-----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, CpNqhxLsnKn4mwnLd/YUNGlI3h9oHL9te0RZd7sqTl3o0wTJy5NNHOdN7p2eT+2R bfyQdfA1AlqLPY6dAEEc9w== 0000726513-97-000020.txt : 19970515 0000726513-97-000020.hdr.sgml : 19970515 ACCESSION NUMBER: 0000726513-97-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 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: 97603258 BUSINESS ADDRESS: STREET 1: 435 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3122229100 10-Q 1 FIRST 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 March 30, 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 May 8, 1997 there were 122,741,658 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)
First Quarter Ended ------------------------------- March 30, 1997 March 31,1996 -------------- ------------- Operating Revenues................................................. $593,919 $537,122 Operating Expenses Cost of sales (exclusive of items shown below)..................... 278,724 282,874 Selling, general and administrative................................ 161,369 136,031 Depreciation and amortization of intangible assets............................................ 37,417 31,142 -------- -------- Total operating expenses........................................... 477,510 450,047 -------- -------- Operating Profit................................................... 116,409 87,075 Interest income.................................................... 9,430 8,550 Interest expense................................................... (15,574) (10,955) -------- -------- Income from Continuing Operations Before Income Taxes.............. 110,265 84,670 Income taxes....................................................... (45,760) (34,291) -------- -------- Income from Continuing Operations.................................. 64,505 50,379 Discontinued Operations of QUNO, net of tax........................ - 89,317 -------- -------- Net Income......................................................... 64,505 139,696 Preferred dividends, net of tax.................................... (4,699) (4,696) -------- -------- Net Income Attributable to Common Shares........................... $ 59,806 $135,000 ======== ======== Net Income Per Share: Primary: Continuing operations............................ $ .49 $ .37 Discontinued operations.......................... - .72 -------- -------- Net income....................................... $ .49 $ 1.09 ======== ======== Fully diluted: Continuing operations............................ $ .45 $ .34 Discontinued operations.......................... - .66 -------- -------- Net income....................................... $ .45 $ 1.00 ======== ======== Dividends per common share......................................... $ .16 $ .15 ======== ========
See Notes to Condensed Consolidated Financial Statements. 2 TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars)
March 30, 1997 December 29, 1996 -------------- ----------------- (Unaudited) ASSETS Current assets Cash and short-term investments................................... $ 22,039 $ 274,170 Accounts receivable, net.......................................... 375,532 350,773 Inventories....................................................... 83,580 80,525 Broadcast rights.................................................. 184,707 154,904 Prepaid expenses and other........................................ 52,757 26,349 ---------- ---------- Total current assets.............................................. 718,615 886,721 Property, plant and equipment..................................... 1,496,382 1,456,209 Accumulated depreciation.......................................... (832,656) (813,501) ---------- ---------- Net properties.................................................... 663,726 642,708 Broadcast rights.................................................. 184,208 173,552 Intangible assets, net............................................ 2,483,584 1,251,470 Investments....................................................... 583,263 629,129 Other............................................................. 118,835 117,320 ---------- ---------- Total assets...................................................... $4,752,231 $3,700,900 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Long-term debt due within one year................................ $ 30,035 $ 31,073 Contracts payable for broadcast rights............................ 231,014 178,589 Deferred income .................................................. 81,844 51,591 Accounts payable, income taxes and other current liabilities...... 431,204 411,848 ---------- ---------- Total current liabilities......................................... 774,097 673,101 Long-term debt.................................................... 1,768,890 979,754 Deferred income taxes............................................. 350,136 189,673 Contracts payable for broadcast rights............................ 218,152 209,754 Compensation and other obligations................................ 111,245 109,112 ---------- ---------- Total liabilities................................................. 3,222,520 2,161,394 Shareholders' equity Series B convertible preferred stock.............................. 