-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AFN7WtO1H5nyGT3b8DCFQZb0xed5Ro+PXk7OPig0Dqauio4TBYo9rvR9yNyJm6ds WA5AafX3S6GPN8rdP40/Gw== 0000726513-97-000038.txt : 19970813 0000726513-97-000038.hdr.sgml : 19970813 ACCESSION NUMBER: 0000726513-97-000038 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970812 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIBUNE CO CENTRAL INDEX KEY: 0000726513 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 361880355 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08572 FILM NUMBER: 97656645 BUSINESS ADDRESS: STREET 1: 435 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3122229100 10-Q 1 SECOND QUARTER 1997 FORM 10-Q - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 1997 Commission file number 1-8572 TRIBUNE COMPANY (Exact name of registrant as specified in its charter) Delaware 36-1880355 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 435 North Michigan Avenue, Chicago, Illinois 60611 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 222-9100 No Changes (Former name, former address and former fiscal year, if changed since last report) 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 / / At August 6, 1997 there were 123,454,615 shares outstanding of the Company's Common Stock (without par value). - -------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars, except per share data) (Unaudited)
Second Quarter Ended First Half Ended ------------------------------- ------------------------------ June 29, 1997 June 30,1996 June 29, 1997 June 30, 1996 ------------- ------------ ------------- ------------- Operating Revenues........................................ $ 719,742 $ 641,927 $1,313,661 $1,179,049 Operating Expenses Cost of sales (exclusive of items shown below)............ 326,347 319,969 605,071 606,849 Selling, general and administrative....................... 170,372 142,492 331,741 274,517 Depreciation and amortization of intangible assets................................... 45,991 34,593 83,408 65,735 --------- --------- ---------- ---------- Total operating expenses.................................. 542,710 497,054 1,020,220 947,101 --------- --------- ---------- ---------- Operating Profit.......................................... 177,032 144,873 293,441 231,948 Other..................................................... 28,529 - 28,529 - Interest income........................................... 5,757 7,825 15,187 16,375 Interest expense.......................................... (25,060) (11,033) (40,634) (21,988) --------- --------- ---------- ---------- Income from Continuing Operations Before Income Taxes..................................... 186,258 141,665 296,523 226,335 Income taxes.............................................. (75,326) (57,375) (121,086) (91,666) --------- --------- ---------- ---------- Income from Continuing Operations......................... 110,932 84,290 175,437 134,669 Discontinued Operations of QUNO, net of tax............... - - - 89,317 --------- --------- ---------- ---------- Net Income................................................ 110,932 84,290 175,437 223,986 Preferred dividends, net of tax........................... (4,700) (4,697) (9,399) (9,393) --------- --------- ---------- ---------- Net Income Attributable to Common Shares.................. $ 106,232 $ 79,593 $ 166,038 $ 214,593 ========= ========= ========== ========== Net Income Per Share: Primary: Continuing operations.................. $ .86 $ .65 $ 1.35 $ 1.02 Discontinued operations................ - - - .73 ------ ------ ------ ------ Net income............................. $ .86 $ .65 $ 1.35 $ 1.75 ====== ====== ====== ====== Fully diluted: Continuing operations.................. $ .79 $ .60 $ 1.24 $ .94 Discontinued operations................ - - - .65 ------ ------ ------ ------ Net income............................. $ .79 $ .60 $ 1.24 $ 1.59 ====== ====== ====== ====== Dividends per common share................................ $ .16 $ .15 $ .32 $ .30 ====== ====== ====== ======
See Notes to Condensed Consolidated Financial Statements. 2 TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars)
June 29, 1997 December 29, 1996 ------------- ----------------- (Unaudited) ASSETS Current assets Cash and short-term investments........................................... $ 816 $ 274,170 Accounts receivable, net.................................................. 419,858 350,773 Inventories............................................................... 80,967 80,525 Broadcast rights.......................................................... 164,265 154,904 Prepaid expenses and other................................................ 26,478 26,349 ----------- ----------- Total current assets...................................................... 692,384 886,721 Property, plant and equipment............................................. 1,488,522 1,456,209 Accumulated depreciation.................................................. (855,842) (813,501) ----------- ----------- Net properties............................................................ 632,680 642,708 Broadcast rights.......................................................... 151,171 173,552 Intangible assets, net.................................................... 2,468,293 1,251,470 Investments............................................................... 570,564 629,129 Other..................................................................... 126,951 117,320 ----------- ----------- Total assets.............................................................. $ 4,642,043 $ 3,700,900 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Long-term debt due within one year........................................ $ 29,656 $ 31,073 Contracts payable for broadcast rights.................................... 200,776 178,589 Deferred income........................................................... 70,991 51,591 Accounts payable, income taxes and other current liabilities.............. 416,266 411,848 ----------- ----------- Total current liabilities................................................. 717,689 673,101 Long-term debt............................................................ 1,615,316 979,754 Deferred income taxes..................................................... 334,818 189,673 Contracts payable for broadcast rights.................................... 188,427 209,754 Compensation and other obligations........................................ 123,331 109,112 ----------- ----------- Total liabilities......................................................... 2,979,581 2,161,394 Shareholders' equity Series B convertible preferred stock...................................... 303,864 312,470 Common stock and additional paid-in capital............................... 167,056 150,879 Retained earnings......................................................... 2,336,829 2,210,024 Treasury stock (at cost).................................................. (1,052,143) (1,034,012) Unearned compensation related to ESOP..................................... (216,772) (218,668) Unrealized gain on investments............................................ 123,628 118,813 ----------- ----------- Total shareholders' equity................................................ 1,662,462 1,539,506 ----------- ----------- Total liabilities and shareholders' equity................................ $ 4,642,043 $ 3,700,900 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 3 TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited)
