
<PAGE> 2
authorized, issued or outstanding (the Common Stock and such other classes and
series of equity securities not expressly designated as ranking on a parity with
or senior to the Series D-1 Preferred Stock collectively may be referred to
herein as the "Junior Stock") as to dividend rights and rights upon liquidation,
winding up or dissolution of the Company, other than (a) the Company's (i) 8%
Cumulative Convertible Preferred Stock, Series A (the "Series A Preferred
Stock") and (ii) Series D-2 Preferred Stock (the "Series D-2 Preferred Stock"),
with respect to which the Series D-1 Preferred Stock is expressly designated as
ranking on a parity as to dividend rights and rights upon liquidation, winding
up or dissolution of the Company; and (b) any other classes or series of equity
securities of the Company expressly designated as ranking on a parity with
(collectively with the Series A Preferred Stock and the Series D-2 Preferred
Stock, the "Parity Stock") or senior to (the "Senior Stock") the Series D-1
Preferred Stock as to dividend rights and rights upon liquidation, winding up or
dissolution of the Company. The Series D-1 Preferred Stock shall be subject to
creation of Senior Stock, Parity Stock and Junior Stock, to the extent not
expressly prohibited by the Certificate of Incorporation or Section 5(c)(i) or
5(c)(ii) hereof, with respect to the payment of dividends and upon liquidation.
2. Cumulative Dividends; Priority.
(a) Payment of Dividends.
(i) The holders of record of shares of Series D-1
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available therefor, cumulative cash
dividends from the date of issuance of such shares at the rate per annum per
share of 5.8% (i.e., $29 per annum) (the "Dividend Rate"), as adjusted from time
to time pursuant to Section 2(c) hereof. Dividends shall be payable quarterly on
the tenth day of March, June, September and December in each year (or if such
day is a non-business day, on the next business day) with respect to the quarter
ending on the last day of such month, commencing on March 10, 2000 (each of such
dates a "Dividend Payment Date"). No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series D-1 Preferred Stock that may be in arrears. Notwithstanding the
foregoing, for purposes of calculating the dividend to be paid with respect to
the period (the "Initial Dividend Period") from the date of issuance of such
shares through March 31, 2000 (payable on March 10, 2000), it shall be assumed
that the shares of Series D-1 Preferred Stock were issued on January 1, 2000.
(ii) Each declared dividend shall be payable to holders of
record as they appear on the stock books of the Company at the close of business
on such record dates, not more than 60 calendar days preceding the applicable
Dividend Payment Dates therefor, as are determined by the Board of Directors
(each of such dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of January,
April, July, and October of each year and shall end on and include the last day
of March, June, September and December, respectively of such year. Dividends on
the shares of Series D-1 Preferred Stock shall be fully cumulative and shall
accrue (whether or not declared) from the first day of each Dividend Period;
provided, however, that the amount of any dividend payable for any Dividend
Period shorter than a full Dividend Period (other than the Initial Dividend
Period, which shall be calculated as set forth in Section 2(a)(i) hereof), shall
be computed on the
2
<PAGE> 3
basis of a 360-day year composed of twelve 30-day months and the actual number
of days elapsed in the relevant Dividend Period.
(b) Priority as to Dividends.
(i) Subject to the provisions hereof, no cash dividend or
other distribution (other than in Common Stock or other Junior Stock) shall be
declared or paid or set apart for payment on Preferred Stock that constitutes
Parity Stock or Junior Stock with respect to dividends for any Dividend Period
unless full dividends on the Series D-1 Preferred Stock for the immediately
preceding Dividend Period have been or contemporaneously are declared and paid
(or declared and a sum sufficient for the payment thereof set apart for such
payment). When dividends are not paid in full (or declared and a sum sufficient
for such full payment not so set apart) upon the Series D-1 Preferred Stock and
any Parity Stock, all dividends declared upon shares of Series D-1 Preferred
Stock and any Parity Stock shall be declared pro rata with respect thereto, so
that in all cases the amount of dividends declared per share on the Series D-1
Preferred Stock and such Parity Stock shall bear to each other the same ratio
that accrued dividends for the then-current Dividend Period per share on the
shares of Series D-1 Preferred Stock (which shall include any accumulation in
respect of unpaid dividends for prior Dividend Periods) and dividends, including
accumulations, if any, of such Parity Stock, bear to each other.
(ii) Except as provided in the preceding paragraph, full
dividends on the Series D-1 Preferred Stock must be declared and paid or set
apart for payment for the immediately preceding Dividend Period before (A) any
cash dividend or other distribution (other than in Common Stock or other Junior
Stock) shall be declared or paid or set aside for payment upon the Common Stock
or any other Junior Stock of the Company or (B) any Common Stock or any other
Junior Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock), except by redemption into
or exchange for Junior Stock or (C) any Series D-1 Preferred Stock or Parity
Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock). The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company if under the preceding
sentence, the Company would be prohibited from purchasing or otherwise acquiring
such shares at such time and in such manner.
(iii) No dividend shall be paid or set aside for holders
of the Series D-1 Preferred Stock for any Dividend Period unless full dividends
on any Preferred Stock that constitutes Senior Stock with respect to dividends
for that period have been or contemporaneously are declared and paid (or
declared and a sum sufficient for the payment thereof set apart for such
payment).
(c) Adjustment to Dividend Rate.
(i) The Dividend Rate shall not be adjusted prior to the
end of the Dividend Period ending on December 31, 2001.
3
<PAGE> 4
(ii) The Dividend Rate for each subsequent year
(commencing with the year that begins on January 1, 2002) shall be adjusted
upward in accordance with Schedule A attached hereto.
(iii) Increases in the Dividend Rate are subject to the
following limitation: the Dividend Rate shall, under no circumstances, exceed
8.4% per annum.
3. Conversion at Option of the Company.
(a) General.
(i) The shares of the Series D-1 Preferred Stock shall not
be convertible at the option of the Company except upon the later to occur of
(x) the date on which a written notice has been mailed or otherwise distributed
by the Company to each record holder of the Series D-1 Preferred Stock stating
that the assets of either Chandler Trust No. 1 or Chandler Trust No. 2 have been
distributed to the beneficiaries thereof and (y) February 1, 2025 (such later
date being the "Convertibility Date"). Subject to and upon compliance with the
provisions of this Section 3, shares of Series D-1 Preferred Stock may be
converted, in whole or in part, at the election of the Company by resolution of
the Board of Directors, upon notice as provided in Section 3(b), at any time or
from time to time on or after the Convertibility Date. Conversion shall be made
by delivering to the holders of Series D-1 Preferred Stock, in respect of the
conversion of each share of Series D-1 Preferred Stock so converted,
certificates representing the number of fully paid and non-assessable shares
(the "Conversion Shares") of Series A Common Stock, par value $1.00 per share,
of the Company ("Series A Common Stock," which, together with the Series B
Common Stock, par value $1.00 per share, and Series C Common Stock, par value
$1.00 per share, of the Company are referred to herein as the "Common Stock")
equal to the quotient of (1) $500 plus accrued and unpaid dividends on such
shares of Series D-1 Preferred Stock to the Conversion Date (as hereinafter
defined) divided by (2) the Common Share Value (as hereinafter defined). The
aggregate number of shares of Common Stock that a holder of shares of Series D-1
Preferred Stock that have been converted is entitled to receive pursuant to this
Section 3 or Section 4 is hereinafter referred to as the "Aggregate Conversion
Shares."
(ii) The "Common Share Value" shall mean the average of
the closing prices of the Series A Common Stock for the 20 days during which
trades of Series A Common Stock occurred immediately preceding the Valuation
Date (as defined below), as reported in The Wall Street Journal, Western
Edition, or, if no closing prices were so reported, the average of the mean
between the high bid and low asked price per share of Series A Common Stock for
each of the 20 days during which trades of Series A Common Stock occurred
immediately preceding the Valuation Date in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if the Series A Common
Stock is not then quoted by any such organization, the average of the mean
between the closing bid and asked prices per share of Series A Common Stock for
each of the 20 days during which trades of Series A Common Stock occurred
immediately preceding the Valuation Date, as furnished by a professional market
maker making a market in the Series A Common Stock, or, if there is no such
market maker, the fair market value of a share of Series A Common Stock
determined by whatever method the Board of Directors reasonably determines to
4
<PAGE> 5
use. In the case of a conversion pursuant to this Section 3, the "Valuation
Date" shall mean the Conversion Notice Date (as defined in Section 3(b)), and in
the case of any conversion pursuant to Section 4, the "Valuation Date" shall
mean the Conversion Time (as hereinafter defined).
(b) Notice of Conversion. Notice of any conversion, setting forth
(i) the Conversion Date (as defined in Section 3(c) hereof), (ii) a statement
that dividends on the shares of Series D-1 Preferred Stock to be converted will
cease to accrue on such Conversion Date, and (iii) the method(s) by which the
holders may surrender the certificates representing shares of Series D-1
Preferred Stock that have been converted and obtain the Conversion Shares
therefor, shall be mailed, postage prepaid, on a date (the "Conversion Notice
Date") that is at least 15 days but not more than 45 days prior to said
Conversion Date to each holder of record of the Series D-1 Preferred Stock to be
converted at his, her or its address as the same shall appear on the books of
the Company. If less than all the shares of the Series D-1 Preferred Stock owned
by such holder are then to be converted, the notice shall specify the number of
shares thereof that are to be converted and the numbers of the certificates
representing such shares.
(c) Method of Conversion. The surrender of any certificate
evidencing shares of Series D-1 Preferred Stock that have been converted shall
be made by the holder thereof by the surrender of the certificate or
certificates formerly representing the shares of Series D-1 Preferred Stock
converted (with proper endorsement or instruments of transfer) to the Company at
the principal office of the Company (or such other office or agency of the
Company as the Company may designate in writing to the holder or holders of the
Series D-1 Preferred Stock) at any time during its usual business hours. Shares
of Series D-1 Preferred Stock called for conversion shall be deemed to have been
converted, and the shares of Series A Common Stock to be issued in respect of
the shares of Series D-1 Preferred Stock converted shall be deemed to have been
issued, as of the close of business on the date fixed for conversion (the
"Conversion Date"), without regard to when certificates evidencing such Series
D-1 Preferred Stock are surrendered pursuant to this Section 3(c) or
certificates evidencing such Series A Common Stock are issued pursuant to
Section 3(d). The rights of the holder of Series D-1 Preferred Stock that has
been converted, except for the right to receive the Aggregate Conversion Shares
therefor in accordance herewith (and any cash payments to which such holder is
entitled pursuant to Section 3(e) hereof), shall cease on the Conversion Date.
In the case of lost or destroyed certificates evidencing ownership of shares of
Series D-1 Preferred Stock that have been converted, the holder shall submit
proof of loss or destruction and such indemnity as shall be required by the
Company.
(d) Issuance of Certificates for Series A Common Stock. As soon
as practicable after its receipt of any certificate or certificates formerly
evidencing ownership of shares of Series D-1 Preferred Stock that have been
converted, the Company shall issue and shall deliver to the person for whose
account such certificates formerly representing shares of Series D-1 Preferred
Stock were so surrendered, or on his, her or its written order, a certificate or
certificates for the number of full shares of Series A Common Stock issuable
upon the conversion of such shares of Series D-1 Preferred Stock and a check or
cash payment (if any) to which such holder is entitled with respect to
fractional shares as determined by the Company, in accordance with Section 3(e)
hereof.
5
<PAGE> 6
(e) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
D-1 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series D-1 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(f) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series D-1
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(g) Common Stock Reserved for Conversion. The Company shall at
all times from and after the Conversion Date reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series D-1 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series D-1
Preferred Stock.
4. Conversion at the Option of Holders.
(a) General. After the later to occur of (i) the date on which a
written notice has been mailed or otherwise distributed by the Company to each
record holder of the Series D-1 Preferred Stock stating that the assets of
either Chandler Trust No. 1 or Chandler Trust No. 2 have been distributed to the
beneficiaries thereof and (ii) February 1, 2025, the holder of any Series D-1
Preferred Stock may convert pursuant to this Section 4 all or any part (in whole
number of shares only) of the Series D-1 Preferred Stock held by such holder
into fully paid and non-assessable shares of Series A Common Stock. The number
of shares of Series A Common Stock into which a share of Series D-1 Preferred
Stock may be converted shall be equal to the quotient of (1) $500 plus accrued
and unpaid dividends on such share of Series D-1 Preferred Stock to the
Conversion Time divided by (2) the Common Share Value.
(b) Method of Conversion. Each conversion of Series D-1 Preferred
Stock shall be effected by the surrender of the certificate or certificates
representing the shares of Series D-1 Preferred Stock to be converted (with
proper endorsement or instruments of transfer) to the Company at the principal
office of the Company (or such other office or agency of the Company as the
Company may designate in writing to the holder or holders of the Series D-1
Preferred Stock) at any time during its usual business hours, together with
written notice by the holder of such Series D-1 Preferred Stock stating that
such holder desires to convert the shares of Series D-1 Preferred Stock, or a
stated number of such shares, represented by such certificate or certificates,
which notice shall also specify the name or names (with addresses) and
6
<PAGE> 7
denominations in which the certificate or certificates for the Series A Common
Stock shall be issued and shall include instructions for delivery thereof. Any
conversion pursuant to this Section 4 shall be deemed to have been effected as
of the close of business on the date on which such certificate or certificates
shall have been surrendered and such notice shall have been received, and at
such time (the "Conversion Time") the rights of the holder of Series D-1
Preferred Stock (or specified portion thereof) as such holder shall cease and
the person or persons in whose name or names any certificate or certificates for
shares of Series A Common Stock are to be issued upon conversion shall be deemed
to have become the holder or holders of record of the shares of Series A Common
Stock represented thereby. In the case of lost or destroyed certificates
evidencing ownership of shares of Series D-1 Preferred Stock to be converted,
the holder shall submit proof of loss or destruction and such indemnity as shall
be required by the Company.
(c) Issuance of Certificates for Series A Common Stock. As soon
as practicable after its receipt of any certificate or certificates evidencing
ownership of shares of Series D-1 Preferred Stock to be converted pursuant to
this Section 4, the Company shall issue and shall deliver to the person for
whose account such shares of Series D-1 Preferred Stock were so surrendered, or
on his, her or its written order, a certificate or certificates for the number
of full shares of Series A Common Stock issuable upon the conversion of such
shares of Series D-1 Preferred Stock and a check or cash payment (if any) to
which such holder is entitled with respect to fractional shares as determined by
the Company, in accordance with Section 4(d) hereof.
(d) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
D-1 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series D-1 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(e) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series D-1
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(f) Common Stock Reserved for Conversion. The Company shall at
all times from and after the Conversion Time reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series D-1 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series D-1
Preferred Stock.
7
<PAGE> 8
5. Voting Rights.
(a) General Voting Rights. Except as expressly provided
hereinafter in this Section 5, or as otherwise from time to time required by
applicable law, the Series D-1 Preferred Stock shall have no voting rights.
(b) Voting Rights Upon Dividend Arrears.
(i) Right to Elect Directors. In the event that an amount
equal to six quarterly dividend payments on the Series D-1 Preferred Stock shall
have accrued and be unpaid (the occurrence of such contingency marking the
beginning of a period herein referred to as the "Default Period," which shall
extend until such time as all accrued and unpaid dividends for all previous
Dividend Periods and for the current Dividend Period on all shares of Series D-1
Preferred Stock then outstanding shall have been declared and paid or declared
and a sum sufficient for such full payment set apart for payment), the holders
of the Series D-1 Preferred Stock shall have the right, voting separately as a
class together with holders of shares of the Series D-2 Preferred Stock and any
other Parity Stock upon which like voting rights have been conferred and are
exercisable (such shares of Series D-1 Preferred Stock, shares of Series D-2
Preferred Stock, and other shares of Parity Stock are hereinafter referred to as
"Voting Parity Stock"), to elect two members of the Board of Directors, each
member to be in addition to the then authorized number of directors, at the next
annual meeting of stockholders or at a special meeting called as described below
and thereafter until the Default Period shall have ended.