304,094 312,470 Common stock and additional paid-in capital....................... 155,740 150,879 Retained earnings................................................. 2,254,918 2,210,024 Treasury stock (at cost).......................................... (1,059,175) (1,034,012) Unearned compensation related to ESOP............................. (218,668) (218,668) Unrealized gain on investments.................................... 92,802 118,813 ---------- ---------- Total shareholders' equity........................................ 1,529,711 1,539,506 ---------- ---------- Total liabilities and shareholders' equity........................ $4,752,231 $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 Quarter Ended ---------------------------------- March 30, 1997 March 31, 1996 -------------- -------------- Operations Net income............................................................ $ 64,505 $ 139,696 Adjustments to reconcile net income to net cash provided by operations: Discontinued operations of QUNO, net of tax................... - (89,317) Depreciation and amortization of intangible assets............ 37,417 31,142 Other, net.................................................... 55,589 46,373 ---------- ---------- Net cash provided by operations....................................... 157,511 127,894 ---------- ---------- Investments Capital expenditures.................................................. (14,886) (20,070) Acquisitions and investments.......................................... (1,131,788) (437,492) Proceeds from sale of QUNO............................................ - 426,828 Other, net............................................................ (2,261) (159) ---------- ---------- Net cash used for investments......................................... (1,148,935) (30,893) ---------- ---------- Financing Proceeds from issuance of long-term debt.............................. 793,681 73,000 Repayments of long-term debt.......................................... (6,101) (69,474) Sale of common stock to employees, net................................ 5,622 5,717 Purchase of treasury stock............................................ (34,298) (96,264) Dividends............................................................. (19,611) (18,488) ---------- ---------- Net cash provided by (used for) financing............................. 739,293 (105,509) ---------- ---------- Net decrease in cash and short-term investments....................... (252,131) (8,508) Cash and short-term investments at the beginning of year.............. 274,170 22,899 ---------- ---------- Cash and short-term investments at the end of quarter................. $ 22,039 $ 14,391 ========== ==========
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 March 30, 1997 and the results of their operations and their cash flows for the quarters ended March 30, 1997 and March 31, 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. 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): March 30, 1997 Dec. 29, 1996 -------------- ------------- Finished goods......................... $61,986 $60,341 Newsprint (at LIFO).................... 11,905 10,186 Supplies and other..................... 9,689 9,998 ------- ------- Total inventories...................... $83,580 $80,525 ======= ======= Newsprint inventories are valued under the LIFO method and were less than current cost by approximately $8.3 million at March 30, 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): First Quarter --------------------------- 1997 1996 ------- ------- Primary................................ 122,546 123,432 Fully diluted.......................... 135,024 136,330 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: - ------- 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 first quarter 1996 after-tax gain of $89.3 million, or $.72 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. 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. 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. 6 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 first quarters of 1997 and 1996 as if the acquisitions and dispositions discussed in Notes 4 and 5 had occurred at the beginning of each period presented. 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 period 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.
First Quarter Ended --------------------------------- March 30, 1997 March 31, 1996 (In thousands, except per share data) -------------- -------------- Operating Revenues................................ $622,880 $584,538 Income from Continuing Operations................. $55,563 $35,766 Primary Net Income Per Share from Continuing Operations.................... $.42 $.25
Note 6: - ------- The aggregate cost basis, net unrealized gain and fair value for investments recorded at fair value under SFAS No. 115 at March 30, 1997 were $335.3 million, $152.7 million and $488.0 million, respectively. At March 30, 1997, the net unrealized gain on investments included an $87 million unrealized loss on The Learning Company common stock investment. The Company believes this loss was temporary at March 30, 1997. The difference between cost and fair value, net of related tax effects, is recorded in a separate component of shareholders' equity and amounted to a net gain of $92.8 million at March 30, 1997. 7 Note 7: - ------- Financial data for each of the Company's business segments is as follows (in thousands):