First Half Ended ------------------------------------- June 29, 1997 June 30, 1996 ------------- ------------- Operations Net income..................................................................... $ 175,437 $ 223,986 Adjustments to reconcile net income to net cash provided by operations: Discontinued operations of QUNO, net of tax............................ - (89,317) Gain on sales of investments........................................... (109,395) - Loss on writedown of investment........................................ 77,266 - Depreciation and amortization of intangible assets..................... 83,408 65,735 Other, net............................................................. (40,178) (97,336) ----------- ----------- Net cash provided by operations................................................ 186,538 103,068 ----------- ----------- Investments Capital expenditures........................................................... (40,264) (42,977) Acquisitions and investments................................................... (1,170,486) (522,256) Proceeds from sales of investments, subsidiary and other assets................ 178,213 - Proceeds from sale of QUNO..................................................... - 426,828 Other, net..................................................................... (3,570) (4,942) ----------- ----------- Net cash used for investments.................................................. (1,036,107) (143,347) ----------- ----------- Financing Proceeds from issuance of long-term debt....................................... 641,897 236,296 Repayments of long-term debt................................................... (6,668) (11,033) Sale of common stock to employees, net......................................... 23,972 17,993 Purchase of treasury stock..................................................... (34,354) (123,353) Dividends...................................................................... (48,632) (46,184) ----------- ----------- Net cash provided by financing................................................. 576,215 73,719 ----------- ----------- Net increase (decrease) in cash and short-term investments..................... (273,354) 33,440 Cash and short-term investments at the beginning of year....................... 274,170 22,899 ----------- ----------- Cash and short-term investments at the end of quarter.......................... $ 816 $ 56,339 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 4 TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1: - ------- In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of Tribune Company and its subsidiaries (the "Company" or "Tribune") as of June 29, 1997 and the results of their operations for the quarters and first halves ended June 29, 1997 and June 30, 1996 and cash flows for the first halves ended June 29, 1997 and June 30, 1996. All adjustments reflected in the accompanying unaudited condensed consolidated financial statements are of a normal recurring nature. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform with the 1997 presentation. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included by reference in the Company's Annual Report on Form 10-K. All share and per share data has been restated to reflect a two-for-one common stock split effective January 15, 1997. Note 2: - ------- Inventories consist of (in thousands): June 29, 1997 Dec. 29, 1996 ------------- ------------- Finished goods.................... $62,236 $60,341 Newsprint (at LIFO)............... 10,719 10,186 Supplies and other................ 8,012 9,998 ------- ------- Total inventories................. $80,967 $80,525 ======= ======= Newsprint inventories are valued under the LIFO method and were less than current cost by approximately $8.4 million at June 29, 1997 and $11.4 million at December 29, 1996. Finished goods primarily include books and supplementary educational materials. Note 3: - ------- Primary net income per share has been computed by dividing net income attributable to common shares by the weighted average number of common shares outstanding during the periods. Fully diluted net income per share has been computed based on the assumption that all of the convertible preferred shares have been converted into common shares. The numbers of common shares used for computing primary and fully diluted net income per share were as follows (in thousands): Second Quarter First Half --------------------- --------------------- 1997 1996 1997 1996 ------- ------- ------- ------- Primary................ 122,822 122,258 122,684 122,844 Fully diluted.......... 135,718 135,660 135,643 136,322 5 The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128 requires presentation on the face of the income statement of both basic and diluted net income per share. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, and requires restatement of all prior period net income per share data presented. The adoption of this statement is not expected to materially affect either future or prior period net income per share of the Company. Note 4: - ------- The second quarter of 1997 included several non-recurring items. In May, the Company sold approximately 2 million shares of America Online, Inc. common stock for $96 million in cash and recorded a pretax gain of $94 million, or $.47 per share on a primary basis. In June, the Company sold 1.3 million shares of CheckFree Corporation common stock for $22 million in cash and recorded a pretax gain of $16 million, or $.08 per share on a primary basis. Also in June, the Company concluded that the decline in the value of its investment in The Learning Company common stock was other than temporary and wrote down the investment to fair market value in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The write-down resulted in a non-cash, pretax loss of $77 million, or $.39 per share on a primary basis. In the aggregate, non-recurring items increased second quarter 1997 primary net income per share by $.14. At the beginning of the 1997 second quarter, the Company sold its Farm Journal subsidiary for approximately $17 million in cash. The Company had acquired Farm Journal in 1994 for approximately $17 million. In June 1997, the Company completed the sale of a building in Fort Lauderdale, which is approximately 35% occupied by the Company's Sun-Sentinel newspaper subsidiary. The Company received proceeds of approximately $43 million and deferred, under sale-leaseback accounting, the gain of approximately $11 million which will be amortized over the Sun-Sentinel's remaining 14.5 year lease term. In May 1997, the Company reached an agreement with Emmis Broadcasting Corporation regarding the sale of the Company's WQCD radio station in New York. Under the agreement, the Company has the option through May 2000 to require Emmis to purchase substantially all of the assets of WQCD for approximately $160 million or to require Emmis to acquire another suitable media property to be exchanged for WQCD. Effective July 1, 1997 and in connection with the agreement, Emmis began operating the station for up to three years for an annual fee of approximately $8 million, after which Emmis has the right to purchase the station. In March 1996, Tribune completed the sale of its holdings in QUNO Corporation, a Canadian newsprint company, as part of QUNO's merger with Donohue Inc. The sale resulted in a 1996 after-tax gain of $89.3 million, or $.73 per share on a primary basis. The gross proceeds from the sale were approximately $427 million in cash, Donohue stock and short-term notes. Immediately after the sale, the Company sold the Donohue stock and notes for cash. After-tax proceeds were approximately $331 million. QUNO has been accounted for as a discontinued operation in the Company's consolidated financial statements. 