(ii) Special Meeting; Written Consent. Whenever such
voting right shall vest, it may be exercised initially by the vote of the
holders of a plurality of the voting power of Series D-1 Preferred Stock and
Voting Parity Stock present and voting as a single class, in person or by proxy,
at a special meeting of holders of the Series D-1 Preferred Stock and Voting
Parity Stock or at the next annual meeting of stockholders. A special meeting
for the exercise of such right shall be called by the Secretary of the Company
as promptly as possible, and in any event within 10 days after receipt of a
written request signed by the holders of record of at least 25% of the
outstanding shares of the Series D-1 Preferred Stock and Voting Parity Stock,
subject to any applicable notice requirements imposed by law or regulation.
Notwithstanding the provisions of this paragraph, no such special meeting shall
be required to be held during the 90-day period preceding the date fixed for the
annual meeting of stockholders. Any action required or permitted to be taken at
any such special meeting of such holders may be taken by a consent or consents
in writing of such stockholders, setting forth the action so taken, which
consent or consents shall be signed by the holders of Series D-1 Preferred Stock
and Voting Parity Stock representing a majority of the voting power of shares of
such Series D-1 Preferred Stock and Voting Parity Stock and shall be delivered
to the Company in the manner set forth from time to time in the DGCL.
(iii) Term of Office of Directors. Any director who shall
have been elected by holders of the Series D-1 Preferred Stock and Voting Parity
Stock entitled to vote in accordance with this subparagraph (b) shall hold
office for a term expiring (subject to the earlier expiry of such term, as set
forth below) at the annual meeting of stockholders at which the term of office
of his class shall expire and during such term may be removed at any time, only
for cause, by, and only by, the affirmative vote of the holders of record of a
majority of the voting
8
<PAGE> 9
power of the Series D-1 Preferred Stock and Voting Parity Stock present and
voting as a single class, in person or by proxy, at a special meeting of such
stockholders called for such purpose, and any vacancy created by such removal
may also be filled at such meeting. A meeting for the removal of a director
elected by the holders of the Series D-1 Preferred Stock and Voting Parity Stock
and the filling of the vacancy created thereby shall be called by the Secretary
of the Company as promptly as possible and in any event within 10 days after
receipt of a request therefor signed by the holders of not less than 25% of the
aggregate outstanding voting power of the Series D-1 Preferred Stock and Voting
Parity Stock, subject to any applicable notice requirements imposed by law or
regulation. Such meeting shall be held at the earliest practicable date
thereafter, provided that no such meeting shall be required to be held during
the 90-day period preceding the date fixed for the annual meeting of
stockholders. Simultaneously with the expiration of the Default Period, the
terms of office of all directors elected by the holders of the shares of Series
D-1 Preferred Stock and the Voting Parity Stock pursuant hereto then in office
shall, without further action, thereupon terminate unless otherwise required by
law. Upon such termination the number of directors constituting the Board of
Directors of the Company shall, without further action, be reduced by two,
subject always to the increase of the number of directors pursuant to the
foregoing provisions in the case of the future right of holders of the shares of
Series D-1 Preferred Stock and Voting Parity Stock to elect directors as
provided above.
(iv) Vacancies. Any vacancy caused by the death,
resignation or removal of a director who shall have been elected in accordance
with this subparagraph (b) may be filled by the remaining director so elected
or, if not so filled, by a vote of holders of a plurality of the voting power of
the Series D-1 Preferred Stock and Voting Parity Stock present and voting as a
single class, in person or by proxy, at a meeting called for such purpose.
Unless such vacancy shall have been filled by the remaining director as
aforesaid, such meeting shall be called by the Secretary of the Company at the
earliest practicable date after such death or resignation, and in any event
within 10 days after receipt of a written request signed by the holders of
record of at least 25% of the outstanding shares of the Series D-1 Preferred
Stock and Voting Parity Stock, subject to any applicable notice requirements
imposed by law or regulation. Notwithstanding the provisions of this paragraph,
no such special meeting shall be required to be held during the 90-day period
preceding the date fixed for the annual meeting of stockholders.
(v) Stockholders' Right to Call Meeting. If any meeting of
the holders of the Series D-1 Preferred Stock and Voting Parity Stock required
by this subparagraph (b) to be called shall not have been called within 30 days
after personal service of a written request therefor upon the Secretary of the
Company or within 30 days after mailing the same within the United States of
America by registered mail addressed to the Secretary of the Company at its
principal executive offices, subject to any applicable notice requirements
imposed by law or regulation, then the holders of record of at least 25% of the
outstanding shares of the Series D-1 Preferred Stock and Voting Parity Stock may
designate in writing one of their number to call such meeting at the expense of
the Company, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders or such shorter notice
(but in no event shorter than permitted by law or regulation) as may be
acceptable to the holders of a majority of the total voting power of the Series
D-1 Preferred Stock and Voting Parity Stock. Any holder of Series D-1 Preferred
Stock and Voting Parity Stock so designated shall have
9
<PAGE> 10
access to the Series D-1 Preferred Stock and Voting Parity Stock books of the
Company for the purpose of causing such meeting to be called pursuant to these
provisions.
(vi) Quorum. At any meeting of the holders of the Series
D-1 Preferred Stock called in accordance with the provisions of this
subparagraph (b) for the election or removal of directors, the presence in
person or by proxy of the holders of a majority of the total voting power of the
Series D-1 Preferred Stock and Voting Parity Stock shall be required to
constitute a quorum; in the absence of a quorum, the holders of a majority of
the total number of votes present in person or by proxy shall have power to
adjourn the meeting from time to time without notice other than an announcement
at the meeting, until a quorum shall be present.
(c) Voting Rights on Extraordinary Matters.
(i) So long as any shares of Series D-1 Preferred Stock
shall be outstanding, the holders of the Series D-1 Preferred Stock shall have
the right, voting separately as a class together with holders of shares of any
Voting Parity Stock (with two-thirds of the voting power of such stock at the
time outstanding given in person or by proxy at a meeting at which the holders
of such shares shall be entitled to vote separately as a class, or by a consent
or consents in writing setting forth such approval, which consent shall be
delivered to the Company in the manner set forth from time to time in the DGCL,
required for approval by such holders), to vote on: (i) the liquidation or
dissolution of the Company; (ii) any proposal to authorize, create or issue, or
increase the authorized or issued amount of, any class or series of capital
stock ranking pari passu with, or prior to, the shares of the Series D-1
Preferred Stock in powers, rights or preferences upon the liquidation,
dissolution or winding up of the affairs of the Company or as to dividends; and
(iii) any proposal to amend by merger, amendment or otherwise (or otherwise
alter or repeal) the Certificate of Incorporation (or this resolution) if such
amendment, alteration or repeal would increase or decrease the aggregate number
of authorized shares of Series D-1 Preferred Stock or any Voting Parity Stock,
increase or decrease the par value of the shares of Series D-1 Preferred Stock
or any Voting Parity Stock, or alter or change the powers, preferences, or
special rights of the shares of Series D-1 Preferred Stock or any Voting Parity
Stock so as to affect them adversely. An amendment that increases the number of
authorized shares of any class or series of Preferred Stock or authorizes the
creation or issuance of other classes or series of Preferred Stock, in each case
ranking junior to the Series D-1 Preferred Stock with respect to the payment of
dividends and distribution of assets upon liquidation, dissolution or winding up
shall not be considered to be such an adverse change.
(ii) So long as any shares of Series D-1 Preferred Stock
shall be outstanding and unless the consent or approval of a greater number of
shares shall then be required by applicable law, without first obtaining the
approval of the holders of at least two-thirds of the voting power of the Series
D-1 Preferred Stock at the time outstanding (voting separately as a class
together with the holders of shares of Voting Parity Stock) given in person or
by proxy at a meeting at which the holders of such shares shall be entitled to
vote separately as a class (or by a consent or consents in writing setting forth
such approval, which consent shall be delivered to the Company in the manner set
forth from time to time in the DGCL), the Company shall not either directly or
indirectly or through merger or consolidation with any other entity, (i)
authorize, create or issue, or increase the authorized or issued amount of, any
class or series of capital stock that would place or have the effect of placing
restrictions on the obligation
10
<PAGE> 11
of the Company to pay dividends to the holders of Series D-1 Preferred Stock or
to perform any of its obligations to the holders of Series D-1 Preferred Stock
at any time; or (ii) authorize, enter into or permit to exist any covenant or
agreement that would place or have the effect of placing restrictions on the
obligations of the Company to pay dividends to holders of Series D-1 Preferred
Stock or to perform any of its other obligations to the holders of Series D-1
Preferred Stock at any time; provided, however, that notwithstanding the
foregoing, the Company may from time to time enter into credit agreements and
indentures that provide for limitations on the ability of the Company to pay
dividends on its capital stock generally, so long as the Board of Directors
determines, in its sole discretion, that such limitation is necessary in order
to obtain financing on commercially reasonable terms.
(d) One Vote Per Share. In connection with any matter on which
holders of the Series D-1 Preferred Stock are entitled to vote as provided in
subparagraphs (b) and (c) above, or any other matter on which the holders of the
Series D-1 Preferred Stock are entitled to vote as one class or otherwise
pursuant to applicable law or the provisions of the Certificate of
Incorporation, each holder of Series D-1 Preferred Stock shall be entitled to
one vote for each share of Series D-1 Preferred Stock held by such holder.
(e) Except as otherwise required by law, the holders of Series
D-1 Preferred Stock and holders of Series D-2 Preferred Stock will vote together
as a single class.
6. No Sinking Fund. No sinking fund will be established for the
retirement or redemption of shares of Series D-1 Preferred Stock.
7. Liquidation Rights: Priority.
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series D-1 Preferred Stock shall be entitled to
receive, out of the assets of the Company, whether such assets are capital or
surplus and whether or not any dividends as such are declared, $500 per share
plus an amount equal to all accrued and unpaid dividends for the then-current
plus all prior Dividend Periods, and no more, before any distribution shall be
made to the holders of the Common Stock or any other class of stock or series
thereof ranking junior to the Series D-1 Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Company. The Series D-2 Preferred Stock and, unless specifically designated as
junior or senior to the Series D-1 Preferred Stock with respect to the
liquidation, dissolution or winding up of the affairs of the Company or as to
dividends, all other series or classes of Preferred Stock of the Company shall
rank on a parity with the Series D-1 Preferred Stock with respect to the
distribution of assets.
(b) Nothing contained in this Section 7 shall be deemed to
prevent conversion of shares of the Series D-1 Preferred Stock by the Company in
the manner provided in Section 3. Neither the merger nor consolidation of the
Company into or with any other entity, nor the merger or consolidation of any
other entity into or with the Company, nor a sale, transfer or lease of all or
any part of the assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section 7.
11
<PAGE> 12
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series D-1 Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) If the amounts available for distribution with respect to the
Series D-1 Preferred Stock and all other outstanding stock of the Company
ranking on a parity with the Series D-1 Preferred Stock upon liquidation,
dissolution or winding up are not sufficient to satisfy the full liquidation
rights of all the outstanding Series D-1 Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amount (which in the case of the Series D-1 Preferred Stock shall
mean the amounts specified in Section 7(a) and in the case of any other series
of preferred stock may include accumulated dividends if contemplated by such
series) to which they are entitled.
8. Status of Shares Converted. Shares of Series D-1 Preferred Stock
converted or purchased or otherwise acquired for value by the Company, shall,
after such event, have the status of authorized and unissued shares of Preferred
Stock without designation and may be reissued by the Company at any time as
shares of any series of Preferred Stock.
12
<PAGE> 13
IN WITNESS WHEREOF, The Times Mirror Company has caused this Certificate to be
signed by Roger H. Molvar, its Senior Vice President and Controller, this 28th
day of December, 1999.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Roger H. Molvar
Name: Roger H. Molvar
Title: Senior Vice President and Controller
13
<PAGE> 14
Schedule A
Dividend Rates
<TABLE>
<CAPTION>
Year Dividend Rate
---- -------------
<S> <C> <C>
2000 5.80%
2001 5.80%
2002 6.01%
2003 6.22%
2004 6.44%
2005 6.67%
2006 6.91%
2007 7.15%
2008 7.41%
2009 7.67%
2010 7.95%
2011 8.23%
2012 and thereafter 8.40%
</TABLE>
14
<PAGE> 1
CERTIFICATE OF DESIGNATION
OF THE
PREFERRED STOCK, SERIES D-2
(PAR VALUE $1.00 PER SHARE)
OF
THE TIMES MIRROR COMPANY
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
The undersigned duly authorized officer of The Times Mirror Company, a
corporation organized and existing under the General Corporation Law (the
"DGCL") of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the Company, the Board of Directors
of the Company (the "Board" or "Board of Directors") on October 28, 1999 adopted
the following resolution creating 245,100 shares of Preferred Stock, Series D-2
(in addition to the shares of Preferred Stock, Series D-1, which were also
created on such date), par value $1.00 per share, each designated as set forth
below:
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors by provisions of the Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), and the DGCL,
the issuance of a series of the Company's preferred stock, par value $1.00 per
share (the "Preferred Stock"), which shall consist of 245,100 shares of
Preferred Stock, be, and the same hereby is, authorized, and the Board of
Directors hereby fixes the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions, set forth
in the Certificate of Incorporation that may be applicable to the Preferred
Stock) as follows:
1. Designation and Rank. The designation of such series of the Preferred
Stock authorized by this resolution shall be the Preferred Stock, Series D-2
(the "Series D-2 Preferred Stock"). The number of shares of Series D-2 Preferred
Stock shall be 245,100. The Series D-2 Preferred Stock shall rank prior to the
Common Stock (as hereinafter defined) of the Company and to all other classes
and series of equity securities of the Company now or hereafter
1
<PAGE> 2
authorized, issued or outstanding (the Common Stock and such other classes and
series of equity securities not expressly designated as ranking on a parity with
or senior to the Series D-2 Preferred Stock collectively may be referred to
herein as the "Junior Stock") as to dividend rights and rights upon liquidation,
winding up or dissolution of the Company, other than (a) the Company's (i) 8%
Cumulative Convertible Preferred Stock, Series A (the "Series A Preferred
Stock") and (ii) Series D-1 Preferred Stock (the "Series D-1 Preferred Stock"),
with respect to which the Series D-2 Preferred Stock is expressly designated as
ranking on a parity as to dividend rights and rights upon liquidation, winding
up or dissolution of the Company; and (b) any other classes or series of equity
securities of the Company expressly designated as ranking on a parity with
(collectively with the Series A Preferred Stock and the Series D-1 Preferred
Stock, the "Parity Stock") or senior to (the "Senior Stock") the Series D-2
Preferred Stock as to dividend rights and rights upon liquidation, winding up or
dissolution of the Company. The Series D-2 Preferred Stock shall be subject to
creation of Senior Stock, Parity Stock and Junior Stock, to the extent not
expressly prohibited by the Certificate of Incorporation or Section 5(c)(i) or
5(c)(ii) hereof, with respect to the payment of dividends and upon liquidation.
2. Cumulative Dividends; Priority.
(a) Payment of Dividends.
(i) The holders of record of shares of Series D-2
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available therefor, cumulative cash
dividends from the date of issuance of such shares at the rate per annum per
share of 5.8% (i.e., $29 per annum) (the "Dividend Rate"), as adjusted from time
to time pursuant to Section 2(c) hereof. Dividends shall be payable quarterly on
the tenth day of March, June, September and December in each year (or if such
day is a non-business day, on the next business day) with respect to the quarter
ending on the last day of such month, commencing on March 10, 2000 (each of such
dates a "Dividend Payment Date"). No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series D-2 Preferred Stock that may be in arrears. Notwithstanding the
foregoing, for purposes of calculating the dividend to be paid with respect to
the period (the "Initial Dividend Period") from the date of issuance of such
shares through March 31, 2000 (payable March 10, 2000) it shall be assumed that
the shares of the Series D-2 Preferred Stock were issued on January 1, 2000.