First Quarter Ended --------------------------------- March 30, 1997 March 31, 1996 -------------- -------------- Operating revenues: Publishing................................. $355,126 $327,333 Broadcasting and Entertainment............. 201,390 187,195 Education.................................. 37,403 22,594 -------- -------- Total operating revenues...................... $593,919 $537,122 ======== ======== Operating profit: Publishing................................. $ 95,305 $ 63,243 Broadcasting and Entertainment............. 29,684 29,024 Education.................................. (207) 2,222 Corporate expenses......................... (8,373) (7,414) -------- -------- Total operating profit........................ $116,409 $ 87,075 ======== ========
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 first quarter of 1997 to the first quarter of 1996. All share and per share data has been restated to reflect a two-for-one common stock split effective January 15, 1997. 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. 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 first quarter 1996 after-tax gain of $89.3 million, or $.72 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 education revenues are typically higher than first and fourth quarter revenues. Results for the 1997 and 1996 first quarters reflect these seasonal patterns. 9 This Management's Discussion and Analysis of Results of Operations and Financial Condition 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, interest rates and other economic conditions and the effect of acquisitions and dispositions on the Company's results of operations and financial condition. CONSOLIDATED The Company's consolidated operating results for the first quarter of 1997 and 1996 and the percentage changes from 1996 were as follows: (Dollars in millions, First Quarter except per share amounts) --------------------------- 1997 1996 Change ---- ---- ------ Operating revenues $594 $537 + 11% Operating profit 116 87 + 34% Income from continuing operations 65 50 + 28% Discontinued operations of QUNO, net of tax - 89 * Net income 65 140 - 54% Primary net income per share Continuing operations .49 .37 + 32% Discontinued operations - .72 * Total .49 1.09 - 55% *Not meaningful Net Income Per Share -- Primary net income per share from continuing operations for the 1997 first quarter was $.49, up 32% from $.37 last year. The increase was mainly due to a 51% gain in publishing profits. Operating Profit and Revenues -- The Company's consolidated operating revenues, EBITDA (operating profit before depreciation and amortization) and operating profit by business segment for the first quarter were as follows: 10 First Quarter --------------------------- (Dollars in millions) 1997 1996 Change ---- ---- ------ Operating revenues Publishing $355 $327 + 8% Broadcasting & Entertainment 201 187 + 8% Education 38 23 + 66% ---- ---- Total operating revenues $594 $537 + 11% EBITDA* Publishing $115 $ 81 + 42% Broadcasting & Entertainment 42 40 + 6% Education 4 4 - 7% Corporate expenses (7) (7) - 10% ---- ---- Total EBITDA $154 $118 + 30% Operating profit Publishing $ 95 $ 63 + 51% Broadcasting & Entertainment 29 29 + 2% Education - 2 - 109% Corporate expenses (8) (7) - 13% ---- ---- Total operating profit $116 $ 87 + 34% * EBITDA is defined as earnings before interest, taxes, depreciation and amortization. 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 increased 11% in the 1997 first quarter to $594 million from $537 million in 1996. This resulted from higher advertising revenues and the recent acquisitions. Excluding recently acquired businesses, revenues were up 7% for the first quarter. Consolidated operating profit grew 34% and EBITDA increased 30% in the first quarter of 1997 due primarily to gains in the publishing group. Publishing operating profit increased 51% in the first quarter due to higher advertising revenues and lower newsprint prices. Broadcasting and entertainment operating profit improved 2% in the first quarter due mainly to significant growth in television, partially offset by higher equity losses from the Company's increased investment in The WB Network. Education reported a 1997 first quarter operating loss of $.2 million, compared with a profit of $2.2 million in 1996, due primarily to companies acquired in March 1996. First quarter results for these companies reflect the seasonality of their businesses. 