6 Note 5: - ------- On March 25, 1997, the Company completed its acquisition of Renaissance Communications Corp., a publicly traded company owning six television stations, for approximately $1.1 billion in cash. The stations acquired were WB affiliates KDAF-Dallas and WDZL-Miami and Fox affiliates KTXL-Sacramento, WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Federal Communications Commission ("FCC") order granting the Company's application to acquire the Renaissance stations contained waivers of two FCC rules. First, the FCC temporarily waived its duopoly rule relating to the overlap of WTIC's and WPMT's broadcast signals with those of other Tribune stations. The temporary waivers were granted subject to the outcome of pending FCC rulemaking that is expected to make duopoly waivers unnecessary. Second, the FCC granted a 12-month waiver of its rule prohibiting television/newspaper cross-ownership in the same market, relating to the Miami television station and the Fort Lauderdale Sun-Sentinel. The Company has appealed the FCC's ruling on the cross-ownership issue and a petition requesting a rulemaking procedure has been filed with the FCC since the FCC issued the order. The Company cannot predict the outcome of such FCC rulemaking or any such appeal. In March 1997, the Company agreed to exercise an option for $21 million to increase its equity ownership in The WB Television Network to 21.9%. In January 1996, the Company acquired Houston television station KHTV for approximately $102 million in cash. In February 1996, the Company acquired the remaining minority interest in Philadelphia television station WPHL for approximately $23 million in cash. In March 1996, the Company acquired Educational Publishing Corporation for $205 million in cash and NTC Publishing Group for $83 million in cash. In April 1996, the Company acquired San Diego television station KSWB for approximately $72 million in cash. The acquisitions are being accounted for by the purchase method, and accordingly, the results of operations of the companies have been included in the consolidated financial statements since their respective dates of acquisition. The purchase accounting for the Renaissance acquisition reflected in the condensed consolidated financial statements is preliminary and will likely change as appraisals are finalized and more facts become known. No material adjustments are expected. The following table presents the unaudited pro forma results of operations of the Company for the second quarter of 1996 and the first half of 1997 and 1996 as if the acquisitions and dispositions discussed in Notes 4 and 5 had occurred at the beginning of each year presented. The table also presents the unaudited results of operations for the second quarter of 1997 as reported for comparison purposes. The pro forma results may not be indicative of the results that would have been reported if the transactions had actually occurred at the beginning of each year presented, or of results that may be attained in the future. The unaudited pro forma results do not reflect any synergies anticipated by the Company as a result of the acquisitions.
Second Quarter Ended First Half Ended -------------------------------- -------------------------------- (In thousands, except per share data) June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 ------------- ------------- ------------- ------------- Operating Revenues.................................. $719,742 $687,929 $1,342,622 $1,272,467 Income from Continuing Operations................... $110,932 $ 81,125 $ 166,495 $ 116,891 Primary Net Income Per Share from Continuing Operations...................... $.86 $.63 $1.28 $.88
7 Note 6: - ------- Financial data for each of the Company's business segments is as follows (in thousands):
Second Quarter Ended First Half Ended ----------------------------- ----------------------------- June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 ------------- ------------- ------------- ------------- Operating revenues: Publishing.................................... $360,131 $330,495 $ 715,257 $ 657,828 Broadcasting and Entertainment................ 300,267 253,280 501,657 440,475 Education..................................... 59,344 58,152 96,747 80,746 -------- -------- ---------- ---------- Total operating revenues............................ $719,742 $641,927 $1,313,661 $1,179,049 ======== ======== ========== ========== Operating profit: Publishing.................................... $ 92,296 $ 72,861 $ 187,601 $ 136,104 Broadcasting and Entertainment................ 81,312 65,904 110,996 94,928 Education..................................... 11,435 13,749 11,228 15,971 Corporate expenses............................ (8,011) (7,641) (16,384) (15,055) -------- -------- ---------- ---------- Total operating profit.............................. $177,032 $144,873 $ 293,441 $ 231,948 ======== ======== ========== ==========
8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. - -------------------------------------------------------------------------------- The following discussion compares the results of operations of Tribune Company and its subsidiaries (the "Company") for the second quarter and first half of 1997 to the second quarter and first half of 1996. All share and per share data has been restated to reflect a two-for-one common stock split effective January 15, 1997. This discussion contains certain forward-looking statements that are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and uncertainties are changes in advertising demand, newsprint prices, circulation, interest rates and other economic conditions and the effect of acquisitions, dispositions and investments on the Company's results of operations and financial condition. SIGNIFICANT EVENTS - ------------------ On March 25, 1997, the Company completed its acquisition of Renaissance Communications Corp., a publicly traded company owning six television stations, for approximately $1.1 billion in cash. The stations acquired were WB affiliates KDAF-Dallas and WDZL-Miami and Fox affiliates KTXL-Sacramento, WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Federal