(ii) Each declared dividend shall be payable to holders of
record as they appear on the stock books of the Company at the close of business
on such record dates, not more than 60 calendar days preceding the applicable
Dividend Payment Dates therefor, as are determined by the Board of Directors
(each of such dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of January,
April, July, and October of each year and shall end on and include the last day
of March, June, September and December, respectively of such year. Dividends on
the shares of Series D-2 Preferred Stock shall be fully cumulative and shall
accrue (whether or not declared) from the first day of each Dividend Period;
provided, however, that the amount of any dividend payable for any Dividend
Period shorter than a full Dividend Period (other than the Initial Dividend
Period, which shall be calculated as set forth in Section 2(a)(i) hereof) shall
be computed on the
2
<PAGE> 3
basis of a 360-day year composed of twelve 30-day months and the actual number
of days elapsed in the relevant Dividend Period.
(b) Priority as to Dividends.
(i) Subject to the provisions hereof, no cash dividend or
other distribution (other than in Common Stock or other Junior Stock) shall be
declared or paid or set apart for payment on Preferred Stock that constitutes
Parity Stock or Junior Stock with respect to dividends for any Dividend Period
unless full dividends on the Series D-2 Preferred Stock for the immediately
preceding Dividend Period have been or contemporaneously are declared and paid
(or declared and a sum sufficient for the payment thereof set apart for such
payment). When dividends are not paid in full (or declared and a sum sufficient
for such full payment not so set apart) upon the Series D-2 Preferred Stock and
any Parity Stock, all dividends declared upon shares of Series D-2 Preferred
Stock and any Parity Stock shall be declared pro rata with respect thereto, so
that in all cases the amount of dividends declared per share on the Series D-2
Preferred Stock and such Parity Stock shall bear to each other the same ratio
that accrued dividends for the then-current Dividend Period per share on the
shares of Series D-2 Preferred Stock (which shall include any accumulation in
respect of unpaid dividends for prior Dividend Periods) and dividends, including
accumulations, if any, of such Parity Stock, bear to each other.
(ii) Except as provided in the preceding paragraph, full
dividends on the Series D-2 Preferred Stock must be declared and paid or set
apart for payment for the immediately preceding Dividend Period before (A) any
cash dividend or other distribution (other than in Common Stock or other Junior
Stock) shall be declared or paid or set aside for payment upon the Common Stock
or any other Junior Stock of the Company or (B) any Common Stock or any other
Junior Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock), except by redemption into
or exchange for Junior Stock or (C) any Series D-2 Preferred Stock or Parity
Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock). The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company if under the preceding
sentence, the Company would be prohibited from purchasing or otherwise acquiring
such shares at such time and in such manner.
(iii) No dividend shall be paid or set aside for holders
of the Series D-2 Preferred Stock for any Dividend Period unless full dividends
on any Preferred Stock that constitutes Senior Stock with respect to dividends
for that period have been or contemporaneously are declared and paid (or
declared and a sum sufficient for the payment thereof set apart for such
payment).
(c) Adjustment to Dividend Rate.
(i) The Dividend Rate shall not be adjusted prior to the
end of the Dividend Period ending on December 31, 2001.
3
<PAGE> 4
(ii) The Dividend Rate for each subsequent year
(commencing with the year that begins on January 1, 2002) shall be adjusted
upward in accordance with Schedule A attached hereto.
(iii) Increases in the Dividend Rate are subject to the
following limitation: the Dividend Rate shall, under no circumstances, exceed
8.4% per annum.
3. Conversion at Option of the Company.
(a) General.
(i) The shares of the Series D-2 Preferred Stock shall not
be convertible at the option of the Company except upon the later to occur of
(x) the date on which a written notice has been mailed or otherwise distributed
by the Company to each record holder of the Series D-2 Preferred Stock stating
that the assets of either Chandler Trust No. 1 or Chandler Trust No. 2 have been
distributed to the beneficiaries thereof and (y) February 1, 2025 (such later
date being the "Convertibility Date"). Subject to and upon compliance with the
provisions of this Section 3, shares of Series D-2 Preferred Stock may be
converted, in whole or in part, at the election of the Company by resolution of
the Board of Directors, upon notice as provided in Section 3(b), at any time or
from time to time on or after the Convertibility Date. Conversion shall be made
by delivering to the holders of Series D-2 Preferred Stock, in respect of the
conversion of each share of Series D-2 Preferred Stock so converted,
certificates representing the number of fully paid and non-assessable shares
(the "Conversion Shares") of Series A Common Stock, par value $1.00 per share,
of the Company ("Series A Common Stock," which, together with the Series B
Common Stock, par value $1.00 per share, and Series C Common Stock, par value
$1.00 per share, of the Company are referred to herein as the "Common Stock")
equal to (subject to Section 3(h) hereof) the quotient of (1) $500 plus accrued
and unpaid dividends on such shares of Series D-2 Preferred Stock to the
Conversion Date (as hereinafter defined) divided by (2) the Common Share Value
(as hereinafter defined). The aggregate number of shares of Common Stock (and,
if applicable, "Conversion Preferred," as such term is defined below) that a
holder of shares of Series D-2 Preferred Stock that have been converted is
entitled to receive pursuant to this Section 3 or Section 4 is hereinafter
referred to as the "Aggregate Conversion Shares."
(ii) The "Common Share Value" shall mean the average of
the closing prices of the Series A Common Stock for the 20 days during which
trades of Series A Common Stock occurred immediately preceding the Valuation
Date (as defined below), as reported in The Wall Street Journal, Western
Edition, or, if no closing prices were so reported, the average of the mean
between the high bid and low asked price per share of Series A Common Stock for
each of the 20 days during which trades of Series A Common Stock occurred
immediately preceding the Valuation Date in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if the Series A Common
Stock is not then quoted by any such organization, the average of the mean
between the closing bid and asked prices per share of Series A Common Stock for
each of the 20 days during which trades of Series A Common Stock occurred
immediately preceding the Valuation Date, as furnished by a professional market
maker making a market in the Series A Common Stock, or, if there is no such
market maker, the fair market value of a share of Series A
4
<PAGE> 5
Common Stock determined by whatever method the Board of Directors reasonably
determines to use. In the case of a conversion pursuant to this Section 3, the
"Valuation Date" shall mean the Conversion Notice Date (as defined in Section
3(b)), and in the case of any conversion pursuant to Section 4, the "Valuation
Date" shall mean the Conversion Time (as hereinafter defined).
(b) Notice of Conversion. Notice of any conversion, setting forth
(i) the Conversion Date (as defined in Section 3(c) hereof), (ii) a statement
that dividends on the shares of Series D-2 Preferred Stock to be converted will
cease to accrue on such Conversion Date, and (iii) the method(s) by which the
holders may surrender the certificates representing shares of Series D-2
Preferred Stock that have been converted and obtain the Conversion Shares
therefor, shall be mailed, postage prepaid, on a date (the "Conversion Notice
Date") that is at least 15 days but not more than 45 days prior to said
Conversion Date to each holder of record of the Series D-2 Preferred Stock to be
converted at his, her or its address as the same shall appear on the books of
the Company. If less than all the shares of the Series D-2 Preferred Stock owned
by such holder are then to be converted, the notice shall specify the number of
shares thereof that are to be converted and the numbers of the certificates
representing such shares. If applicable, the notice shall also specify the
"Maximum Number" applicable to, and the amount of "Conversion Cash" to be
received by (absent an election pursuant to Section 3(h)(v) hereof to receive
"Conversion Preferred") such holder (as such terms are defined below).
(c) Method of Conversion. The surrender of any certificate
evidencing shares of Series D-2 Preferred Stock that have been converted shall
be made by the holder thereof by the surrender of the certificate or
certificates formerly representing the shares of Series D-2 Preferred Stock
converted (with proper endorsement or instruments of transfer) to the Company at
the principal office of the Company (or such other office or agency of the
Company as the Company may designate in writing to the holder or holders of the
Series D-2 Preferred Stock) at any time during its usual business hours. Shares
of Series D-2 Preferred Stock called for conversion shall be deemed to have been
converted, and the shares of Series A Common Stock (and, if applicable,
Conversion Preferred) to be issued in respect of the shares of Series D-2
Preferred Stock converted shall be deemed to have been issued, as of the close
of business on the date fixed for conversion (the "Conversion Date"), without
regard to when certificates evidencing such Series D-2 Preferred Stock are
surrendered pursuant to this Section 3(c) or certificates evidencing such Series
A Common Stock (and, if applicable, Conversion Preferred) are issued pursuant to
Section 3(d). The rights of the holder of Series D-2 Preferred Stock that has
been converted, except for the right to receive the Aggregate Conversion Shares
therefor in accordance herewith (and any cash payments to which such holder is
entitled pursuant to Sections 3(e) and (h) hereof), shall cease on the
Conversion Date. In the case of lost or destroyed certificates evidencing
ownership of shares of Series D-2 Preferred Stock that have been converted, the
holder shall submit proof of loss or destruction and such indemnity as shall be
required by the Company.
(d) Issuance of Certificates for Series A Common Stock. As soon
as practicable after its receipt of any certificate or certificates formerly
evidencing ownership of shares of Series D-2 Preferred Stock that have been
converted, the Company shall issue and shall deliver to the person for whose
account such certificates formerly representing shares of Series D-2 Preferred
Stock were so surrendered, or on his, her or its written order, a certificate or
certificates for the number of full shares of Series A Common Stock (and, if
applicable,
5
<PAGE> 6
Conversion Preferred) issuable upon the conversion of such shares of Series D-2
Preferred Stock and a check or cash payment (if any) to which such holder is
entitled with respect to fractional shares or Conversion Cash as determined by
the Company, in accordance with Sections 3(e) and (h) hereof, respectively.
(e) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
D-2 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series D-2 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(f) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series D-2
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(g) Common Stock Reserved for Conversion. The Company shall at
all times from and after the Conversion Date reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series D-2 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series D-2
Preferred Stock.
(h) Limitation of the Number of Shares of Series A Common Stock
(i) The number of shares of Series A Common Stock into
which the Series D-2 Preferred Stock may be converted into shall be limited, as
set forth herein.
(ii) The maximum number of shares of Series A Common Stock
into which the Series D-2 Preferred Stock may be converted into is, in the
aggregate, 2,956,942 shares of Series A Common Stock (the "Maximum Number"). If
the Company in any manner subdivides or combines the outstanding shares of
Series A Common Stock, then the Maximum Number shall be adjusted appropriately.
(iii) On conversion, no holder shall be entitled to
receive more shares of Series A Common Stock than its pro rata share of the
Maximum Number (a holder's "Pro Rata Number"), which shall be calculated by
dividing (A) the number of shares of Series D-2 Preferred Stock held by such
holder which are then being converted, by (B) 245,100.
(iv) If, as a result of Section 3(h)(iii), immediately
above, a holder's Pro Rata Number is less than the number of shares of Series A
Common Stock to which such
6
<PAGE> 7
holder would otherwise be entitled (a holder's "Unrestricted Number"), then,
such holder shall be entitled to receive from the Company a cash payment
("Conversion Cash") equal to:
(A) the Common Share Value, multiplied by
(B) the positive difference between (a) such holder's
Unrestricted Number minus (b) such holder's Pro Rata Number.
(v) In lieu of Conversion Cash, a holder may elect,
by providing written notice to the Company, which notice must be received by the
Company at least five days prior to the Conversion Date, to exchange, in lieu of
conversion, the number of shares of Series D-2 Preferred Stock held by such
holder which as a result of Section 3(h)(iii) cannot be fully converted into
such holder's Unrestricted Number, for a like number of shares of a new series
of preferred stock of the Company (the "Conversion Preferred") which shall be
identical to the Series D-2 Preferred Stock, except that it shall (A) not be
convertible into or exchangeable for Common Stock and (B) be redeemable, at
liquidation value plus accrued but unpaid dividends, by the Company at any time.
4. Conversion at the Option of Holders.
(a) General. After the later to occur of (i) the date on which a
written notice has been mailed or otherwise distributed by the Company to each
record holder of the Series D-2 Preferred Stock stating that the assets of
either Chandler Trust No. 1 or Chandler Trust No. 2 have been distributed to the
beneficiaries thereof and (ii) February 1, 2025, the holder of any Series D-2
Preferred Stock may convert pursuant to this Section 4 all or any part (in whole
number of shares only) of the Series D-2 Preferred Stock held by such holder
into fully paid and non-assessable shares of Series A Common Stock. Subject to
Section 4(g) below, the number of shares of Series A Common Stock into which a
share of Series D-2 Preferred Stock may be converted shall be equal to the
quotient of (1) $500 plus accrued and unpaid dividends on such share of Series
D-2 Preferred Stock to the Conversion Time divided by (2) the Common Share
Value.
(b) Method of Conversion. Each conversion of Series D-2 Preferred
Stock shall be effected by the surrender of the certificate or certificates
representing the shares of Series D-2 Preferred Stock to be converted (with
proper endorsement or instruments of transfer) to the Company at the principal
office of the Company (or such other office or agency of the Company as the
Company may designate in writing to the holder or holders of the Series D-2
Preferred Stock) at any time during its usual business hours, together with
written notice by the holder of such Series D-2 Preferred Stock stating that
such holder desires to convert the shares of Series D-2 Preferred Stock, or a
stated number of such shares, represented by such certificate or certificates,
which notice shall also specify the name or names (with addresses) and
denominations in which the certificate or certificates for the Series A Common
Stock (and, if applicable, Conversion Preferred) shall be issued and shall
include instructions for delivery thereof. If such holder desires to receive
Conversion Preferred in lieu of any Conversion Cash that may be payable
to such holder, the notice shall so state. Any conversion pursuant to this
Section 4 shall be deemed to have been effected as of the close of business on
the date on which such certificate or certificates shall have been surrendered
and such notice shall have been
7
<PAGE> 8
received, and at such time (the "Conversion Time") the rights of the holder of
Series D-2 Preferred Stock (or specified portion thereof) as such holder shall
cease and the person or persons in whose name or names any certificate or
certificates for shares of Series A Common Stock (and, if applicable, Conversion
Preferred) are to be issued upon conversion shall be deemed to have become the
holder or holders of record of the shares of Series A Common Stock (and, if
applicable, Conversion Preferred) represented thereby. In the case of lost or
destroyed certificates evidencing ownership of shares of Series D-2 Preferred
Stock to be converted, the holder shall submit proof of loss or destruction and
such indemnity as shall be required by the Company.
(c) Issuance of Certificates for Series A Common Stock. As soon
as practicable after its receipt of any certificate or certificates evidencing
ownership of shares of Series D-2 Preferred Stock to be converted pursuant to
this Section 4, the Company shall issue and shall deliver to the person for
whose account such shares of Series D-2 Preferred Stock were so surrendered, or
on his, her or its written order, a certificate or certificates for the number
of full shares of Series A Common Stock (and, if applicable, Conversion
Preferred) issuable upon the conversion of such shares of Series D-2 Preferred
Stock and a check or cash payment (if any) to which such holder is entitled with
respect to fractional shares or Conversion Cash as determined by the Company, in
accordance with Sections 4(d) and (g) hereof, respectively.
(d) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
D-2 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series D-2 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(e) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series D-2
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(f) Common Stock Reserved for Conversion. The Company shall at
all times from and after the Conversion Time reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series D-2 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series D-2
Preferred Stock.
8
<PAGE> 9
(g) Limitation of the Number of Shares of Series A Common Stock
(i) The number of shares of Series A Common Stock into
which the Series D-2 Preferred Stock may be converted into shall be limited, as
set forth herein.
(ii) On conversion, no holder shall be entitled to receive
more shares of Series A Common Stock than its Pro Rata Number.