11 Operating Expenses -- Consolidated operating expenses increased 6% in the quarter as follows: First Quarter -------------------------- (Dollars in millions) 1997 1996 Change ---- ---- ------ Cost of sales $279 $283 - 1% Selling, general & administrative 161 136 + 19% Depreciation & amortization of intangible assets 38 31 + 20% ---- ---- Total operating expenses $478 $450 + 6% Cost of sales decreased 1%, or $4 million, in the 1997 first quarter due to lower newsprint and ink expense, partially offset by the effect of the acquisitions and higher compensation expense. Excluding the acquisitions, cost of sales decreased 4%, or $12 million in the quarter. Newsprint and ink expense decreased $19 million, or 28%, in the 1997 first quarter, while compensation expense increased $3 million, or 4%. Selling, general and administrative expenses were up $25 million, or 19%, in the 1997 first quarter. Excluding the acquisitions, SG&A expense increased $16 million, or 12%, primarily due to increased losses from equity investments and expenses for development activities of $6 million and increased compensation expense of $9 million. The increase in depreciation and amortization of intangible assets reflects the acquisitions and capital expenditures made in 1996 and 1997. PUBLISHING Operating Profit and Revenues -- The following table presents publishing operating revenues, EBITDA and operating profit for daily newspapers and other publications/services/development. 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. First Quarter -------------------------- (Dollars in millions) 1997 1996 Change ---- ---- ------ Operating revenues Daily newspapers $336 $310 + 8% Other publications/ services/development 19 17 + 9% ---- ---- Total operating revenues $355 $327 + 8% EBITDA Daily newspapers $116 $ 85 + 36% Other publications/ services/development (1) (4) + 80% ---- ----- Total EBITDA $115 $ 81 + 42% Operating profit Daily newspapers $ 98 $ 68 + 45% Other publications/ services/development (3) (5) + 34% ---- ---- Total operating profit $ 95 $ 63 + 51% 12 Publishing operating revenues for the 1997 first quarter were up 8% to $355 million from $327 million in 1996 due to higher advertising revenues at all of the newspapers. Advertising revenues increased 10% due to higher rates and linage. Operating profit for the 1997 first quarter was $95 million, up 51% from $63 million, primarily due to higher advertising revenues and lower newsprint expense. Daily newspaper operating margins increased to 29.3% from 22.0% in 1996. Publishing group revenues by classification were as follows: First Quarter -------------------------- (Dollars in millions) 1997 1996 Change ---- ---- ------ Advertising Retail $106 $100 + 6% General 37 34 + 8% Classified 130 115 + 13% ---- ---- Total advertising 273 249 + 10% Circulation 65 65 + 1% Other 17 13 + 24% ---- ---- Total revenues $355 $327 + 8% Retail advertising revenues for the 1997 first quarter rose mainly due to improvements in the department store, health care and furniture store categories in Orlando, the movie, electronics and general merchandise categories in Chicago and the health care and furniture store categories in Fort Lauderdale. Classified advertising increased in the quarter due to increased help wanted advertising at all of the newspapers and advertising from Internet and other electronic products. Total advertising linage increased 5% in the 1997 first quarter. Full run retail advertising linage increased 4% due to increases at Orlando, Newport News and Fort Lauderdale. Full run general advertising linage increased 10% due to increases at Chicago, Orlando and Newport News. Part run advertising linage was up 2% due primarily to increases in Chicago in classified and in Fort Lauderdale and Orlando in retail. Preprint advertising linage was up 13% due to increases at all of the daily newspapers. The following summary presents advertising linage for the first quarter: First Quarter --------------------------- (Inches in thousands) 1997 1996 Change ----- ----- ------ Full run Retail 886 853 + 4% General 196 178 + 10% Classified 1,610 1,594 + 1% ----- ----- Total full run 2,692 2,625 + 3% Part run 2,376 2,322 + 2% Preprint 2,041 1,802 + 13% ----- ----- Total inches 7,109 6,749 + 5% Circulation revenues increased 1% in the 1997 first quarter due to selected price increases at certain Company newspapers and increased circulation at Fort Lauderdale. Total average daily circulation was 13 down 2% to 1,314,000 copies in the 1997 first quarter, and total average Sunday circulation was down 2% to 1,962,000 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 first quarter resulted primarily from higher revenues from direct mail operations and usage revenues from Internet/electronic projects. Operating Expenses -- Publishing operating expenses decreased 2%, or $4 million, in the first quarter of 1997. Newsprint and ink expense decreased $19 million, or 28%, as average newsprint prices were down 30%, while newsprint consumption increased 5%. Other expenses were up 7%, or $15 million, mainly due to higher compensation costs and increased development of Internet businesses, including Digital City. 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. 