Communications Commission ("FCC") order granting the Company's application to acquire the Renaissance stations contained waivers of two FCC rules. First, the FCC temporarily waived its duopoly rule relating to the overlap of WTIC's and WPMT's broadcast signals with those of other Tribune stations. The temporary waivers were granted subject to the outcome of pending FCC rulemaking that is expected to make duopoly waivers unnecessary. Second, the FCC granted a 12-month waiver of its rule prohibiting television/newspaper cross-ownership in the same market, relating to the Miami television station and the Fort Lauderdale Sun-Sentinel. The Company has appealed the FCC's ruling on the cross-ownership issue and a petition requesting a rulemaking procedure has been filed with the FCC since the FCC issued the order. The Company cannot predict the outcome of such FCC rulemaking or any such appeal. The Company also acquired four businesses in 1996: Houston television station KHTV in January, Educational Publishing Corporation and NTC Publishing Group in March and San Diego television station KSWB in April. The results of these businesses have been included in the consolidated financial statements since their respective dates of acquisition. The second quarter of 1997 included several non-recurring items. In May, the Company sold approximately 2 million shares of America Online, Inc. common stock for $96 million in cash and recorded a pretax gain of $94 million, or $.47 per share on a primary basis. In June, the Company sold 1.3 million shares of CheckFree Corporation common stock for $22 million in cash and recorded a pretax gain of $16 million, or $.08 per share on a primary basis. Also in June, the Company concluded that the decline in the value of its investment in The Learning Company common stock was other than temporary and wrote down the investment to fair market value in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The write-down resulted in a non-cash, pretax loss of $77 million, or $.39 per share on a primary basis. In the aggregate, non-recurring items increased second quarter 1997 primary net income per share by $.14. 9 In March 1996, the Company completed the sale of its holdings in QUNO Corporation, a Canadian newsprint company, as part of QUNO's merger with Donohue Inc. The sale resulted in a 1996 after-tax gain of $89.3 million, or $.73 per share on a primary basis. The gross proceeds from the sale were approximately $427 million in cash, Donohue stock and short-term notes. Immediately after the sale, the Company sold the Donohue stock and notes for cash. After-tax proceeds were approximately $331 million. QUNO has been accounted for as a discontinued operation in the Company's consolidated financial statements. RESULTS OF OPERATIONS - --------------------- The results of operations, when examined on a quarterly basis, reflect the seasonality of the Company's revenues. In both publishing and broadcasting and entertainment, second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. In education, second and third quarter revenues are typically higher than first and fourth quarter revenues. Results for the 1997 and 1996 second quarters reflect these seasonal patterns. CONSOLIDATED The Company's consolidated operating results for the second quarter and first half of 1997 and 1996 and the percentage changes from 1996 were as follows:
(Dollars in millions, Second Quarter First Half except per share amounts) ---------------------- -------------------------- 1997 1996 Change 1997 1996 Change ---- ---- ------ ------ ------ ------ Operating revenues $720 $642 + 12% $1,314 $1,179 + 11% Operating profit 177 145 + 22% 293 232 + 27% Non-recurring items 29 - * 29 - * Income from continuing operations 111 84 + 32% 175 135 + 30% Discontinued operations of QUNO, net of tax - - - - 89 * Net income 111 84 + 32% 175 224 - 22% Continuing operations excluding non-recurring items 93 84 + 11% 158 135 + 17% Primary net income per share Continuing operations .86 .65 + 32% 1.35 1.02 + 32% Discontinued operations - - - - .73 * Total .86 .65 + 32% 1.35 1.75 - 23% Continuing operations excluding non-recurring items .72 .65 + 11% 1.21 1.02 + 19% *Not meaningful
Net Income Per Share -- Primary net income per share for the 1997 second quarter rose to $.72, up 11% from $.65 last year, excluding non-recurring items. For the first half of 1997, primary net income per share from continuing operations rose 19% to $1.21 from $1.02 in 1996, excluding non-recurring items. The improvements were due primarily to higher operating profit from publishing as well as broadcasting and entertainment, partially offset by higher net interest expense. Including non-recurring items, primary net income per share from continuing operations increased 32% to $.86 in the second quarter of 1997 and increased 32% to $1.35 in the first half. 10 Operating Profit and Revenues -- The Company's consolidated operating revenues, EBITDA (operating profit before depreciation, amortization and non-recurring items) and operating profit by business segment for the second quarter and first half were as follows:
Second Quarter First Half ------------------------ --------------------------- (Dollars in millions) 1997 1996 Change 1997 1996 Change ---- ---- ------ ------ ------ ------- Operating revenues Publishing $360 $331 + 9% $ 715 $ 658 + 9% Broadcasting and Entertainment 300 253 + 19% 502 440 + 14% Education 60 58 + 2% 97 81 + 20% ---- ---- ------ ------ Total operating revenues $720 $642 + 12% $1,314 $1,179 + 11% EBITDA* Publishing $112 $ 92 + 23% $ 228 $ 173 + 32% Broadcasting and Entertainment 102 77 + 32% 145 117 + 23% Education 16 17 - 10% 19 22 - 9% Corporate expenses (7) (7) - 8% (15) (14) - 9% ---- ---- ------ ------ Total EBITDA $223 $179 + 24% $ 377 $ 298 + 27% Operating profit Publishing $ 92 $ 73 + 27% $ 187 $ 136 + 38% Broadcasting and Entertainment 81 66 + 23% 111 95 + 17% Education 12 14 - 17% 11 16 - 30% Corporate expenses (8) (8) - 5% (16) (15) - 9% ---- ---- ------ ------ Total operating profit $177 $145 + 22% $ 293 $ 232 + 27%
* EBITDA is defined as earnings before interest, taxes, depreciation, amortization and non-recurring items. The Company has presented EBITDA because it is comparable to the data provided by other companies in the industry and is a common alternative measure of performance. EBITDA does not represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flows, is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Consolidated operating revenues for the 1997 second quarter rose 12% to $720 million from $642 million in 1996 and for the first half increased 11% to $1,314 million from $1,179 million in 1996. This was due to recent acquisitions and higher newspaper advertising revenues. Excluding businesses recently acquired or sold, operating revenues were up 5% for the second quarter and up 7% for the first half. Consolidated operating profit increased 22% in the 1997 second quarter and 27% in the first half, while EBITDA increased 24% in the second quarter and 27% in the first half. Publishing operating profit increased 27% in the 1997 second quarter and 38% in the first half primarily due to higher advertising revenues and lower newsprint expense. Broadcasting and entertainment operating profit increased in both periods of 1997 due to significant growth in television with the March acquisition of Renaissance Communications and improved radio results, partially offset by higher equity losses in The WB Television Network. Education reported a decline in operating profit of 17% in the second quarter and 30% in the first half, due mainly to slower sales at Educational Publishing Corporation. Excluding businesses recently 11 acquired or sold, consolidated operating profit was up 9% in the second quarter and 22% in the first half, while EBITDA was up 8% in the second quarter and 19% in the first half. Operating Expenses -- Consolidated operating expenses increased 9% in the second quarter and 8% in the first half as follows:
Second Quarter First Half ------------------------ -------------------------- (Dollars in millions) 1997 1996 Change 1997 1996 Change ---- ---- ------ ------ ---- ------ Cost of sales $326 $320 + 2% $ 605 $607 - Selling, general & administrative 171 142 + 20% 332 274 + 21% Depreciation & amortization of intangible assets 46 35 + 33% 83 66 + 27% ---- ---- ------ ---- Total operating expenses $543 $497 + 9% $1,020 $947 + 8%
Cost of sales increased 2%, or $6 million, in the 1997 second quarter and decreased less than 1%, or $2 million, in the first half. Excluding businesses recently acquired or sold, cost of sales decreased 2%, or $6 million, in the second quarter and was down 3%, or $19 million in the first half. The decrease in both periods was due to lower newsprint and ink expense and reduced broadcast rights amortization expense, partially offset by increased compensation costs. Newsprint and ink expense decreased 15%, or $10 million, in the second quarter of 1997 and was down 22%, or $28 million, in the first half. Broadcast rights amortization decreased 11%, or $7 million, in the second quarter and was down 9%, or $11 million, in the first half. Compensation expense was up 8%, or $8 million, in the second quarter and 6%, or $12 million, in the first half. Selling, general and administrative expenses (SG&A) were up 20%, or $29 million, in the 1997 second quarter and increased 21%, or $58 million, in the first half. Excluding businesses recently acquired or sold, SG&A expenses increased 15%, or $21 million, in the second quarter and increased 15%, or $38 million, in the first half primarily due to increased losses from equity investments, expenses for development activities, higher compensation expense and increased marketing, promotion and general expenses at the Company's newspapers. Expenses for development activities and losses from equity investments increased $5 million in the 1997 second quarter and rose $13 million in the first half. Compensation expense was up 10%, or $6 million, in the second quarter and 12%, or $14 million, in the first half. The increase in depreciation and amortization of intangible assets reflects the acquisitions and capital expenditures made in 1997 and 1996. PUBLISHING Operating Profit and Revenues -- The following table presents publishing operating revenues, EBITDA and operating profit for daily newspapers and other publications/services/development for the second quarter and first half. The latter category includes syndication of editorial products, advertising placement services, niche publications, delivery of other publications, direct mail operations, online/electronic products and, for EBITDA and operating profit, equity losses from investments. 12
Second Quarter First Half ------------------------ ------------------------ (Dollars in millions) 1997 1996 Change 1997 1996 Change ---- ---- ------ ---- ---- ------ Operating revenues Daily newspapers $342 $314 + 9% $678 $623 + 9% Other publications/ services/development 18 17 + 8% 37 35 + 9% ---- ---- ---- ---- Total operating revenues $360 $331 + 9% $715 $658 + 9% EBITDA Daily newspapers $113 $ 97 + 18% $230 $182 + 26% Other publications/ services/development (1) (5) + 75% (2) (9) + 77% ---- ---- ---- ---- Total EBITDA $112 $ 92 + 23% $228 $173 + 32% Operating profit Daily newspapers $ 96 $ 79 + 22% $195 $147 + 32% Other publications/ services/development (4) (6) + 33% (8) (11) + 33% ---- ---- ---- ---- Total operating profit $ 92 $ 73 + 27% $187 $136 + 38%
Publishing operating revenues for the 1997 second quarter increased 9% to $360 million, and for the first half were up 9% to $715 million, due principally to higher advertising revenues at all of the newspapers. Advertising revenues increased 10% in both the second quarter and first half due to higher linage and rates. Operating profit for the 1997 second quarter was up 27% to $92 million, and for the first half was up 38% to $187 million, due primarily to higher advertising revenues and lower newsprint expenses. In the second quarter of 1997, daily newspaper operating profit margins increased to 28.2% from 25.2% in 1996 and in the first half increased to 28.8% from 23.6% in 1996. Publishing group revenues, by classification, for the second quarter and first half were as follows:
Second Quarter First Half ------------------------ ------------------------ (Dollars in millions) 1997 1996 Change 1997 1996 Change ---- ---- ------ ---- ---- ------ Advertising Retail $111 $104 + 7% $218 $205 + 6% General 38 35 + 10% 75 68 + 9% Classified 132 116 + 13% 262 231 + 13% ---- ---- ---- ---- Total advertising 281 255 + 10% 555 504 + 10% Circulation 62 63 - 1% 127 128 - Other 17 13 + 35% 33 26 + 30% ---- ---- ---- ---- Total revenues $360 $331 + 9% $715 $658 + 9%
Retail advertising revenues for the 1997 second quarter and first half rose mainly due to increases in the electronics, movie, furniture stores and general merchandise categories in Chicago, the department store, health care, food and drug and apparel store categories in Orlando and the health care and furniture store categories in Fort Lauderdale. General advertising rose in the second quarter and first half due mainly to increases in the transportation, financial and resorts categories in Chicago. Classified advertising revenues were up in the second quarter and first half due to increases in help wanted advertising at all of the newspapers and advertising from Internet and other electronic products. 13 Total advertising linage increased 10% in the 1997 second quarter and 8% in the first half. Full run retail advertising linage increased 2% in the second quarter and 3% in the first half due to increases at Orlando and Newport News. Full run general advertising linage increased 9% in the second quarter and 10% in the first half due to increases at Orlando, Chicago and Newport News. Part run advertising linage was up 10% for the second quarter and 6% for the first half due primarily to increases in Chicago in classified and in Orlando and Fort Lauderdale in retail. Preprint advertising linage increased 21% in the 1997 second quarter and 17% in the first half due primarily to higher preprint part run linage in Chicago, Orlando and Fort Lauderdale and increased full run linage in Orlando and Newport News. The following summary presents advertising linage for the second quarter and first half.