(iii) If, as a result of Section 4(g)(ii), immediately
above, a holder's Pro Rata Number is less than such holder's Unrestricted
Number, then such holder shall be entitled to receive from the Company the
Conversion Cash.
(iv) In lieu of Conversion Cash, a holder may elect, by
providing notice of such election in the notice of conversion delivered pursuant
to Section 4(b), to exchange, in lieu of conversion, the number of shares of
Series D-2 Preferred Stock held by such holder which as a result of Section
4(g)(iii) cannot be fully converted into such holder's Unrestricted Number, for
a like number of shares of Conversion Preferred.
5. Voting Rights.
(a) General Voting Rights. Except as expressly provided
hereinafter in this Section 5, or as otherwise from time to time required by
applicable law, the Series D-2 Preferred Stock shall have no voting rights.
(b) Voting Rights Upon Dividend Arrears.
(i) Right to Elect Directors. In the event that an amount
equal to six quarterly dividend payments on the Series D-2 Preferred Stock shall
have accrued and be unpaid (the occurrence of such contingency marking the
beginning of a period herein referred to as the "Default Period," which shall
extend until such time as all accrued and unpaid dividends for all previous
Dividend Periods and for the current Dividend Period on all shares of Series D-2
Preferred Stock then outstanding shall have been declared and paid or declared
and a sum sufficient for such full payment set apart for payment), the holders
of the Series D-2 Preferred Stock shall have the right, voting separately as a
class together with holders of shares of the Series D-2 Preferred Stock and any
other Parity Stock upon which like voting rights have been conferred and are
exercisable (such shares of Series D-2 Preferred Stock, shares of Series D-2
Preferred Stock, and other shares of Parity Stock are hereinafter referred to as
"Voting Parity Stock"), to elect two members of the Board of Directors, each
member to be in addition to the then authorized number of directors, at the next
annual meeting of stockholders or at a special meeting called as described below
and thereafter until the Default Period shall have ended.
(ii) Special Meeting; Written Consent. Whenever such
voting right shall vest, it may be exercised initially by the vote of the
holders of a plurality of the voting power of Series D-2 Preferred Stock and
Voting Parity Stock present and voting as a single class, in person or by proxy,
at a special meeting of holders of the Series D-2 Preferred Stock and Voting
Parity Stock or at the next annual meeting of stockholders. A special meeting
for the exercise of such right shall be called by the Secretary of the Company
as promptly as possible, and in any event within 10 days after receipt of a
written request signed by the holders of record
9
<PAGE> 10
of at least 25% of the outstanding shares of the Series D-2 Preferred
Stock and Voting Parity Stock, subject to any applicable notice requirements
imposed by law or regulation. Notwithstanding the provisions of this paragraph,
no such special meeting shall be required to be held during the 90-day period
preceding the date fixed for the annual meeting of stockholders. Any action
required or permitted to be taken at any such special meeting of such holders
may be taken by a consent or consents in writing of such stockholders, setting
forth the action so taken, which consent or consents shall be signed by the
holders of Series D-2 Preferred Stock and Voting Parity Stock representing a
majority of the voting power of shares of such Series D-2 Preferred Stock and
Voting Parity Stock and shall be delivered to the Company in the manner set
forth from time to time in the DGCL.
(iii) Term of Office of Directors. Any director who shall
have been elected by holders of the Series D-2 Preferred Stock and Voting Parity
Stock entitled to vote in accordance with this subparagraph (b) shall hold
office for a term expiring (subject to the earlier expiry of such term, as set
forth below) at the annual meeting of stockholders at which the term of office
of his class shall expire and during such term may be removed at any time, only
for cause, by, and only by, the affirmative vote of the holders of record of a
majority of the voting power of the Series D-2 Preferred Stock and Voting Parity
Stock present and voting as a single class, in person or by proxy, at a special
meeting of such stockholders called for such purpose, and any vacancy created by
such removal may also be filled at such meeting. A meeting for the removal of a
director elected by the holders of the Series D-2 Preferred Stock and Voting
Parity Stock and the filling of the vacancy created thereby shall be called by
the Secretary of the Company as promptly as possible and in any event within 10
days after receipt of a request therefor signed by the holders of not less than
25% of the aggregate outstanding voting power of the Series D-2 Preferred Stock
and Voting Parity Stock, subject to any applicable notice requirements imposed
by law or regulation. Such meeting shall be held at the earliest practicable
date thereafter, provided that no such meeting shall be required to be held
during the 90-day period preceding the date fixed for the annual meeting of
stockholders. Simultaneously with the expiration of the Default Period, the
terms of office of all directors elected by the holders of the shares of Series
D-2 Preferred Stock and the Voting Parity Stock pursuant hereto then in office
shall, without further action, thereupon terminate unless otherwise required by
law. Upon such termination the number of directors constituting the Board of
Directors of the Company shall, without further action, be reduced by two,
subject always to the increase of the number of directors pursuant to the
foregoing provisions in the case of the future right of holders of the shares of
Series D-2 Preferred Stock and Voting Parity Stock to elect directors as
provided above.
(iv) Vacancies. Any vacancy caused by the death,
resignation or removal of a director who shall have been elected in accordance
with this subparagraph (b) may be filled by the remaining director so elected
or, if not so filled, by a vote of holders of a plurality of the voting power of
the Series D-2 Preferred Stock and Voting Parity Stock present and voting as a
single class, in person or by proxy, at a meeting called for such purpose.
Unless such vacancy shall have been filled by the remaining director as
aforesaid, such meeting shall be called by the Secretary of the Company at the
earliest practicable date after such death or resignation, and in any event
within 10 days after receipt of a written request signed by the holders of
record of at least 25% of the outstanding shares of the Series D-2 Preferred
Stock and Voting Parity Stock, subject to any applicable notice requirements
imposed by law or regulation.
10
<PAGE> 11
Notwithstanding the provisions of this paragraph, no such special meeting shall
be required to be held during the 90-day period preceding the date fixed for the
annual meeting of stockholders.
(v) Stockholders' Right to Call Meeting. If any meeting of
the holders of the Series D-2 Preferred Stock and Voting Parity Stock required
by this subparagraph (b) to be called shall not have been called within 30 days
after personal service of a written request therefor upon the Secretary of the
Company or within 30 days after mailing the same within the United States of
America by registered mail addressed to the Secretary of the Company at its
principal executive offices, subject to any applicable notice requirements
imposed by law or regulation, then the holders of record of at least 25% of the
outstanding shares of the Series D-2 Preferred Stock and Voting Parity Stock may
designate in writing one of their number to call such meeting at the expense of
the Company, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders or such shorter notice
(but in no event shorter than permitted by law or regulation) as may be
acceptable to the holders of a majority of the total voting power of the Series
D-2 Preferred Stock and Voting Parity Stock. Any holder of Series D-2 Preferred
Stock and Voting Parity Stock so designated shall have access to the Series D-2
Preferred Stock and Voting Parity Stock books of the Company for the purpose of
causing such meeting to be called pursuant to these provisions.
(vi) Quorum. At any meeting of the holders of the Series
D-2 Preferred Stock called in accordance with the provisions of this
subparagraph (b) for the election or removal of directors, the presence in
person or by proxy of the holders of a majority of the total voting power of the
Series D-2 Preferred Stock and Voting Parity Stock shall be required to
constitute a quorum; in the absence of a quorum, the holders of a majority of
the total number of votes present in person or by proxy shall have power to
adjourn the meeting from time to time without notice other than an announcement
at the meeting, until a quorum shall be present.
(c) Voting Rights on Extraordinary Matters.
(i) So long as any shares of Series D-2 Preferred Stock
shall be outstanding, the holders of the Series D-2 Preferred Stock shall have
the right, voting separately as a class together with holders of shares of any
Voting Parity Stock (with two-thirds of the voting power of such stock at the
time outstanding given in person or by proxy at a meeting at which the holders
of such shares shall be entitled to vote separately as a class, or by a consent
or consents in writing setting forth such approval, which consent shall be
delivered to the Company in the manner set forth from time to time in the DGCL,
required for approval by such holders), to vote on: (i) the liquidation or
dissolution of the Company; (ii) any proposal to authorize, create or issue, or
increase the authorized or issued amount of, any class or series of capital
stock ranking pari passu with, or prior to, the shares of the Series D-2
Preferred Stock in powers, rights or preferences upon the liquidation,
dissolution or winding up of the affairs of the Company or as to dividends; and
(iii) any proposal to amend by merger, amendment or otherwise (or otherwise
alter or repeal) the Certificate of Incorporation (or this resolution) if such
amendment, alteration or repeal would increase or decrease the aggregate number
of authorized shares of Series D-2 Preferred Stock or any Voting Parity Stock,
increase or decrease the par value of the shares of Series D-2 Preferred Stock
or any Voting Parity Stock, or alter or change the powers, preferences, or
special rights of the shares of Series D-2 Preferred Stock or any Voting Parity
Stock so as to affect them adversely. An amendment that increases the number of
authorized
11
<PAGE> 12
shares of any class or series of Preferred Stock or authorizes the creation or
issuance of other classes or series of Preferred Stock, in each case ranking
junior to the Series D-2 Preferred Stock with respect to the payment of
dividends and distribution of assets upon liquidation, dissolution or winding up
shall not be considered to be such an adverse change.
(ii) So long as any shares of Series D-2 Preferred Stock
shall be outstanding and unless the consent or approval of a greater number of
shares shall then be required by applicable law, without first obtaining the
approval of the holders of at least two-thirds of the voting power of the Series
D-2 Preferred Stock at the time outstanding (voting separately as a class
together with the holders of shares of Voting Parity Stock) given in person or
by proxy at a meeting at which the holders of such shares shall be entitled to
vote separately as a class (or by a consent or consents in writing setting forth
such approval, which consent shall be delivered to the Company in the manner set
forth from time to time in the DGCL), the Company shall not either directly or
indirectly or through merger or consolidation with any other entity, (i)
authorize, create or issue, or increase the authorized or issued amount of, any
class or series of capital stock that would place or have the effect of placing
restrictions on the obligation of the Company to pay dividends to the holders of
Series D-2 Preferred Stock or to perform any of its obligations to the holders
of Series D-2 Preferred Stock at any time; or (ii) authorize, enter into or
permit to exist any covenant or agreement that would place or have the effect of
placing restrictions on the obligations of the Company to pay dividends to
holders of Series D-2 Preferred Stock or to perform any of its other obligations
to the holders of Series D-2 Preferred Stock at any time; provided, however,
that notwithstanding the foregoing, the Company may from time to time enter into
credit agreements and indentures that provide for limitations on the ability of
the Company to pay dividends on its capital stock generally, so long as the
Board of Directors determines, in its sole discretion, that such limitation is
necessary in order to obtain financing on commercially reasonable terms.
(d) One Vote Per Share. In connection with any matter on which
holders of the Series D-2 Preferred Stock are entitled to vote as provided in
subparagraphs (b) and (c) above, or any other matter on which the holders of the
Series D-2 Preferred Stock are entitled to vote as one class or otherwise
pursuant to applicable law or the provisions of the Certificate of
Incorporation, each holder of Series D-2 Preferred Stock shall be entitled to
one vote for each share of Series D-2 Preferred Stock held by such holder.
(e) Except as otherwise required by law, the holders of Series
D-2 Preferred Stock and holders of Series D-2 Preferred Stock will vote together
as a single class.
6. No Sinking Fund. No sinking fund will be established for the
retirement or redemption of shares of Series D-2 Preferred Stock.
7. Liquidation Rights: Priority.
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series D-2 Preferred Stock shall be entitled to
receive, out of the assets of the Company, whether such assets are capital or
surplus and whether or not any dividends as such are declared, $500 per share
plus an
12
<PAGE> 13
amount equal to all accrued and unpaid dividends for the then-current plus all
prior Dividend Periods, and no more, before any distribution shall be made to
the holders of the Common Stock or any other class of stock or series thereof
ranking junior to the Series D-2 Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Company. The Series D-2 Preferred Stock and, unless specifically designated as
junior or senior to the Series D-2 Preferred Stock with respect to the
liquidation, dissolution or winding up of the affairs of the Company or as to
dividends, all other series or classes of Preferred Stock of the Company shall
rank on a parity with the Series D-2 Preferred Stock with respect to the
distribution of assets.
(b) Nothing contained in this Section 7 shall be deemed to
prevent conversion of shares of the Series D-2 Preferred Stock by the Company in
the manner provided in Section 3. Neither the merger nor consolidation of the
Company into or with any other entity, nor the merger or consolidation of any
other entity into or with the Company, nor a sale, transfer or lease of all or
any part of the assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section 7.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series D-2 Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) If the amounts available for distribution with respect to the
Series D-2 Preferred Stock and all other outstanding stock of the Company
ranking on a parity with the Series D-2 Preferred Stock upon liquidation,
dissolution or winding up are not sufficient to satisfy the full liquidation
rights of all the outstanding Series D-2 Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amount (which in the case of the Series D-2 Preferred Stock shall
mean the amounts specified in Section 7(a) and in the case of any other series
of preferred stock may include accumulated dividends if contemplated by such
series) to which they are entitled.
8. Status of Shares Converted. Shares of Series D-2 Preferred Stock
converted or purchased or otherwise acquired for value by the Company, shall,
after such event, have the status of authorized and unissued shares of Preferred
Stock without designation and may be reissued by the Company at any time as
shares of any series of Preferred Stock.
13
<PAGE> 14
IN WITNESS WHEREOF, The Times Mirror Company has caused this Certificate
to be signed by Roger H. Molvar, its Senior Vice President and Controller, this
28th day of December, 1999.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Roger H. Molvar
Name: Roger H. Molvar
Title: Senior Vice President and Controller
<PAGE> 15
Schedule A
Dividend Rates
<TABLE>
Year Dividend Rate
---- -------------
<S> <C> <C>
2000 5.80%
2001 5.80%
2002 6.01%
2003 6.22%
2004 6.44%
2005 6.67%
2006 6.91%
2007 7.15%
2008 7.41%
2009 7.67%
2010 7.95%
2011 8.23%
2012 and thereafter 8.40%
</TABLE>
14
<PAGE> 1
EXHIBIT 10.19
[TIMES MIRROR LETTERHEAD]
April 5, 1999
PERSONAL AND CONFIDENTIAL
Ms. Mary E. Junck
1001 St. Georges Road
Baltimore, Maryland 21210
Dear Mary:
This letter will confirm our previous discussions and shall constitute the
agreement ("Agreement") reached with you concerning the terms and conditions
under which you resign your employment with The Times Mirror Company ("Times
Mirror") and its wholly owned subsidiary, The Baltimore Sun, Inc. ("The
Baltimore Sun"), (both of which are collectively referred to in this Agreement
as the "Companies") and the benefits and payments which you will receive from
the Companies in consideration of the termination of your employment. This
Agreement and the benefits and payments described in it are conditioned upon
your execution of and complying with the terms and conditions set forth in this
Agreement.
1. Employment Status: (a) By the execution of this Agreement, as of April 9,
1999, you will relinquish the title and duties of Executive Vice
President, as well as any other positions you may hold within the
Companies and any of their respective subsidiaries and affiliates.
(b) Effective the close of business on June 30, 1999, (the "Effective
Date") regardless of whether you become disabled prior to such date, your
active employment with the Companies will terminate and you will be
placed on a leave of absence ("Leave of Absence"). Regardless of whether
you accept employment with another employer, your employment with the
Companies, as well as the Leave of Absence, will terminate on the earlier
of (i) the date you elect to terminate employment by providing written
notice to either the Senior Vice President of Human Resources or the
Secretary of Times Mirror or (ii) July 1, 2001 ("Termination Date"). In
the event that you accept employment with another employer not within the
Times Mirror group of companies before your Termination Date, your
employment status under this Agreement and the terms of this Agreement
will not change other than as specified herein. (Notwithstanding the
foregoing, if you do not execute this Agreement, your employment will
terminate as of June 30, 1999.)