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 Network, TV Food Network and Qwest Broadcasting. First Quarter ---------------------------- (Dollars in millions) 1997 1996 Change ---- ---- ------ Operating revenues Television $162 $148 + 9% Radio 25 25 + 1% Entertainment/Chicago Cubs 12 12 - 2% Cable Programming/Development 2 2 + 33% ---- ---- Total operating revenues $201 $187 + 8% EBITDA Television $ 51 $ 42 + 23% Radio 5 5 + 10% Entertainment/Chicago Cubs (4) (3) - 51% Cable Programming/Development (10) (4) -152% ---- ---- Total EBITDA $ 42 $ 40 + 6% Operating profit Television $ 41 $ 33 + 23% Radio 4 4 + 12% Entertainment/Chicago Cubs (5) (4) - 35% Cable Programming/Development (11) (4) -142% ---- ---- Total operating profit $ 29 $ 29 + 2% 14 Broadcasting and entertainment first quarter 1997 operating revenues increased 8% to $201 million from $187 million in 1996 due mainly to a 9%, or $14 million, increase in television revenues. Television gains were primarily attributed to improvement at WGN-Chicago and the acquisition of the six television stations from Renaissance Communications in late March 1997 and of KSWB-San Diego in April 1996. Excluding the acquisitions, television revenues increased 5%. First quarter 1997 operating profit for broadcasting and entertainment was up 2% to $29 million in 1997 and EBITDA was up 6% to $42 million. A television operating profit increase of 23% (21% without acquisitions) to $41 million was partially offset by higher equity losses in The WB Network. In the first quarter of 1997, Tribune increased its equity position in The WB Network to 21.9% from 12.5%. First quarter 1997 operating profit includes an $11 million loss from The WB Network compared to $3 million in 1996. Operating Expenses -- Broadcasting and entertainment operating expenses increased 9%, or $14 million, in the 1997 first quarter primarily due to the acquisitions and the $8 million increase in equity losses from The WB. Excluding the acquisitions and the equity losses from The WB Network, broadcasting and entertainment operating expenses increased 1%, or $1 million, for the first quarter. EDUCATION Operating Profit and Revenues -- The following table presents operating revenues, EBITDA and operating profit for the education segment: First Quarter -------------------------- (Dollars in millions) 1997 1996 Change ---- ---- ------ Operating revenues $ 38 $ 23 + 66% EBITDA 4 4 - 7% Operating profit - 2 -109% Education first quarter 1997 operating revenues were up 66% to $38 million from $23 million in 1996 due to the March 1996 acquisitions and improvements at existing business units. Excluding the acquisitions, education operating revenues were up 12%. Education first quarter operating loss was $.2 million in 1997 versus an operating profit of $2.2 million in 1996. The decline was due primarily to the acquisition of Educational Publishing Corporation and NTC Publishing Group in March 1996. First quarter results for these companies reflect the seasonality of their businesses. 15 Operating Expenses -- Education operating expenses were up 85%, or $17 million, primarily due to the recent acquisitions. Excluding the acquisitions, first quarter operating expenses were up 14%, or $2 million, mainly due to increased compensation and cost of goods sold as a result of higher sales. OTHER Interest expense for the 1997 first quarter increased 42% to $16 million from $11 million last year due to higher debt levels related to acquisitions and stock repurchases. Interest income for the 1997 first quarter grew 10% to $9 million. The effective tax rate was 41.5% and 40.5% for the 1997 and 1996 first quarters, 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 quarter increased to $158 million in 1997 from $128 million in 1996 mainly due to higher income from continuing operations. 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 $1.1 billion in the first quarter of 1997 and related mainly to the acquisition of Renaissance Communications Corp. Net cash provided by financing activities in the 1997 first quarter was $739 million as proceeds from the issuance of debt and the sale of stock to employees were partially offset by purchases of treasury stock, dividends and repayments of debt. In the first quarter of 1997, the Company issued $794 million of commercial paper and repurchased .9 million shares of its common stock for $34 million. At March 30, 1997, the Company had authorization to repurchase an additional 4.1 million shares and expects to continue to repurchase shares in 1997. The first quarter 1997 dividend increased 7% to $.16 per share from $.15 per share in 1996. 16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The Company held its annual meeting of stockholders on May 6, 1997. (b) No answer required. (c) Proposal 1 involved the election of four directors to serve until the 2000 Annual Meeting and one director to serve until the 1999 Annual Meeting. Those directors and the voting results are as follows: Votes Votes "For" "Not For" ----------- --------- 2000 Annual Meeting: James C. Dowdle 119,458,756 1,081,383 Diego E. Hernandez 119,429,357 1,110,782 Robert E. La Blanc 119,528,471 1,011,668 Andrew J. McKenna 119,471,551 1,068,588 1999 Annual Meeting: Patrick G. Ryan 119,199,535 1,340,604 Proposal 2 involved the adoption of the Tribune Company 1997 Incentive Compensation Plan. Votes Votes Votes "For" "Not For" "Abstained" ----------- --------- ----------- 103,106,822 8,770,742 1,585,591 Proposal 3 involved the ratification of the selection of Price Waterhouse LLP to serve as the Company's independent accountants for 1997. Votes Votes Votes "For" "Not For" "Abstained" ----------- --------- ----------- 118,485,813 1,615,531 438,795 (d) Not applicable. 17 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. 10.15 - 1997 Incentive Compensation Plan. 