Second Quarter First Half -------------------------- ---------------------------- (Inches in thousands) 1997 1996 Change 1997 1996 Change ----- ----- ------ ------ ------ ------ Full run Retail 909 888 + 2% 1,795 1,741 + 3% General 201 184 + 9% 397 362 + 10% Classified 1,670 1,673 - 3,280 3,267 - ----- ----- ------ ------ Total full run 2,780 2,745 + 1% 5,472 5,370 + 2% Part run 2,624 2,386 + 10% 5,000 4,708 + 6% Preprint 2,379 1,965 + 21% 4,420 3,767 + 17% ----- ----- ------ ------ Total inches 7,783 7,096 + 10% 14,892 13,845 + 8%
Circulation revenues decreased 1% in the 1997 second quarter and were down slightly in the first half. Total average daily circulation was down 3% to 1,265,000 copies in the 1997 second quarter, and total average Sunday circulation was down 2% to 1,886,000 copies. For the first half of 1997, total average daily circulation decreased 2% to 1,291,000 copies, while total average Sunday circulation was down 2% to 1,924,000 copies. Other revenues are derived from advertising placement services; the syndication of columns, features, information and comics to newspapers; commercial printing operations; delivery of other publications; direct mail operations; and other publishing-related activities. The increase in other revenues in the 1997 second quarter and first half resulted primarily from higher revenues from direct mail operations and usage revenues from Internet/electronic projects. Operating Expenses -- Publishing operating expenses increased 4%, or $10 million, in the second quarter of 1997 and 1%, or $6 million, in the first half. In the second quarter of 1997, newsprint and ink expense decreased 15%, or $10 million, as average newsprint prices were down 21% while consumption increased 8% as a result of increased advertising volume. Other expenses were up 10%, or $20 million, mainly due to higher compensation costs of $7 million, increased development of Internet businesses, including Digital City, of $3 million and increased marketing, promotion and general expenses. For the first half, newsprint and ink expense decreased 22%, or $28 million, as average newsprint prices were down 25% while consumption increased 6%. Other expenses were up 9%, or $34 million, in the first half mainly due to higher compensation costs of $14 million, increased development spending of $6 million and increased marketing, promotion and general expenses. 14 BROADCASTING AND ENTERTAINMENT Operating Profit and Revenues -- The following table presents operating revenues, EBITDA and operating profit for television, radio, entertainment/Chicago Cubs and cable programming/development for the second quarter and first half. Cable programming/development includes CLTV News and, for EBITDA and operating profit, the Company's equity income or loss from its investments in The WB Television Network, TV Food Network and Qwest Broadcasting.
Second Quarter First Half --------------------------- --------------------------- (Dollars in millions) 1997 1996 Change 1997 1996 Change ---- ---- ------- ---- ---- ------- Operating revenues Television $243 $196 + 24% $405 $344 + 18% Radio 18 20 - 10% 43 45 - 4% Entertainment/Chicago Cubs 36 35 + 4% 49 47 + 3% Cable Programming/Development 3 2 + 26% 5 4 + 29% ---- ---- ---- ---- Total operating revenues $300 $253 + 19% $502 $440 + 14% EBITDA Television $102 $ 75 + 35% $153 $117 + 31% Radio 6 3 + 75% 12 8 + 39% Entertainment/Chicago Cubs (2) 1 * (6) (2) - 205% Cable Programming/Development (4) (2) - 82% (14) (6) - 127% ---- ---- ---- ---- Total EBITDA $102 $ 77 + 32% $145 $117 + 23% Operating profit Television $ 83 $ 66 + 26% $124 $ 99 + 25% Radio 6 3 + 101% 10 7 + 50% Entertainment/Chicago Cubs (3) - - 874% (8) (4) - 97% Cable Programming/Development (5) (3) - 73% (15) (7) - 116% ---- ---- ---- ---- Total operating profit $ 81 $ 66 + 23% $111 $ 95 + 17% *Not meaningful
Broadcasting and entertainment operating revenues increased 19% to $300 million in the 1997 second quarter and increased 14% to $502 million in the first half due primarily to increased television revenues. Television revenues were up 24%, or $47 million, in the second quarter and 18%, or $61 million, in the first half, due to the acquisition of the six Renaissance stations in March 1997. Excluding Renaissance, television revenues were down 2% in the second quarter and were up 2% in the first half. Second quarter 1997 operating profit for broadcasting and entertainment was up 23% to $81 million from $66 million in 1996 and for the first half was up 17% to $111 million from $95 million in 1996. An increase in television operating profit and improved radio results in both periods were partially offset by higher equity losses in The WB and increased entertainment/Chicago Cubs losses. Television operating profit increased 26%, or $17 million, in the second quarter and 25%, or $25 million, in the first half due primarily to the acquisition of Renaissance and gains at KTLA-Los Angeles. Excluding Renaissance, television operating profit was up 1% in the second quarter and 8% in the first half. Equity losses in The WB increased $4 million in the second quarter of 1997 and $11 million in the first half, due in part to Tribune's increased equity investment in The WB. 15 Operating Expenses -- Broadcasting and entertainment operating expenses increased 17%, or $32 million, in the 1997 second quarter and 13%, or $45 million, in the first half. The increase in both periods was primarily due to the acquisition of Renaissance and higher equity losses from The WB. Excluding Renaissance, The WB, KSWB-San Diego and Farm Journal, broadcasting and entertainment operating expenses were flat in the both the second quarter and the first half due to lower broadcast rights amortization offset by higher compensation expense. Broadcast rights amortization decreased 11%, or $7 million, in the second quarter