<PAGE> 2
Ms. Mary E. Junck
April 5, 1999
Page 2
2. Paid Leave of Absence/Special Payment: (a) From April 9, 1999 through the
Effective Date, you will be paid $8,653.85 per week, less required
withholdings, on regular payroll intervals. Thereafter, during the Leave
of Absence, subject to the terms and conditions of this Agreement and
regardless of your death or disability, you will receive a special
payment equal to $100,000, which represents one-half of your annual
target bonus incentive award in effect on the date of this Agreement,
payable as set forth below. Such special payment is in lieu of any bonus
award otherwise payable for 1999 and constitutes severance payments to
you during the Leave of Absence.
(b) During the Leave of Absence through your Termination Date, this
special payment will be paid to you, less appropriate withholdings, in
equivalent quarterly installments of $12,500, the first payroll period of
each calendar quarter, commencing with the third calendar quarter of 1999
(i.e., on or about July 1, 1999). In the event your Termination Date is
prior to July 1, 2001 (as provided for in paragraph 1(b) of this
Agreement), then upon such earlier Termination Date, you or your heirs or
assigns will receive the remaining special payments (if any) in a single
special payment equal to the difference of (i) $100,000, less (ii) the
special payments received during the Leave of Absence. The single sum
special payment, if any, less appropriate withholdings, will be payable
within 30 days after your earlier Termination Date.
(c) For purposes of Regulation S-K of the Securities Exchange Act of 1934
("Regulation S-K"), all payments made to you under this Agreement shall
be deemed to be severance payments and not salary or bonus.
3. Annual Bonus Incentive Award/Matching Bonus Restricted Stock: On the
Effective Date you will cease participation in the Times Mirror bonus
incentive plan with respect to 1999 and thereafter. Since you will not be
receiving a 1999 bonus incentive award, your election to place on deposit
shares of Times Mirror stock equal in value to 25% of your 1999 bonus
will be canceled.
4. Group Benefits: (a) While you are still actively employed, all group
health care and group insurance benefits offered to active full-time
employees to which you are currently entitled and/or enrolled will
continue in accordance with your enrollment elections and the terms of
the plans. While on your Leave of Absence, for a maximum period of one
year, you will remain eligible for The Baltimore Sun's group insurance
programs offered to active employees, except as noted below. Your
contributions for these coverages will be at the same rate paid by active
employees and will, be deducted from the periodic severance payments
being made to you under this Agreement.
(b) As of the Effective Date, which is the date that your active
employment terminates, your coverage under business travel and the short
and long term disability programs, if enrolled, will cease. You have the
option to convert all or part of your business travel
<PAGE> 3
Ms. Mary E. Junck
April 5, 1999
Page 3
insurance to an individual policy, subject to established rules and plan
limitations. Further, if you are enrolled in the long-term disability
plan ("LTD") and you have been covered under the plan for 12 months or
more, you may, subject to plan terms, convert your LTD coverage to an
individual policy. If you wish to take advantage of either or both of
these conversion options, your application(s) must be received by the
respective insurance carrier(s) within 31 days from the date your
coverage terminates; otherwise, you will waive your right to convert.
(c) Upon the earlier of the end of the first year of your Leave of
Absence or your Termination Date, all other employee benefit plan
coverages will cease. You have the option, subject to established rules
and plan limitations, to convert all or part of your basic life and, if
enrolled, voluntary accidental death and dismemberment coverages to
individual policies. If you wish to take advantage of this option, your
application(s) must be received by the insurance carrier(s) within 31
days from the date your coverages terminate, otherwise you will waive
your right to convert. If you are enrolled in the Group Universal Life
Insurance Program, you will hear from Prudential directly concerning the
portability and conversion options available under that Plan. In
addition, if you or any of your qualified family members currently have
coverage under the long-term care plan, the coverage may be continued.
The John Hancock Company will contact the covered individuals directly
concerning the continuation of coverage.
(d) If you are covered under one of the Baltimore Sun-sponsored health
care plans, upon termination of your health care coverage (at the earlier
of the end of the first year of your Leave of Absence or your Termination
Date), you may elect to continue the coverage currently in effect for you
and your covered dependents under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) as specified by that statute. COBRA coverage
may be continued for up to 18 months (up to 29 months for any eligible
individual who is disabled as determined by the Social Security
Administration during the first 60 days of COBRA coverage) or until the
individual is covered, after COBRA is elected, under another group health
plan with no pre-existing condition limitation affecting his or her
coverage or is entitled to Medicare, whichever occurs first. The COBRA
election notice and form will be mailed to you upon the termination of
coverage. If you and/or your eligible dependents wish to elect COBRA
continuation coverage, the completed election form must be returned to
The Baltimore Sun within 60 days from the date the notice is sent or the
date your coverage terminated, whichever is later. You are not
automatically enrolled in COBRA coverage. If you do not wish to extend
health coverage under COBRA, you may, subject to established rules,
convert your group medical coverage to an individual policy without proof
of good health. The converted policy may not provide the same coverage as
the group plan. The levels of coverage may be less and an overall
lifetime maximum benefit may apply. If you are interested in converting
your group coverage to an individual policy, you must apply and pay your
first premiums to the health care carrier within 31 days from the date
coverage ceased. Application may be
<PAGE> 4
Ms. Mary E. Junck
April 5, 1999
Page 4
obtained directly from the carriers by contacting Member Services or, if
you are covered under the Aetna plan, from Employee Benefits at (213)
237-5732. If COBRA continuation coverage is elected for the medical
coverage, and coverage ends because the maximum coverage period expires,
you have another opportunity to convert to an individual medical policy
during the 180-day period that ends on the expiration date.
5. Retirement Benefits: (a) Prior to and during your Leave of Absence, you
will continue to be eligible to participate in the Times Mirror and The
Baltimore Sun's retirement plans in accordance with the respective terms
and limitations of each plan. You will accrue benefits as described under
the retirement plans, and you may continue to participate in the Savings
Plus Plan at your selected savings rate (subject to any election you wish
to make) as a result of the amounts paid to you prior to and during your
Leave of Absence, subject to plan maximums and provisions. (The
retirement plans provide for a maximum of one year of benefit accrual
service or salary credit for the combination of your salary
continuation/periodic severance payments during the Leave of Absence and
any lump sum severance payments, subject to statutory limits in the
Internal Revenue Code.)
(b) You are currently vested in your benefits earned under the retirement
plans and Savings Plus Plan. In addition, you are also vested in your
benefits earned under the Time Mirror Supplemental Executive Retirement
Plan ("SERP"). As of your Termination Date, you will be entitled to
receive any vested accrued benefits under retirement plans, Savings Plus
Plan and SERP in accordance with the terms of the plans and any elections
you make under the plans. Distributions under each plan shall be made in
accordance with the terms and procedures of each respective plan based on
your participation and vesting under the plans.
6. Stock Options: (a) You presently hold options to purchase shares of stock
under the Times Mirror Company stock option plans (the "Plans"). Prior
to and during your Leave of Absence, options will continue to vest in
accordance with the grants and the terms of the Plans, and to the extent
that options are vested and exercisable during your Leave of Absence,
they may be exercised in accordance with the terms of the Plans. You will
not be eligible for any future stock option grants.
(b) To the extent that options are vested and exercisable as of your
Termination Date, they may be exercised in accordance with the terms of
the Plans for a period of up to 30 days following your Termination Date.
Options not exercisable will be canceled on your Termination Date.
(c) Subject to the provisions of paragraph 17, your acceptance of
employment with another employer not within the Times Mirror group of
companies before your Termination Date will not affect your rights with
respect to the Plans. Options will continue to vest in accordance with
the grants and the terms of the Plans, and to the extent
<PAGE> 5
Ms. Mary E. Junck
April 5, 1999
Page 5
that options are vested and exercisable prior to July 1, 2001, they may
be exercised in accordance with the terms of the Plans.
(d) The Companies acknowledge that as of April 9, 1999, you will no
longer be an "officer as that term is defined in Rule 16a-1(f) of the
rules and regulations promulgated under the Securities and Exchange Act
of 1934, as amended.
(e) Specific details on your personal vesting, exercise rights, and
procedures may be obtained from the Executive Compensation and Stock
Benefits group of Human Resources at Times Mirror (213) 237-3973.
7. Restricted Stock: During your Leave of Absence, restrictions will lapse
on your shares of restricted stock in accordance with the provisions of
the restricted stock program. Upon your Termination Date, any shares of
restricted stock still subject to restriction will be canceled.
8. Matching Bonus Restricted Stock: During your Leave of Absence, you will
continue to vest in your matching bonus restricted stock provided you
leave your personal shares on deposit with Times Mirror. Upon your
Termination Date, in accordance with the terms of the matching bonus
restricted stock program, any shares of matching bonus restricted stock
still subject to restrictions will be canceled and their corresponding
personal shares on deposit with Times Mirror will be returned to you.
9. Club Dues: Within 10 days of the Effective Date, Times Mirror will pay
you a single lump sum amount for your actual 1998 and 1999 club
membership dues. No further payments for membership fees, club dues or
any other special purposes will be payable after the Effective Date.
10. Other Perquisites and Benefits: All other perquisites and employee
benefits and your participation in all other employee benefit programs
not described herein will terminate on your Effective Date. You will
continue to participate in the Times Mirror Matching Gifts Program which
will cease as of your Termination Date. In addition, you will continue to
be eligible for one annual physical exam provided at Times Mirror expense
during the first year of your Leave of Absence, and the Companies will
reimburse you up to $5,000 for financial counseling expenses incurred
during the first year of your Leave of Absence. If applicable, you will
cease to accrue vacation and personal days after the Effective Date, when
your active employment ceases. Any accumulated but unused vacation and
personal days will be paid to you as of your Termination Date.
11. Withholding and Taxes: All payments required to be made by the Companies
hereunder shall be subject to any and all applicable withholdings,
including any withholdings for any related federal, state or local taxes.
You shall be responsible for any and all income
<PAGE> 6
Ms. Mary E. Junck
April 5, 1999
Page 6
taxes or other taxes incurred by you as a result of your receipt of any
payments from the Companies.
12. Company Property: (a) Your privileges under all of the Companies' credit
cards will cease on the Effective Date. On that date, you will return all
such credit cards. The Companies will prepare an accounting of your
expense account and credit card balances as of that date. All business
expenses through the Effective Date are to be submitted within 30 days of
the Effective Date. The net amount due between you and the Companies may
be added to or subtracted from the payments described above if no other
reimbursement method is used.
(b) In addition, you will return to the Companies all property of the
Companies, including, without limitation, all equipment, tangible
proprietary information documents, books, records, reports, contracts,
lists, computer disks (or other computer-generated files or data), or
copies thereof, created on any medium, prepared or obtained by you or the
Companies in the course of or incident to your employment with the
Companies.
13. Confidentiality: You agree to keep the terms of this Agreement strictly
confidential and you agree that you will not disclose its terms to anyone
other than your legal or financial advisor(s), relevant taxing
authorities, and appropriate family members, and except as required by
law. Further, to the extent to which information contained in this
Agreement is disclosed to any other person, you agree to obtain from them
the promise not to disclose this information unless required to do so by
law, a court or governmental authority. The Companies agrees to keep the
terms of this Agreement confidential except to the extent that disclosure
of the terms is required in the ordinary course of business operations
necessary or advisable to effect the terms of this Agreement or as
required by relevant taxing authorities or as required by law.
14. No Claims: You represent and warrant to the Companies that you have not
instituted any complaints, charges or other proceedings against the
Companies, or any of its subsidiaries with any governmental agency, any
court, or any arbitration agency or tribunal, and that, as a condition of
this Agreement, you hereby waive any right to recovery in any such action
or proceeding if you should file at any time hereafter; provided,
however, that this shall not limit you from instituting such proceedings
as may be necessary for the sole purpose of enforcing your rights under
this Agreement or your rights to payment of benefits under any benefit
plan sponsored by the Companies in which you participated on the date of
this Agreement.
15. Company Information: (a) You acknowledge that in the course of your
employment with the Companies, certain confidential factual and
strategic information specifically related to the Companies, and its
subsidiaries has been disclosed to you in confidence which was for the
use of the Companies, or any or all of their respective subsidiaries
("Company
<PAGE> 7
Ms. Mary E. Junck
April 5, 1999
Page 7
Information"). You understand and agree that you (i) will keep such
Company Information confidential at all times during and after your
employment with the Companies, (ii) will not disclose or communicate
Company Information to any third party, and (iii) will not make use of
Company Information on your own behalf, or on behalf of any third party;
provided that this Agreement does not apply to information that becomes
publicly available.
(b) In view of the nature of your employment and the nature of Company
Information which you received during the course of your employment, you
agree that any unauthorized disclosure to third parties of Company
Information or other violation, or threatened violation, of this
Agreement would cause irreparable damage to the confidential status of
Company Information and to the Companies, or any and all of their
respective subsidiaries, and that therefore, the Companies shall be
entitled to an injunction prohibiting you from any such disclosure,
attempted disclosure, violation, or threatened violation. When specific
Company Information becomes generally available to the public other than
by your acts or omissions, it is no longer subject to restrictions in
this paragraph. However, Company Information shall not be deemed to come
under this exception merely because it is embraced by more general
information which is or becomes generally available to the public.
(c) The undertaking set forth in this paragraph 15 shall survive the
termination of this Agreement.
16. Director and Officer Liability Coverage: During your period of employment
as an officer of the Companies, under the bylaws of Times Mirror, you
were covered under The Times Mirror Company's directors' and officers'
liability coverage. This coverage will continue in effect with respect to
the period of time during which you served as an officer of the Companies
and with respect to your actions related to your employment as an officer
of the Companies. In any event, Times Mirror will indemnify you, in the
manner and to the extent permitted by law, from any claims, demands,
lawsuits, judgments and related expenses arising from your good faith
performance as an officer of the Companies during the period of your
active employment with the Companies.
17. Restrictive Covenant: (a) During your employment with the Companies you
have held high executive positions and responsibilities. Major operating
units of Times Mirror have been under your control. As a result, you have
had access to and direct responsibility for the means by which such
operating units conduct their businesses, including, but not limited to,
trade secrets, confidential information and future plans. The interests
of the Companies require that certain reasonable limitations be imposed
upon the extent to which you may become employed by competitors of the
Companies. Accordingly, from the date of this Agreement through July 1,
2001, the period during which you will receive consideration from the
Companies, and subject to the provisions of subparagraph (b)
<PAGE> 8
Ms. Mary E. Junck
April 5, 1999
Page 8
below, you agree that you shall not, without the express prior written
consent of the Chief Executive Officer of Times Mirror, directly or
indirectly, and whether as a principal, partner, officer, director,
employee, consultant, venturer, agent or otherwise, alone or in
association with any person, carry on, be engaged or take part in or
render services to any newspaper publishing entity or business engaged in
competition with (i) The Baltimore Sun, The Times Mirror Company or any
of its subsidiaries in the Baltimore Metropolitan Area which is defined
as Baltimore City and the counties of Baltimore, Harford, Caroll, Anne
Arundel, and Howard, Maryland, or (ii) Times Mirror or any division or
subsidiary of Times Mirror in the Southern California region (consisting
of the counties of Los Angeles, Orange, Ventura, San Bernardino, San
Diego or Riverside, California (referred to below as the "Six Counties").
Included within the meaning of an indirect interest would be, by way of
example only, an interest in a trust, corporation, venture, or
partnership which in turn owns an interest in any such competitive
business, or an interest in any such competitive business held through a
nominee, agent, option or other device. The foregoing provisions do not
apply to an investment in stock of any publicly held corporation if the
market value of such investment when acquired does not exceed $500,000 or
to any investment in a mutual fund.