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 has filed two reports on Form 8-K during the quarter for which this report is filed. o The Company filed a Form 8-K Current Report dated January 14, 1997, which reported 2 events under Item 5. The first event was the Registration on Form S-3 of $500 million of Series E medium-term notes on December 27, 1996. The registration statement was declared effective by the Securities and Exchange Commission on January 9, 1997. The second event was a two-for-one common stock split effected by a 100% stock dividend distributed on January 15, 1997, to holders of record on December 27, 1996. No financial statements were filed as part of the report. o The Company filed a Form 8-K dated March 26, 1997, which included Items 2 and 7. Item 2 reported the acquisition of Renaissance Communications Corp. Item 7 incorporated by reference the financial statements of Renaissance and the pro forma financial information of the Company previously filed as a Form 8-K Current Report dated July 26, 1996 (as subsequently amended). 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: May 13, 1997 /s/ R. Mark Mallory --------------------- R. Mark Mallory Vice President and Controller (on behalf of the Registrant and as Chief Accounting Officer) 19 EX-10.15 2 1997 INCENTIVE COMPENSATION PLAN Exhibit 10.15 TRIBUNE COMPANY 1997 INCENTIVE COMPENSATION PLAN ARTICLE I Purpose The purpose of the 1997 Incentive Compensation Plan (the "Plan") is to enable Tribune Company (the "Company") to provide management and other employees of the Company and its Subsidiaries stock options and other stock and cash incentives based upon the achievement of financial and other performance goals, thereby attracting, retaining and rewarding such employees and strengthening the mutuality of interests between the employees and the Company's stockholders. ARTICLE II Definitions 2.1 "Board" shall mean the Board of Directors of the Company. 2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation. 2.3 "Committee" shall mean the Committee as defined in Section 3.1 hereof. 2.4 "Common Stock" shall mean the Common Stock (without par value) of the Company. 2.5 "Disability" shall mean a disability qualifying the Participant to receive benefits under the Company's or a Subsidiary's long-term disability plan. Disability shall be deemed to occur on the date benefit payments begin. 2.6 "EBITDA" shall mean the earnings of the Company before deducting interest, taxes, depreciation and amortization. 2.7 "Extraordinary Items" shall mean (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, or (iv) the effect of a merger or acquisition, all of which must be identified in the audited financial statements, including footnotes, or the Management Discussion and Analysis section of the Company's annual report. -1- 2.8 "Fair Market Value" unless otherwise required by any applicable provision of the Code, or any regulations issued thereunder, shall mean as of any date the closing price of the Common Stock as reported on the New York Stock Exchange Composite Transaction List for such day or if the Common Stock was not traded on such day, then the next preceding day on which the Common Stock was traded. 2.9 "Incentive Stock Option" shall mean any stock option awarded under the Plan intended to be, and designated as, an incentive stock option within the meaning of Section 422 of the Code or any successor provision. 2.10 "Nonqualified Stock Option" shall mean any stock option awarded under the Plan that is not an Incentive Stock Option. 2.11 "Participant" shall mean an eligible employee to whom an award has been made pursuant to the Plan. 2.12 "Retirement" shall mean any termination of employment by an employee (other than by death or Disability) who is at least 55 years of age after at least 10 years of employment by the Company and/or a Subsidiary. 2.13 "Subsidiary" shall mean any corporation (or partnership, joint venture or other enterprise) (i) of which the Company owns or controls, directly or indirectly, 20% or more of the outstanding shares of stock normally entitled to vote for the election of Directors (or comparable equity participations and voting power) or (ii) which the Company controls by contract or other means. "Control" means the power to direct or cause the direction of the management and policies of a corporation, partnership, joint venture or other enterprise. 2.14 "Termination of Employment" shall mean the termination of a Participant's employment with the Company or any Subsidiary. A Participant employed by a Subsidiary shall also be deemed to incur a Termination of Employment if the Subsidiary ceases to be a Subsidiary and the Participant does not immediately thereafter become an employee of the Company or another Subsidiary. 