and was down 9%, or $11 million, in the first half due primarily to lower amortization for syndicated and feature programming and lower sports rights expense at KTLA-Los Angeles. Compensation expense increased 9%, or $6 million, in the second quarter and 8%, or $8 million, in the first half due primarily to higher player compensation at the Chicago Cubs and to expanded news coverage at several television stations. EDUCATION Operating Profit and Revenues -- The following table presents education operating revenues, EBITDA and operating profit for the second quarter and first half: Second Quarter First Half ----------------------- ----------------------- (Dollars in millions) 1997 1996 Change 1997 1996 Change ---- ---- ------ ---- ---- ------ Operating revenues $60 $58 + 2% $97 $81 + 20% EBITDA 16 17 - 10% 19 22 - 9% Operating profit 12 14 - 17% 11 16 - 30% Education second quarter operating revenues were up 2% to $60 million in 1997 as slower sales at Educational Publishing Corporation partially offset improvements at the each of the other education businesses. In the first half of 1997, operating revenues were up 20% to $97 million. The increase was primarily due to the March 1996 acquisitions of Educational Publishing and NTC Publishing and improvements at the other education businesses. Excluding the acquisitions, education revenues increased 18% in the first half. Education second quarter operating profit was down 17% to $12 million in 1997 and in the first half was down 30% to $11 million. The declines were due to the slower sales at Educational Publishing, which more than offset improvements at the other education businesses. Operating Expenses -- Education operating expenses increased 8%, or $4 million, in the second quarter of 1997, primarily due to higher compensation expense. For the first half, education operating expenses increased 32%, or $21 million, primarily due to the recent acquisitions. 16 OTHER Interest expense for the 1997 second quarter increased 127% to $25 million and for the first half increased 85% to $41 million due to higher debt levels resulting from acquisitions and stock repurchases. Interest income decreased 26% to $6 million in the 1997 second quarter and decreased 7% to $15 million in the first half, due mainly to the prepayment of a mortgage note receivable in the fourth quarter of 1996. The effective tax rate, excluding non-recurring items, was 40.8% and 40.5% for the 1997 and 1996 second quarters, respectively, and 41.1% and 40.5% for the 1997 and 1996 first halves, respectively. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash flow generated from operations is the Company's primary source of liquidity. Net cash provided by operations in the first half was $187 million in 1997, up from $103 million in 1996 mainly due to higher income from continuing operations, changes in working capital and, in 1996, the payment of taxes on the sale of QUNO. The Company normally expects to fund dividends, capital expenditures and other operating requirements with net cash provided by operations. Funding required for share repurchases and acquisitions is financed by available cash flow from operations and, if necessary, by the issuance of debt or stock. Net cash used for investments totaled $1.0 billion in the 1997 first half and related mainly to the acquisition of Renaissance Communications Corp. which was financed largely through the issuance of commercial paper and long-term debt. The Company received $118 million of gross proceeds in 1997 from the sale of America Online and CheckFree common stock, $43 million from a sale-leaseback transaction on a Fort Lauderdale building and $17 million from the sale of its Farm Journal subsidiary. Net cash provided by financing activities in the 1997 first half was $576 million, as proceeds from the issuance of debt and the sale of stock to employees were only partially offset by purchases of treasury stock, dividends and repayments of debt. In the first half of 1997, the Company issued $642 million of commercial paper and repurchased .9 million shares of its common stock for $34 million. At June 29, 1997, the Company had authorization to repurchase an additional 4.1 million shares and expects to continue to repurchase shares in 1997. The 1997 common dividend increased 7% to $.32 per share for the first half from $.30 per share in 1996. In July 1997, the Company issued $150 million of Series D medium-term notes. Proceeds from the issuance of the notes were used to repay commercial paper. 17 PART II. OTHER INFORMATION Item 5. Other Information. ------------------ The computation of the ratios of earnings to fixed charges, filed herewith as Exhibit 12, is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits. 11 - Statements of computation of primary and fully diluted net income per share. 12 - Computation of ratios of earnings to fixed charges. (b) Reports on Form 8-K. The Company filed one report on Form 8-K during the quarter for which this report is filed. o The Company filed a Form 8-K Current Report dated June 10, 1997, which included Items 5 and 7. Item 5 reported the acquisition of Renaissance Communications Corp. Item 7 included the financial statements of Renaissance Communications Corp. for the year ended December 31, 1996 and the unaudited pro forma condensed consolidated statement of income of Tribune Company for the fiscal year ended December 29, 1996. 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIBUNE COMPANY (Registrant) Date: August 12, 1997 /s/ R. Mark Mallory ------------------- R. Mark Mallory Vice President and Controller (on behalf of the Registrant and as Chief Accounting Officer) 19 EX-11 2 NET INCOME PER SHARE EXHIBIT 11 TRIBUNE COMPANY STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE (In thousands, except per share amounts)