(b) Provided further however, that you shall not be in violation of the
provisions of subparagraph (a), above, by taking a position with or
becoming employed by any of the following businesses: (i) television or
radio; (ii) cable television; (iii) a national newspaper group so long as
your responsibilities do not include being solely responsible for the
performance of a newspaper owned by such group which is distributed in
the Six Counties or the Baltimore Metropolitan Area; (iv) magazine
publishing; (v) an online service which does not directly compete with
the content of any online service offered by the Companies or any
division, subsidiary or affiliate of the Companies; (vi) weekly
newspapers or shoppers; or (vii) direct mail or marketing so long as none
of the businesses referred to in subparagraph (vi) above or this
subparagraph (vii), distribute or circulate any publication or product in
the Baltimore Metropolitan Area or in the Six Counties.
(c) You further agree that you will not, until July 1, 2001, without the
express prior written consent of the Chief Executive Officer of Times
Mirror, whether for your own account or for the account of any other
person, directly or through an agent, initiate contact for the purpose of
enticing away from the Companies, or any of its subsidiaries any person
who is an officer, employee, customer, vendor or supplier of, or an
author, who is currently under contract with, the Companies, or any of
their respective subsidiaries.
(d) It is understood by and between us that the covenants and
restrictions set forth in this paragraph are essential elements of our
Agreement and that, but for your agreement to comply with such covenants,
the Companies would not have entered into this Agreement.
<PAGE> 9
Ms. Mary E. Junck
April 5, 1999
Page 9
(e) Notwithstanding any election which you may make resulting in the
receipt by you of any portion of any remaining severance payments in a
single payment under the provisions of paragraph 2, the covenants and
restrictions set forth in this paragraph 17 shall remain in full force
and effect to the same extent as though such severance payments had been
made to you over the 24 month period set forth in paragraph 2.
(f) Further, you may at any time request the express prior written
consent of the Chief Executive Officer of Times Mirror regarding any
actions you intend to take in order to avoid inadvertently breaching such
provisions.
18. Termination of Benefits: You agree that the benefits to be provided to
you by the Companies under this Agreement are subject to termination,
reduction or cancellation in the event that you take any action or engage
in any conduct in material violation of this Agreement. The Companies
agree to notify you if you are believed to be engaging in conduct in
violation of this Agreement and provide you with a thirty-day grace
period to cure your breach if it consists of an act that can be cured.
Notwithstanding anything in this Agreement to the contrary, if you fail
to cure such breach during such period or if the breach is not one that
is susceptible of being cured, the benefits provided to you under this
Agreement will cease, but only to the extent they are in addition to
those benefits to which you would otherwise be entitled.
19. Public Commentary/Acknowledgement: Each of the parties hereto agrees that
such party shall not respond to or in any way participate in or
contribute to any public discussion, notice, or other publicity
concerning or in any way relating to the execution or the terms of this
Agreement, the other parties hereto, or the business or prospects of the
parties in any way that would defame, hold in a negative light or
otherwise injure any other party hereto. The Companies acknowledge that
your resignation was completely voluntary, that your job performance has
been consistently exemplary, and that you have been an outstanding
executive.
20. Release: (a) In exchange for the additional benefits to be provided to
you from the Companies under this Agreement, you, on behalf of yourself,
your heirs, executors, administrators and assigns, hereby waive, release,
and forever discharge the Companies, their shareholders, directors,
officers, employees, successors and assigns completely from any and all
claims, actions, rights, demands, liabilities and causes of any action of
every kind and character, known or unknown, mature or unmatured, which
you had or now have, arising from or relating to your employment your
termination, or any act of the Companies, or their directors, officers,
and employees occurring up to and including the date of this release,
including, but not limited to, any claim to reinstatement of, or future
employment with, the Companies, any claim for breach of contract or
wrongful termination, any claim for additional salary, severance pay, or
other compensation or
<PAGE> 10
Ms. Mary E. Junck
April 5, 1999
Page 10
employee, fringe or retiree benefits, any claim under the Employee
Retirement Income Security Act of 1974, as amended, the Americans with
Disabilities Act, as amended, or the Family and Medical Leave Act, as
amended, and any claim based on tort, contract (expressed or implied), or
any federal, state or local law, rule or regulation prohibiting
employment discrimination, including, but not limited to, any claims of
unlawful discrimination, any rights under the Age Discrimination in
Employment Act of 1967, as amended by the Older Workers Benefit
Protection Act ("Age Discrimination Act"), which prohibits age
discrimination in employment, any rights under Title VII of the Civil
Rights Act of 1964, which prohibits discrimination in employment based on
race, color, national origin, religion, or sex, or any other claim,
action, cause of action, or liability arising under any other federal,
state, municipal, or local statute, law, ordinance, or regulation.
(b) You also agree not to sue the Companies, or any of the other related
parties or participate in a lawsuit or otherwise file or pursue a claim
or initiate a proceeding of any sort on the basis of any claim of any
type whatsoever in any way, directly or indirectly, arising out of or
related to your employment, or the termination of that employment, with
the Companies. You further acknowledge and agree in the event that you
breach the provisions of the preceding sentence (i) the Companies shall
be entitled to apply for and receive an injunction to restrain any
violation of said provision, (ii) the Companies shall not be obliged to
continue payment of enhanced benefits under the Agreement to you, (iii)
you shall be obliged to pay to the Companies or any one of the Companies
its costs and expenses in enforcing this release and defending against
such lawsuit (including court costs, expenses and reasonable legal fees),
and (iv) you shall be obliged upon demand to repay to the Companies all
but $1,000 of the value of the benefits under this Agreement paid or
provided to you and the foregoing shall not affect the validity of this
release.
(c) This release does not release the Companies from any obligation or
claim for any amount payable under this Agreement or any employee benefit
plan nor does it apply to any rights under the Age Discrimination Act
which occur after the date this release is signed.
21. Company Release: (a) In exchange for the consideration contained in this
Agreement, the Companies, their respective directors, officers,
employees, successors and assigns (collectively referred to in this
paragraph 21 as the "Companies") hereby completely releases you, your
successors, affiliates, agents, attorneys, heirs, representatives and
assigns (collectively referred to in this paragraph 21 as "you" or
"your") from any claims actions or causes of action the Companies had,
now has or in the future may have, arising from or relating to your
employment, your termination of employment or any act of yours prior to
your Termination Date, expressly including, but not limited to, any claim
arising under any Federal, State or local statute, rule or regulation,
unless your actions represented gross negligence or were criminal in
nature.
<PAGE> 11
Ms. Mary E. Junck
April 5, 1999
Page 11
(b) The Companies agree that the Companies will not participate in a
lawsuit or otherwise file or pursue a claim or initiate a proceeding of
any sort on the basis of any claim which has been released by the
Companies under the provisions of subparagraph (a), above. The Companies
further acknowledge and agree in the event that the Companies or any one
of the Companies breach the provisions of the preceding sentence (i) you
shall be entitled to apply for an injunction to restrain any violation of
said provision, and (ii) the Companies shall be obliged to pay the costs
and expenses which you incur in enforcing his release and defending
against such lawsuit (including court costs, expenses and reasonable
legal fees).
(c) This release by the Companies does not release you from any
obligation you may have under this Agreement nor does it apply to any
acts which occur after the date this release is signed,
22. Revocation Period: (a) You acknowledge that you have been given a period
of at least twenty-one (21) days to review and consider this Agreement
before signing it. You further understand that you may use as much of the
21-day period as you wish before signing it. If you do not execute and
deliver this Agreement to the Companies within the time provided, none of
the payments or benefits under this Agreement will be made by the
Companies to you.
(b) You also understand that you may revoke this Agreement within seven
(7) days after signing this Agreement. Revocation may be made by
delivering a written notice of revocation to me. For this revocation to
be effective, I must receive written notice no later than the close of
business on the seventh day after you have signed this Agreement.
However, if you elect to revoke this Agreement, the rights and
obligations of both you and the Companies under this Agreement shall in
all respects terminate, it will not be effective or enforceable, you will
not receive the benefits and payment described in this Agreement and your
employment with the Companies will terminate on June 30, 1999.
(c) Provided that you have complied with all of the terms and conditions
of this Agreement, and provided further that you have not exercised your
revocation rights, it shall become effective on the day which immediately
follows the expiration of the above seven day revocation period described
in the preceding paragraph.
(d) You acknowledge that in the event that you do not execute and deliver
all the documents required by this Agreement or in the event that you
revoke the required releases, you will be obligated to return, and you
expressly agree that you will return upon demand of the Companies, all
payments made to you by the Companies pursuant to this Agreement, and
this obligation to return all such payments shall survive any such
actions by you.
<PAGE> 12
Ms. Mary E. Junck
April 5, 1999
Page 12
23. Advice of Counsel: You represent and agree that you fully understand your
right to discuss, and that the Companies have advised you to discuss, all
aspects of this Agreement with your private attorney, that you have
carefully read and fully understand all of the provisions of this
Agreement, and that you are voluntarily entering into this Agreement.
24. Entire Agreement: Except for other documents referred to herein, this
Agreement contains the entire agreement and understanding between you and
the Companies regarding your employment with and termination of
employment from the Companies, and totally replaces any and all prior
agreements, arrangements, representations, and understandings, written or
oral, express or implied. Neither you nor the Companies shall be bound or
liable for any representation, promise or inducement not contained herein
or therein. This Agreement cannot be amended, modified, supplemented or
altered in a manner that would change the economic value of the
Agreement, except by written amendment or supplement signed by you and
the Companies.
25. Binding on Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the
Companies and shall inure to the benefit of and be binding upon your
heirs, executors, administrators, successors and assigns. Should the
Companies merge or consolidate with another company or sell substantially
all of their respective assets to another company or entity, this
Agreement shall become an obligation of the surviving or acquiring
company or entity.
26. Severability: Should any provision of this Agreement be found, held,
declared, determined, or deemed by any court of competent jurisdiction to
be void, illegal, invalid or unenforceable under any applicable statute
or controlling law, the legality, validity, and enforceability of the
remaining provisions will not be affected and the illegal, invalid, or
unenforceable provision will be deemed not to be a part of the Agreement.
27. Arbitration: In exchange for the additional benefits to be provided to
you under this Agreement and the mutual promises contained herein, the
parties hereto agree that any dispute, controversy or claim arising out
of or relating to this Agreement or any payment required to be made
hereunder or arising out of or in connection with your employment
relationship with the Companies shall be resolved through final and
binding arbitration as set forth below, and such arbitration shall be the
sole and exclusive remedy for resolving any such claims or disputes. The
parties understand that by agreeing to arbitration as an exclusive
remedy, they are waiving any rights they may have to litigate their
rights under this Agreement in a court of law, including but not limited
to, any right to a jury trial; provided, however, the parties are not
waiving the right to bring suit to enforce the provisions of this
paragraph. This binding arbitration provided for under this Agreement
with respect to this Agreement shall take place in Maryland and be in
compliance with
<PAGE> 13
Ms. Mary E. Junck
April 5, 1999
Page 13
and governed by the provisions of the National Rules for the Resolution
of Employment Disputes of the American Arbitration Association.
28. Governing Law: This Agreement shall be construed and interpreted in
accordance with Maryland law.
29. Acknowledgment: You acknowledge and agree the release in this Agreement
is an essential and material term of this Agreement and that if you do
not agree to this release, you will not receive any of the benefits under
this Agreement. Further, you recognize and agree that you are
voluntarily signing this Agreement with the full knowledge and consent
that, as a consequence thereof, arbitration is the sole and exclusive
remedy for resolving any dispute, controversy or claim arising out of
this Agreement or your employment relationship with the Companies.
Please sign below and return this letter to me within 21 days to indicate your
agreement to these terms.
Sincerely,
/s/ JAMES R. SIMPSON
James R. Simpson
Senior Vice President,
Human Resources
I have read the terms of this Agreement, including the waiver and release, and I
understand and agree to its provisions. I have been provided with a fully
executed copy of same. I understand that it contains a release of all known and
unknown claims and I voluntarily sign this Agreement.
/s/ MARY E. JUNCK Date: 4-29-99
- --------------------------- -------------------------------
Mary E. Junck
<PAGE> 1
EXHIBIT 10.20
[TIMES MIRROR LETTERHEAD]
December 22, 1999
PERSONAL AND CONFIDENTIAL
Thomas Unterman
1451 Amalfi Drive
Pacific Palisades, CA 90272
Dear Tom:
This letter will confirm our previous discussions and shall constitute the
agreement ("Agreement") reached with you concerning the terms and conditions
under which your active status with The Times Mirror Company (the "Company")
will cease, and the benefits and payments which you will receive from the
Company during a leave of absence and upon the termination of your employment.
This Agreement and the benefits and payments described in it are conditioned
upon your execution of and compliance with the terms and conditions set forth in
this Agreement.
1. Employment Status: Before the end of 1999, by executing a letter of
resignation, you will relinquish the titles and duties of Executive Vice
President and Chief Financial Officer, as well as any other positions you
may hold within the Company, any of its subsidiaries and affiliates,
including assignments to any committees, and any positions you may hold
with other entities in which you are acting on behalf of the Company.
Effective the close of business on December 27, 1999 (the "Effective
Date") regardless of whether you become disabled prior to such date, your
active employment with the Company will terminate and you will be placed
on an unpaid leave of absence ("Leave of Absence"). Regardless of your
employment with another employer, your employment with the Company, as
well as the Leave of Absence, will terminate on the earlier of (i) the
date you elect to terminate employment by providing written notice to
either the Senior Vice President of Human Resources or the Secretary of
Times Mirror or (ii) December 31, 2004 ("Termination Date").
2. Special Payments for Consulting Services: (a) Provided you are available
to provide the consulting assistance and special services to the
Company's management as described in the attached memo from you dated
October 4, 1999, or such other services as may be requested and agreed
to, commencing in 2000, an amount of $50,000 (less appropriate
withholdings) will be payable prior to December 31 of each year of your
Leave of Absence. If your employment terminates before the end of the
Leave of Absence or if you are no longer available to provide the
consulting assistance and requested special services, these payments will
cease.
<PAGE> 2
Thomas Unterman
December 22, 1999
Page 2
(b) In lieu of paying these special payments to you in cash, each annual
special payment of $50,000, less appropriate withholdings, will be
credited to a special deferral account in the Times Mirror Company
Deferred Compensation Plan for Executives as of October 1 of each year of
the Leave of Absence. The balance in these special deferral accounts will
be paid to you in accordance with your election to be completed by you
when you execute this Agreement. Attached is an election form to be used
for this purpose and your election will apply to all your special
deferral accounts resulting from these special payments.
(c) For purposes of Regulation S-K of the Securities Exchange Act of 1934
("Regulation S-K"), these special payments made to you under this
Agreement shall be deemed to be severance payments and not salary or
bonus.
3. Annual Bonus Incentive Award: In consideration of the provisions of this
Agreement, you and the Company agree that you will not receive any
payment under the Company's 1999 bonus incentive plan, and you will cease
participation in the Company's bonus incentive plans with respect to 2000
and thereafter.
4. (a) Payment: In consideration of the terms and provisions of this
Agreement, you will receive a payment of $675,000. This amount will be
paid and/or deferred as follows: $350,000, less appropriate withholdings,
will be paid to you in cash in February, 2000 and $325,000, less
appropriate withholdings, will be credited to a special deferral account
under the Times Mirror Company Deferred Compensation Plan for Executives
as of February 15, 2000. The balance of the special deferral account will
be paid to you commencing in the January following your Termination Date
in fifteen annual installments. For purposes of Regulation S-K, this
special payment shall be deemed to be a severance payment and not bonus.
(b) Matching Bonus Restricted Stock: You will be eligible to participate
in the matching bonus restricted stock program relative to the payment
described in paragraph 4(a). Provided you place on deposit shares of
Times Mirror stock equal in value to 25% of the payment described in
paragraph 4(a), you will receive an equal number of shares of matching
bonus restricted stock. The restrictions on these shares will lapse in
accordance with the terms of the matching bonus restricted stock program.