2.15 "Transfer" shall mean anticipation, alienation, attachment, sale, assignment, pledge, encumbrance, charge or other disposition; and the terms "Transferred" or "Transferable" shall have corresponding meanings. -2- ARTICLE III Administration 3.1 The Committee. The Plan shall be administered by one or more committees (any such committee, the "Committee") of the Board. The Board shall have the sole discretion to appoint, add, remove or replace members of the Committee, and shall have the sole authority to fill vacancies on the Committee. Unless otherwise provided by the Board: (i) with respect to any award under the Plan for which the Committee determines that it is necessary or desirable for the grant or issuance thereof to be exempt under Rule 16b-3 of the Securities Exchange Act of 1934 (the "1934 Act"), the Committee shall consist of two or more directors each of whom is permitted under that Rule to make grants or awards that are exempt from the operation of 1934 Act Section 16(b), and (ii) with respect to any award that is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), the Committee shall consist of two or more directors, each of whom is an "outside director" (as such term is defined in applicable regulations under Code Section 162(m)). With respect to any award that is not intended to satisfy the conditions of 1934 Act Rule 16b-3 or Code Section 162(m)(4)(C), the Committee may delegate all or any of its responsibilities hereunder to any directors or, except to the extent prohibited under applicable law, to any officers of the Company (any of whom also may be a Participant who has been granted or is eligible to be granted awards under the Plan), and in the context of such awards, references in the Plan to the "Committee" shall refer to both the Committee and, unless otherwise provided by the Committee, to any such delegates of the Committee. 3.2 Authority. The Committee shall have full power to select key employees to whom awards are granted; to determine the size and types of awards and their terms and conditions; to construe and interpret the Plan; to establish and amend the rules for the Plan administration; and to make all other determinations which may be necessary or advisable for the administration of the Plan. All determinations of the Committee shall be final and conclusive on all persons, including the Company, its stockholders and Participants, and their estates and beneficiaries. ARTICLE IV Reserved Shares The number of shares of Common Stock available for awards under the Plan shall be the sum of the following amounts: (a) Ten million (10,000,000) shares; -3- (b) any shares of Common Stock subject to an award hereunder or under any prior stock incentive plan of the Company if there is a lapse, forfeiture, expiration or termination of any such award; (c) the number of shares of Common Stock exchanged by an optionee as full or partial payment to the Company of the exercise price under any stock option exercised under the Plan or any prior stock incentive plan of the Company; (d) the number of shares of Common Stock retained by the Company pursuant to a Participant's tax withholding election or exchanged by a Participant to satisfy his or her tax withholding obligations as permitted by Section 15.5 hereof; and (e) any shares of Common Stock purchased by the Company with cash obtained upon the exercise of options granted under the Plan or any prior stock incentive plan of the Company and shares repurchased with tax savings resulting from deductibility exceeding reported compensation expense. All of these shares may be either authorized but unissued or reacquired shares. Four million (4,000,000) of the Plan shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options. The maximum number of shares subject to stock options granted to any Participant during any five-year period during the term of the Plan shall not exceed one million (1,000,000). ARTICLE V Eligibility All management and other employees of the Company and its Subsidiaries, including employees who are members of the Board of Directors, shall be eligible for participation in the Plan or any program contained herein. Participation under the Plan from among those eligible shall be determined by the Committee. ARTICLE VI Types of Awards Awards under the Plan may be granted in any one or a combination of (a) stock options, (b) performance equity program awards, and (c) annual management incentive program awards. -4- ARTICLE VII Stock Option Program 7.1 General Terms. Stock options may be granted to Participants at any time as determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an Incentive Stock Option. The option price for each option shall be determined by the Committee but shall not be less than 100% of the Fair Market Value of the Common Stock on the date the option is granted. Each option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no option shall be exercisable later than the tenth (10th) anniversary date of its grant. Options granted under the Plan shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine. The option price upon exercise of any option shall be payable to the Company in full by (a) cash payment or its equivalent; (b) tendering previously acquired shares having a Fair Market Value at the time of exercise equal to the option price; (c) certification of ownership of such previously acquired shares; (d) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and withholding taxes due to Company; or (e) such other methods of payment as the Committee at its discretion deems appropriate. For purposes of paragraphs (b) and (c), previously acquired shares must have been owned by the Participant for at least six months prior to exercise. 