Second Quarter Ended First Half Ended ------------------------------ ------------------------------- PRIMARY June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996 - ------- ------------- ------------- ------------- ------------- Income from continuing operations $ 110,932 $ 84,290 $ 175,437 $ 134,669 Discontinued operations of QUNO, net of tax - - - 89,317 --------- --------- --------- ---------- Net income 110,932 84,290 175,437 223,986 Preferred dividends, net of tax (4,700) (4,697) (9,399) (9,393) --------- --------- --------- ---------- Net income attributable to common shares $ 106,232 $ 79,593 $ 166,038 $ 214,593 --------- --------- --------- ---------- Weighted average common shares outstanding 122,822 122,258 122,684 122,844 --------- --------- --------- ---------- Primary net income per share: Continuing operations (A) $ .86 $ .65 $ 1.35 $ 1.02 Discontinued operations - - - .73 --------- --------- --------- ---------- Total $ .86 $ .65 $ 1.35 $ 1.75 ========= ========= ========= ========== FULLY DILUTED Income from continuing operations $ 110,932 $ 84,290 $ 175,437 $ 134,669 Additional ESOP contribution required assuming all preferred shares were converted, net of tax (3,288) (3,375) (6,576) (6,749) --------- --------- --------- ---------- Adjusted income from continuing operations 107,644 80,915 168,861 127,920 Discontinued operations of QUNO, net of tax - - - 89,317 --------- --------- --------- ---------- Adjusted net income $ 107,644 $ 80,915 $ 168,861 $ 217,237 --------- --------- --------- ---------- Weighted average common shares outstanding 122,822 122,258 122,684 122,844 Assumed conversion of preferred shares into common shares 11,093 11,406 11,093 11,406 Assumed exercise of stock options, net of common shares assumed repurchased with the proceeds 1,803 1,996 1,866 2,072 --------- --------- --------- ---------- Adjusted weighted average common shares outstanding 135,718 135,660 135,643 136,322 --------- --------- --------- ---------- Fully diluted net income per share: Continuing operations $ .79 $ .60 $ 1.24 $ .94 Discontinued operations - - - .65 --------- --------- --------- ---------- Total $ .79 $ .60 $ 1.24 $ 1.59 ========= ========= ========= ==========
(A) Primary net income per share from continuing operations is computed by deducting preferred dividends, net of tax, from income from continuing operations and then dividing by weighted average common shares outstanding. EX-12 3 EARNINGS TO FIXED CHARGES EXHIBIT 12 TRIBUNE COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (In thousands, except ratios)
Fiscal Year Ended December First Half ------------------------------------------------------------------ Ended 6/29/97 1996 1995 1994 1993 1992 ------------- ---------- ---------- ---------- ---------- ---------- Income from continuing operations before cumulative effects of accounting changes $ 175,437 $ 282,750 $ 245,458 $ 233,149 $ 204,646 $ 179,534 Add: Income tax expense 121,086 191,663 167,076 158,698 142,212 120,089 Losses on equity investments 15,674 13,281 13,209 9,739 1,857 1,903 ------------- ---------- ---------- ---------- ---------- ---------- Subtotal 312,197 487,694 425,743 401,586 348,715 301,526 ------------- ---------- ---------- ---------- ---------- ---------- Fixed charge adjustments Add: Interest expense 40,634 47,779 21,814 20,585 24,660 35,301 Amortization of capitalized interest 1,039 2,108 2,253 2,362 2,392 2,434 Interest component of rental expense (A) 4,745 9,362 8,200 8,236 8,732 8,182 ------------- ---------- ---------- ---------- ---------- ---------- Earnings, as adjusted $ 358,615 $ 546,943 $ 458,010 $ 432,769 $ 384,499 $ 347,443 ============= ========== ========== ========== ========== ========== Fixed charges: Interest expense $ 40,634 $ 47,779 $ 21,814 $ 20,585 $ 24,660 $ 35,301 Interest capitalized 223 168 610 - 1,099 1,092 Interest component of rental expense (A) 4,745 9,362 8,200 8,236 8,732 8,182 Interest related to guaranteed ESOP debt (B) 8,989 20,134 22,057 24,017 25,742 27,019 ------------- ---------- ---------- ---------- ---------- ---------- Total fixed charges $ 54,591 $ 77,443 $ 52,681 $ 52,838 $ 60,233 $ 71,594 ============= ========== ========== ========== ========== ========== Ratio of Earnings to Fixed Charges 6.6 7.1 8.7 8.2 6.4 4.9 ============= ========== ========== ========== ========== ==========
(A) Represents a portion of rental expense incurred by the Company, which is a reasonable approximation of the interest cost component of such expense. (B) Tribune Company guarantees the debt of its Employee Stock Ownership Plan (ESOP). EX-27 4 FDS
5 This schedule contains summary financial information extracted from the June 29, 1997 condensed consolidated statement of income and condensed consolidated balance sheet and is qualified in its entirety by references to such financial statements. 1,000 6-MOS DEC-28-1997 DEC-30-1996 JUN-29-1997 0 816 459,442 39,584 80,967 692,384 1,488,522 855,842 4,642,043 717,689 0 0 303,864 1,018 1,357,580 4,642,043 0 1,313,661 0 605,071 0 0 40,634 296,523 121,086 175,437 0 0 0 175,437 1.35 1.24
EX-27.1 5 RESTATED FDS
5 This schedule contains summary financial information extracted from the June 30, 1996 condensed consolidated balance sheet and restated financial information for the first half of 1996 extracted from the June 29, 1997 condensed consolidated statements of income and is qualified in its entirety by reference to such reports. The previously filed financial data schedule has been restated to conform to revised financial statement presentation. The restatement had no effect on net income. 1,000 6-MOS DEC-29-1996 JAN-01-1996 JUN-30-1996 16,145 40,194 378,274 31,700 94,500 661,218 1,419,048 769,255 3,547,114 608,866 0 0 312,470 1,018 1,111,896 3,547,114 0 1,179,049 0 606,849 0 0 21,988 226,335 91,666 134,669 89,317 0 0 223,986 1.75 1.59
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