5. Group Benefits: (a) While you are still actively employed, all group
health care and group insurance benefits offered to active full-time
employees to which you are currently entitled and/or enrolled will
continue in accordance with your enrollment elections and the terms of
the plans. While on your Leave of Absence, for a maximum period of one
year, you will remain eligible for the Company's group insurance programs
offered to active employees, except as noted below. Your contributions
for these coverages will be at the same rate paid by active employees and
since your Leave of Absence will be unpaid, you will be required to make
your contributions for benefit coverages through direct payments to the
Company. These coverages will cease at such time as you become eligible
for coverage under another employer's group health care plans.
<PAGE> 3
Thomas Unterman
December 22, 1999
Page 3
(b) As of the Effective Date, which is the date that your active
employment terminates, your coverage under business travel and the short
and long term disability programs will cease. You have the option to
convert part of your business travel insurance to an individual policy,
subject to established rules and plan limitations. In addition, as a
participant in the long-term disability plan ("LTD"), you may convert
part of your LTD coverage to a trust policy. If you apply for an LTD
monthly benefit amount in excess of $4,000, you must complete a Statement
Relating to Insurability form and a blood test will be required.
Additional information regarding LTD conversion is attached for your
reference. If you wish to take advantage of either or both of these
conversion options, your application(s) must be received by the
respective insurance carrier(s) within 31 days from the date your
coverage terminates; otherwise, you will waive your right to convert.
(c) Upon the earlier of the end of the first year of your Leave of
Absence, the date you become eligible for other health care coverage or
your Termination Date, all other employee benefit plan coverages,
including but not limited to health care coverage as well as
participation in the Tax-Saver HealthCare account, will cease. You have
the option, subject to established rules and plan limitations, to convert
all or part of your basic life and voluntary accidental death and
dismemberment coverages to individual policies. If you wish to take
advantage of this option, your application(s) must be received by the
insurance carrier(s) within 31 days from the date your coverages
terminate, otherwise you will waive your right to convert. Prudential
will contact you directly concerning the portability and conversion
options available under the Group Universal Life Insurance program. Our
records indicate that you are not enrolled in the long-term care plan.
(d) If you are covered under one of the Company-sponsored health care
plans or if you participate in the Tax-Saver HealthCare account, upon
termination of your health care coverage (at the earlier of the end of
the first year of your Leave of Absence, the date you become eligible for
other health care coverage or your Termination Date), you may elect to
continue the coverage currently in effect for you and your covered
dependents under the Consolidated Omnibus Budget Reconciliation Act
(COBRA) as specified by that statute. COBRA coverage may be continued for
up to 18 months (up to 29 months for any eligible individual who is
disabled as determined by the Social Security Administration during the
first 60 days of COBRA coverage -- this eleven-month extension is also
available to nondisabled family members who are entitled to COBRA
continuation coverage) or until the individual is covered, after COBRA is
elected, under another group health plan with no pre-existing condition
limitation affecting his or her coverage or is entitled to Medicare,
whichever occurs first. The COBRA election notice and form will be mailed
to you upon the termination of coverage. If you and/or your eligible
dependents wish to elect COBRA continuation coverage, the completed
election form must be returned to the Company within 60 days from the
date the notice is sent or the date your coverage terminated, whichever
is later. You are not automatically enrolled in COBRA coverage. In
addition, you will be eligible for any conversion privileges available
under the terms of any of the plans in which you are enrolled and/or
participate. If you do not wish to extend health coverage under COBRA,
you may, subject to established rules, convert your group medical
<PAGE> 4
Thomas Unterman
December 22, 1999
Page 4
coverage to an individual policy without proof of good health. The
converted policy may not provide the same coverage as the group plan. The
levels of coverage may be less and an overall lifetime maximum benefit
may apply. If you are interested in converting your group coverage to an
individual policy, you must apply and pay your first premiums to the
health care carrier within 31 days from the date coverage ceased.
Application may be obtained directly from the carriers by contacting
their member services department or, if you are covered under the Aetna
plan, from the Company's employee benefits representative, If COBRA
continuation coverage is elected for the medical coverage, and coverage
ends because the maximum coverage period expires, you have another
opportunity to covert to an individual policy during the 180-day period
that ends on the expiration date.
(e) Your participation in the Tax-Saver HealthCare account will cease
upon the earlier of the end of the first year of your Leave of Absence,
the date you become eligible for other health care coverage or your
Termination Date. If you are enrolled in the Tax-Saver HealthCare Account
when your coverage ceases, you may continue to access the account for
expenses incurred before your participation ceases. You may only access
the account for expenses incurred beyond that date if you continue to
make the elected contributions through COBRA. Our records indicate that
you have not enrolled in the Tax-Saver Dependent Care Account.
6. Retirement Benefits: You are currently vested in your benefits earned
under the Company's retirement plans, including the Times Mirror Pension
Plan, Employee Stock Ownership Plan ("ESOP"), Savings Plus Plan and the
Supplemental Executive Retirement Plan, (these plans are referred to
collectively as the "Retirement Plans"). After the Effective Date, you
will not accrue any further benefits under the Times Mirror Pension Plan
and the Supplemental Executive Retirement Plan, nor will there be any
further deferrals under the Savings Plus Plan. Your account balances
under the ESOP and the Savings Plus Plan will remain invested in
accordance with plan terms until they are distributed. After your
Termination Date, you will be entitled to receive any vested accrued
benefits under these Retirement Plans in accordance with the terms of the
Retirement Plans and any elections you make under the Retirement Plans.
Distributions under each Retirement Plan shall be made in accordance with
the terms and procedures of each respective Retirement Plan based on your
participation and vesting under the Retirement Plans.
7. Stock Options: (a) You presently hold options to purchase shares of
stock under the Times Mirror Company stock option plans (the "Option
Plans"). Prior to and during your Leave of Absence, options will continue
to vest in accordance with the grants and the terms of the Option Plans,
and to the extent that options are vested and exercisable during your
Leave of Absence, they may be exercised in accordance with the terms of
the Option Plans. You will not be eligible for any future stock option
grants.
<PAGE> 5
Thomas Unterman
December 22, 1999
Page 5
(b) Management grants: For purposes of the Option Plans, as of your
Termination Date, you will be considered an early retiree and the rules
regarding the vesting and exercise of your stock options will be
determined under the terms of the Option Plans. For options granted prior
to 1998, a portion of your options which are not otherwise exercisable
prior to your Termination Date may become exercisable in accordance with
the formula set forth in the Option Plans based on your service since the
grant date. To the extent that such options are vested and exercisable as
of your Termination Date, they may be exercised in accordance with the
terms of the Option Plans for a period of three years following your
Termination Date or through the term of the option, depending upon the
grant. Options not exercisable will be canceled on your Termination Date.
Options granted after 1997 will continue to vest in accordance with their
terms after your Termination Date and will be exercisable through the
term of the options, provided your Termination Date is on or after the
first anniversary of each respective grant date.
(c) Specific details on your personal vesting, exercise rights, and
procedures may be obtained from the Executive Compensation and Stock
Benefits group of Human Resources at Times Mirror (213) 237-3973.
8. Restricted Stock: During your Leave of Absence, restrictions will
continue to lapse on your shares of restricted stock in accordance with
the provisions of the restricted stock program. Upon your Termination
Date, any shares of restricted stock still subject to restrictions will
be canceled.
9. Matching Bonus Restricted Stock: For purposes of applying the provisions
of the matching bonus restricted stock program, you will be considered an
early retiree. The restrictions on your shares of matching bonus
restricted stock will lapse four years after the award provided you leave
the appropriate number of your personal shares on deposit with the
Company during that period. Upon the lapse of the restrictions, your
personal shares will be returned to you and the matching bonus restricted
stock will be issued to you with no restrictions.
10. Deferred Compensation Plan: Any amounts you have deferred into the Times
Mirror Company Deferred Compensation Plan for Executives will be paid to
you in accordance with your prior elections.
11. Other Perquisites and Benefits: All other perquisites and employee
benefits and your participation in all other employee benefit programs
not described herein will terminate on the Effective Date, except for
your participation in the Times Mirror Matching Gifts Program which will
cease as of your Termination Date unless you are considered a retiree
under that program. The Company payment of dues to the California Club,
as well as any other club dues including the Admiral's Club, and for
various subscriptions will cease on the Effective Date. Further, you will
repay the Company an amount of $6,000 which represents about one-half of
the initiation fee in the California Club paid by the Company on your
behalf.
<PAGE> 6
Thomas Unterman
December 22, 1999
Page 6
12. Timing of Payments: The special payments to be made or deferred pursuant
to this Agreement will be paid or deferred as specified in the Agreement
only following your execution of this Agreement and the expiration of the
seven (7) day revocation period (and provided you have not exercised any
of your revocation rights) unless otherwise indicated in this Agreement.
13. Withholding and Taxes: All payments required to be made by the Company
hereunder shall be subject to any and all applicable withholdings,
including any withholdings for any related federal, state or local taxes.
You shall be responsible for any and all income taxes or other taxes
incurred by you as a result of your receipt of any payments from the
Company.
14. Company Property: (a) Your privileges under all Company credit cards will
cease on the Effective Date. On that date, you will return all such
credit cards. The Company will prepare an accounting of your expense
account and credit card balances as of that date. All business expenses
through the Effective Date are to be submitted within 30 days of the
Effective Date. The net amount due between you and the Company may be
added to or subtracted from the payments described above if no other
reimbursement method is used.
(b) In addition, as of the Effective Date, you will return to the Company
all property of the Company, including, without limitation, all
equipment, tangible proprietary information documents, books, records,
reports, contracts, lists, computer disks (or other computer-generated
files or data), or copies thereof, created on any medium, prepared or
obtained by you or the Company in the course of or incident to your
employment with the Company.
15. Confidentiality: You agree to keep the terms of this Agreement strictly
confidential and you agree that you will not disclose its terms to anyone
other than your legal or financial advisor(s), relevant taxing
authorities, and appropriate family members, and except as required by
law. Further, to the extent to which information contained in this
Agreement is disclosed to any other person, you agree to obtain from them
the promise not to disclose this information unless required to do so by
law, a court or governmental authority. The Company agrees to keep the
terms of this Agreement confidential except to the extent that disclosure
of the terms is required in the ordinary course of business operations
necessary or advisable to effect the terms of this Agreement or as
required by relevant taxing authorities or as required by law.
16. No Claims: You represent and warrant to the Company that you have not
instituted any complaints, charges or other proceedings against the
Company or any of its subsidiaries and affiliates with any governmental
agency, any court, or any arbitration agency or tribunal, and that, as a
condition of this Agreement, you hereby waive any right to recovery in
any such action or proceeding if you should file at any time hereafter;
provided, however, that this shall not limit you from instituting such
proceedings as may be necessary for the sole purpose of enforcing your
rights under this Agreement or your rights
<PAGE> 7
Thomas Unterman
December 22, 1999
Page 7
to payment of benefits under any benefit plan sponsored by the Company in
which you participated on the date of this Agreement.
17. Company Information: (a) You acknowledge that in the course of your
employment with the Company, certain factual and strategic information
specifically related to the Company and its subsidiaries and affiliates
has been disclosed to you in confidence which was for the use of the
Company or any or all of its subsidiaries and affiliates ("Company
Information"). You understand and agree that you (i) will keep such
Company Information confidential at all times during and after your
employment with the Company, (ii) will not disclose or communicate
Company Information to any third party, and (iii) will not make use of
Company Information on your own behalf, or on behalf of any third party;
provided that this Agreement does not apply to information that becomes
publicly available.
(b) In view of the nature of your employment and the nature of Company
Information which you received during the course of your employment, you
agree that any unauthorized disclosure to third parties of Company
Information or other violation, or threatened violation, of this
Agreement would cause irreparable damage to the confidential status of
Company Information and to the Company or any and all of its subsidiaries
and affiliates, and that therefore, the Company shall be entitled to an
injunction prohibiting you from any such disclosure, attempted
disclosure, violation, or threatened violation. When specific Company
Information becomes generally available to the public other than by your
acts or omissions, it is no longer subject to restrictions in this
paragraph. However, Company Information shall not be deemed to come under
this exception merely because it is included within more general
information which is or becomes generally available to the public. The
undertaking set forth in this paragraph shall survive the termination of
this Agreement.
18. Director and Officer Liability Coverage: During your period of active
employment as an officer of the Company, under the bylaws of the Company,
you were covered under The Times Mirror Company's directors' and
officers' liability coverage. This coverage will continue in effect with
respect to the period of time during which you served as an officer of
the Company and with respect to your actions related to your employment
as an officer of the Company. In any event, the Company will indemnify
you, in the manner and to the extent permitted by law, from any claims,
demands, lawsuits, judgments and related expenses arising from your good
faith performance as an officer of the Company during the period of your
active employment with the Company.
19. Restrictive Covenant: (a) During your employment with the Company, you
have held high executive positions and responsibilities. As a result, you
have had access to the means by which the Company's operating units and
affiliates conduct their businesses, including, but not limited to, trade
secrets, confidential information and future plans. The interests of the
Company require that certain reasonable limitations be imposed upon the
extent to which you may become employed by competitors of the Company.
Accordingly, for the period represented by the special payments and Leave
of Absence under this Agreement, and subject to the provisions of
subparagraph (b) below, you agree that you shall not directly or
<PAGE> 8
Thomas Unterman Includes change in
December 22, 1999 subparagraph 19(a)(iii)
Page 8 (as revised) agreed to on l/10/2000
indirectly, and whether as a principal, partner, officer, director,
employee, consultant, venturer, agent or otherwise, alone or in
association with any person, carry on, be engaged or take part in or
render services to any entity or business which is engaged in competition
with the Company or any of its subsidiaries and affiliates in any area in
the United States or in any foreign country in which the Company or any
such subsidiary or affiliate engages in business during the term of this
Agreement. Included within the meaning of an indirect interest would be,
by way of example only, an interest in a trust, corporation, venture, or
partnership which in turn owns an interest in any such competitive
business, or an interest in any such competitive business held through a
nominee, agent, option or other device. The foregoing provisions do not
apply to: (i) an investment in stock of any publicly held corporation if
the market value of such investment when acquired does not exceed
$1,000,000 or to any investment in a mutual fund; (ii) any investment
held by TMCT Ventures, L.P. which the Company's representatives on the
investment committee of TMCT Ventures, L.P. have voted to approve; or
(iii) the holding of any interest in any Investment Company, as defined
in subparagraph (c), below, acquired at a point in time when the Company
or any of its subsidiaries or affiliates are not engaged in the business
in which the Investment Company is engaged.
(b) You further agree that you will not, until December 31, 2004, without
the express prior written consent of the Chief Executive Officer of the
Company, whether for your own account or for the account of any other
person, directly or through an agent, (i) attempt to persuade any officer
or employee of the Company or any of its subsidiaries or affiliates to
leave such employment, or (ii) interfere with the relationship between
the Company or any its subsidiaries or affiliates and any of their
respective customers, vendors, suppliers or contractors.
(c) The Company understands and agrees that you are or may be providing
services or furnishing advice to (i) TMCT Ventures, L.P., (ii) TMCT II,
LLC (the limited partner in TMCT Ventures, L.P.), (iii) Chandler Trust
No. 1 or (iv) Chandler Trust No. 2 and the Company agrees that providing
such services or furnishing such advice does not contravene any provision
of this Agreement. However, you may also be providing services and
furnishing advice to companies in which the entities described in
subparagraphs (i) through (iv) have acquired or may acquire an interest
or business relationship (the "Investment Company(s)"), and any such
activities engaged in by you shall be subject to the provisions of
paragraphs 17 and 19 of this Agreement.
(d) It is understood by and between us that the promises made by you in
this paragraph 19 are essential elements of our Agreement and that, but
for your agreement to comply with such covenants, the Company would not
have entered into this Agreement.
(e) You may at any time consult with the Chief Executive Officer of the
Company regarding any actions you intend to take, or transactions which
you intend to engage, in order to avoid inadvertently breaching the
provisions of paragraphs 17 or 19, or any other provision, of this
Agreement.
<PAGE> 9
Thomas Unterman
December 22, 1999
Page 9
20. Termination of Benefits: You agree that the benefits to be provided to
you by the Company under this Agreement are subject to termination,
reduction or cancellation in the event that you take any action or engage
in any conduct in violation of this Agreement. The Company agrees to
notify you if you are believed to be engaging in conduct in violation of
this Agreement and provide you with a thirty-day grace period to cure
your breach if it consists of an act that can be cured. Notwithstanding
anything in this Agreement to the contrary, if you fail to cure such
breach during such period or if the breach is not one that is susceptible
of being cured, the benefits provided to you under this Agreement will be
canceled, but only to the extent they are in addition to those benefits
to which you would otherwise be entitled.
21. Further Assurances: Each of the parties to this Agreement agrees that
neither party shall, directly or indirectly, participate in or contribute
to any discussion, or other publicity concerning or relating to the terms
of this Agreement. Further, the parties agree that neither will make any
statements, orally or in writing and directly or indirectly, that in any
way would reflect negatively upon or be injurious to the reputation of
the other party.
22. Release: (a) In exchange for the additional benefits to be provided to
you from the Company under this Agreement, you, on behalf of yourself,
your heirs, executors, administrators and assigns, hereby waive, release,
and forever discharge the Company, its shareholders, directors, officers,
employees, successors and assigns completely from any and all claims,
actions, rights, demands, liabilities and causes of any action of every
kind and character, known or unknown, mature or unmatured, which you had
or now have, arising from or relating to your active employment, your
Leave of Absence, your termination of employment, or any act of the
Company, or its directors, officers, and employees occurring up to and
including the date of this release, including, but not limited to, any
claim to reinstatement of, or future employment with, the Company, any
claim for breach of contract or wrongful termination, any claim for
additional salary, severance pay, or other compensation or employee,
fringe or retiree benefits, any claim under the Employee Retirement
Income Security Act of 1974, as amended, the Americans with Disabilities
Act, as amended, or the Family and Medical Leave Act, as amended, and any
claim based on tort, contract (expressed or implied), or any federal,
state or local law, rule or regulation prohibiting employment
discrimination, including, but not limited to, any claims of unlawful
discrimination, any rights under the Age Discrimination in Employment Act
of 1967, as amended by the Older Workers Benefit Protection Act ("Age
Discrimination Act"), which prohibits age discrimination in employment,
any rights under Title VII of the Civil Rights Act of 1964, which
prohibits discrimination in employment based on race, color, national
origin, religion, or sex, or any other claim, action, cause of action, or
liability arising under any other federal, state, municipal, or local
statute, law, ordinance, or regulation.
(b) You also agree not to sue the Company or any of the other related
parties or participate in a lawsuit or otherwise file or pursue a claim
or initiate a proceeding of any sort on the basis of any claim of any
type whatsoever in any way, directly or indirectly, arising out of
<PAGE> 10
Thomas Unterman
December 22, 1999
Page 10
or related to your active employment, your Leave of Absence, or the
termination of your employment, with the Company. You further acknowledge
and agree in the event that you breach the provisions of the preceding
sentence (i) the Company shall be entitled to apply for and receive an
injunction to restrain any violation of said provision, (ii) the Company
shall not be obliged to continue payment of enhanced benefits under the
Agreement to you, (iii) you shall be obliged to pay to the Company its
costs and expenses in enforcing this release and defending against such
lawsuit (including court costs, expenses and reasonable legal fees), and
(iv) you shall be obliged upon demand to repay to the Company all but
$1,000 of the value of the benefits under this Agreement paid or provided
to you, and the foregoing shall not affect the validity of this release.
(c) This release does not release the Company from any obligation or
claim for any amount payable under this Agreement or any employee benefit
plan nor does it apply to any rights under the Age Discrimination Act
which occur after the date this release is signed.
23. Additional Waiver for California: In addition, you expressly waive and
relinquish all rights and benefits afforded by Section 1542 of the
California Civil Code, and do so understanding and acknowledging the
significance of such specific waiver of Section 1542, which states as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Thus, notwithstanding the provisions of Section 1542, and for the purpose
of implementing a full and complete release and discharge of the Company,
you expressly acknowledge that this, Agreement is intended to include in
its effect, without limitation, all claims which you do not know or
suspect to exist in your favor at the time of execution of this
Agreement, and that this Agreement contemplates the extinguishment of any
such claim or claims.
24. Revocation Period: (a) You acknowledge that you have been given a period
of at least twenty-one (21) days to review and consider this Agreement
before signing it. You further understand that you may use as much of the
2l-day period as you wish before signing it. If you do not execute and
deliver this Agreement to the Company within the time provided, none of
the payments or benefits under this Agreement will be made by the Company
to you and your employment will terminate as of December 27, 1999.
(b) You also understand that you may revoke this Agreement within seven
(7) days after signing this Agreement. Revocation may be made by
delivering a written notice of revocation to me. For this revocation to
be effective, I must receive written notice no later than the close of
business on the seventh day after you have signed this Agreement.
However, if you elect to revoke this Agreement, the rights and
obligations of both you and the Company under this Agreement shall in all
respects terminate, it will not be effective or enforceable, you will not
receive the benefits and payments described in this Agreement, and your
employment will terminate as of December 27, 1999.
<PAGE> 11
Thomas Unterman
December 22, 1999
Page 11
(c) Provided that you have complied with all of the terms and conditions
of this Agreement, and provided further that you have not exercised your
revocation rights, it shall become effective on the day which immediately
follows the expiration of the above seven day revocation period described
in the preceding paragraph.
(d) You acknowledge that in the event that you do not execute and deliver
all the documents required by this Agreement or in the event that you
revoke the required releases, you will be obligated to return, and you
expressly agree that you will return upon demand of the Company, all
payments made to you by the Company pursuant to this Agreement, and this
obligation to return all such payments shall survive any such actions by
you.
25. Advice of Counsel: You represent and agree that you fully understand your
right to discuss, and that the Company has advised you to discuss, all
aspects of this Agreement with your private attorney, that you have
carefully read and fully understand all of the provisions of this
Agreement, and that you are voluntarily entering into this Agreement.
26. Entire Agreement: This Agreement contains the entire agreement and
understanding between you and the Company regarding your active
employment, Leave of Absence, and termination of employment from the
Company, and totally replaces any and all prior agreements, arrangements,
representations, and understandings, written or oral, express or implied,
including, without limitation, obligations under the Company's regular
severance pay policy. Neither you nor the Company shall be bound or
liable for any representation, promise or inducement not contained herein
or therein. This Agreement cannot be amended, modified, supplemented or
altered in a manner that would change the economic value of the
Agreement, except by written amendment or supplement signed by you and
the Company.
27. Binding on Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company
and shall inure to the benefit of and be binding upon your heirs,
executors, administrators, successors and assigns. Should the Company
merge or consolidate with another company or sell substantially all of
its assets to another company or entity, this Agreement shall become an
obligation of the surviving or acquiring company or entity,
28. Severability: Should any provision of this Agreement be found, held,
declared, determined, or deemed by any court of competent jurisdiction to
be void, illegal, invalid or unenforceable under any applicable statute
or controlling law, the legality, validity, and enforceability of the
remaining provisions will not be affected and the illegal, invalid, or
unenforceable provision will be deemed not to be a part of the Agreement.
29. Arbitration: In exchange for the additional benefits to be provided to
you under this Agreement, the parties hereto agree that any dispute,
controversy or claim arising out of or relating to this Agreement or any
payment required to be made hereunder or arising out of or in connection
with your employment relationship with the Company shall be resolved
<PAGE> 12
Thomas Unterman
December 22, 1999
Page 12
through final and binding arbitration as set forth below, and such
arbitration shall be the sole and exclusive remedy for resolving any such
claims or disputes. You understand that by agreeing to arbitration as an
exclusive remedy, you are waiving any rights you may have to litigate
your rights under this Agreement or in connection with your employment
with the Company or any of its subsidiaries and affiliates in a court of
law, including but not limited to, any right to a jury trial. This
binding arbitration provided for under this Agreement with respect to
this Agreement and your employment shall take place in California and be
in compliance with and governed by the provisions of the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association.
30. Governing Law: This Agreement shall be construed and interpreted in
accordance with California law.
31. Acknowledgment: You acknowledge and agree the release in this Agreement
is an essential and material term of this Agreement and that if you do
not agree to this release, you will not receive any of the benefits under
this Agreement. Further, you recognize and agree that you are voluntarily
signing this Agreement with the full knowledge and consent that, as a
consequence thereof, arbitration is the sole and exclusive remedy for
resolving any dispute, controversy or claim arising out of this Agreement
or your employment relationship with the Company.
Please sign below and return this letter to me within 21 days to indicate your
agreement to these terms.
Sincerely,
/s/ MARK H. WILLES
Mark H. Willes
on behalf of the The Times Mirror Company
I have read the terms of this Agreement, including the waiver and release, and I
understand and agree to its provisions. I have been provided with a fully
executed copy of same. I understand that it contains a release of all known and
unknown claims and I voluntarily sign this Agreement.
/s/ THOMAS UNTERMAN Date: 12/23/99
- --------------------------- -------------------------------
Thomas Unterman
Attachments
- October 4, 1999 memo
- Special Deferral Election Form
- LTD conversion information
<PAGE> 1
EXHIBIT 11
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOURTH QUARTER
ENDED DECEMBER 31
-------------------
1999 1998
------- --------
<S> <C> <C>
BASIC
Weighted average shares for basic earnings per share........ 59,931 78,923
======= ========
Income from continuing operations........................... $67,519 $ 20,726
Preferred stock dividends................................... (1,794) (5,425)
------- --------
Earnings applicable to common shareholders from continuing
operations................................................ 65,725 15,301
Income from discontinued operations......................... 375 225,601
------- --------
Total earnings applicable to common shareholders....... $66,100 $240,902
======= ========
Basic earnings per common share:
Continuing operations..................................... $ 1.10 $ .19
Discontinued operations................................... -- 2.86
------- --------
Basic earnings per share.................................... $ 1.10 $ 3.05
======= ========
DILUTED
Weighted average shares for basic earnings per share........ 59,931 78,923
Effect of dilutive securities:
Stock options............................................. 2,679 1,649
LYONs convertible debt.................................... 2,914 --
Series C-1, convertible preferred stock................... 589 --
Series C-2, convertible preferred stock................... 379 --
------- --------
Weighted average shares for diluted earnings per share...... 66,492 80,572
======= ========
Income from continuing operations........................... $67,519 $ 20,726
Preferred stock dividends................................... (1,794) (5,425)
LYONs interest expense, net of tax.......................... 1,583 --
Series C-1, preferred dividends............................. 552 --
Series C-2, preferred dividends............................. 355 --
------- --------
Earnings applicable to common shareholders from continuing
operations................................................ 68,215 15,301
Income from discontinued operations......................... 375 225,601
------- --------
Total earnings applicable to common shareholders....... $68,590 $240,902
======= ========
Diluted earnings per common share:
Continuing operations..................................... $ 1.03 $ .19
Discontinued operations................................... -- 2.80
------- --------
Diluted earnings per share.................................. $ 1.03 $ 2.99
======= ========
</TABLE>
<PAGE> 1
EXHIBIT 12
THE TIMES MIRROR COMPANY
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense......................... $ 93,439 $ 68,473 $ 35,713 $ 19,362 $ 20,216
Capitalized interest..................... -- -- -- -- 485
Portion of rents deemed to be interest... 12,929 11,533 12,406 12,637 14,205
Amortization of debt expense............. 2,264 2,151 1,417 529 411
-------- -------- -------- -------- ---------
Total fixed charges.............. 108,632 82,157 49,536 32,528 35,317
Preferred stock dividends.................. 30,634 39,653 54,883 71,901 74,581
-------- -------- -------- -------- ---------
Fixed charges and preferred stock
dividends................................ $139,266 $121,810 $104,419 $104,429 $ 109,898
======== ======== ======== ======== =========
Earnings (loss):
Income (loss) from continuing operations
before income taxes................... $439,291 $245,004 $396,499 $300,254 $(253,421)
Fixed charges, less capitalized
interest.............................. 108,632 82,157 49,536 32,528 34,832
Amortization of capitalized interest..... 3,862 3,902 3,966 4,094 4,475
Distributed income from less than 50%
owned unconsolidated affiliates....... -- -- 92 191 191
Equity loss (income) from less than 50%
owned unconsolidated affiliates....... 3,783 13,146 4,690 (115) (1,917)
-------- -------- -------- -------- ---------
Total earnings (loss)............ $555,568 $344,209 $454,783 $336,952 $(215,840)
======== ======== ======== ======== =========
Ratio of earnings to fixed charges......... 5.1x 4.2x 9.2x 10.4x (a)
Ratio of earnings to fixed charges and
preferred stock dividends................ 4.0x 2.8x 4.4x 3.2x (b)
</TABLE>
- ---------------
(a) Earnings are approximately $251 million lower than the amount needed to
cover fixed charges in this year, as earnings were impacted by approximately
$502 million in restructuring charges.
(b) Earnings are approximately $326 million lower than the amount needed to
cover fixed charges and preferred stock dividends in this year, as earnings
in 1995 were impacted by approximately $502 million in restructuring
charges.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE TIMES MIRROR COMPANY
AS OF DECEMBER 31, 1999*
<TABLE>
<CAPTION>
STATE (OR COUNTRY)
NAME OF INCORPORATION
---- ------------------
<S> <C>
AchieveGlobal, Inc.......................................... Florida
The Baltimore Sun Company................................... Maryland
Eagle New Media Investments, LLC**.......................... Delaware
Eagle Publishing Investments, LLC**......................... Delaware
E Z Buy & E Z Sell Recycler Corporation..................... Delaware
The Hartford Courant Company................................ Connecticut
Jeppesen & Co., GmbH***..................................... Germany
Jeppesen Sanderson, Inc..................................... Delaware
The Morning Call, Inc....................................... Pennsylvania
Newsday, Inc.***............................................ New York
The StayWell Company........................................ Delaware
Times Mirror Magazines, Inc.***............................. New York
</TABLE>
- ---------------
* The names of certain other subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary. The Los Angeles Times is a division of
The Times Mirror Company.
** Affiliates that are controlled by the Registrant as described in Note 5 to
the consolidated financial statements.
*** 100% owned by a wholly-owned subsidiary of the Registrant. (All other
subsidiaries listed above are directly wholly-owned by the Registrant.)
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 Nos. 333-38605, 333-34691, 333-30773 and 333-86807) and in the
Registration Statements (Form S-8 Nos. 333-32773 and 33-65259) of our report
dated February 2, 2000, with respect to the consolidated financial statements
and schedule of The Times Mirror Company included in its Annual Report (Form
10-K) for the year ended December 31, 1999.
ERNST & YOUNG LLP
Los Angeles, California
March 13, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1999 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 144,319
<SECURITIES> 0
<RECEIVABLES> 398,082
<ALLOWANCES> 34,721
<INVENTORY> 35,082
<CURRENT-ASSETS> 886,648
<PP&E> 1,974,166
<DEPRECIATION> 1,008,071
<TOTAL-ASSETS> 3,897,371
<CURRENT-LIABILITIES> 866,130
<BONDS> 1,562,240
0
724,820
<COMMON> 112,125
<OTHER-SE> (437,216)
<TOTAL-LIABILITY-AND-EQUITY> 3,897,371
<SALES> 3,029,249
<TOTAL-REVENUES> 3,029,249
<CGS> 1,615,273
<TOTAL-COSTS> 1,615,273
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,643
<INTEREST-EXPENSE> 93,368
<INCOME-PRETAX> 439,291
<INCOME-TAX> 180,229
<INCOME-CONTINUING> 259,062
<DISCONTINUED> 24
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 259,086
<EPS-BASIC> 3.53
<EPS-DILUTED> 3.38
</TABLE>