7.2 Termination of Employment by Death, Disability or Retirement. If a Participant's employment by the Company or a Subsidiary terminates by reason of death, Disability or Retirement, any stock option held by such Participant, unless otherwise determined by the Committee at grant, shall be fully vested and may thereafter be exercised by the Participant or by the beneficiary or legal representative of the estate of a disabled or deceased Participant, for a period of five years (or such shorter period as the Committee may specify at grant) from the date of such death, Disability or Retirement or until the expiration of the stated term of such stock option, whichever period is the shorter. 7.3 Other Termination of Employment. Subject to Article XII, unless otherwise determined by the Committee at or after grant, if a Participant's employment by the Company or a Subsidiary terminates for any reason other than death, Disability or Retirement, the stock option shall terminate at such time as provided in the award. -5- ARTICLE VIII Performance Equity Program 8.1 General Terms. The Committee may establish performance equity program awards for Participants subject to such terms and conditions as the Committee determines appropriate. Performance equity program awards shall consist of the right to receive shares of Common Stock which may be earned in whole or in part if certain performance goals established by the Committee are achieved over a period of time designated by the Committee. The Committee may, in its discretion, substitute cash for shares of Common Stock based on the Fair Market Value of the Common Stock. 8.2 Performance Equity Program Award. Each award shall set forth provisions regarding (a) the number of shares subject to such award or a formula for determining such number, (b) the performance criteria and level of achievement related to these criteria which shall determine the number of shares granted, issued, retainable and/or vested, (c) the period as to which performance shall be measured for determining achievement of performance (a "Performance Period"), which period may, in no event, be less than two years, (d) the timing of any delivery of shares earned by virtue of performance, (e) restrictions on the Transfer of the performance equity program award, (f) forfeiture provisions, and (g) such further terms and conditions, in each case not inconsistent with the Plan, as may be determined from time to time by the Committee. The maximum number of shares payable as a performance equity program award may be a multiple of the target amount payable, and the maximum number of shares payable for a Performance Period to any Participant that is intended to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall not exceed 30,000. 8.3 Performance Criteria. The Committee shall establish the performance criteria and level of achievement related to these criteria which shall determine the target and maximum number of shares payable under a performance equity program award, which criteria may be based on financial performance and/or personal performance evaluations. Notwithstanding anything to the contrary herein, the performance criteria for any performance equity program awards that are intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall be a measure based solely on one or more Qualifying Performance Criteria (as defined in Article X hereof) selected by the Committee and specified at the time the performance equity program award is established. The Committee shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the number of shares payable as a result thereof, prior to the delivery of any shares that are intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m). -6- 8.4 Timing of Delivery. The Committee shall determine the timing of any performance equity program award. The Committee may provide for or, subject to such terms and conditions as the Committee may specify, may permit a Participant to elect for the delivery of shares or cash payable under any performance equity program award to be deferred. 8.5 Termination of Employment. Upon a Termination of Employment by a Participant prior to the end of a Performance Period, the following procedures shall apply as to any performance equity program awards established for such Participant, unless determined otherwise by the Committee in its sole discretion: (a) Death, Disability or Retirement. Following the death, Disability or Retirement of a Participant, the Participant shall be entitled to a pro-rata portion of any performance equity program award. Such pro-rata portion shall be determined following the termination of the relevant Performance Period by multiplying (i) the number of shares as to which the Committee determines the performance criteria applicable to such award has been satisfied, times (ii) a ratio equal to the number of full months of the Participant's employment with the Company during the Performance Period for such award divided by the number of months in the Performance Period for such award. (b) Other Termination of Employment. Subject to Article XII, unless the Committee provides otherwise, upon a Termination of Employment for any reason other than death, Disability, or Retirement prior to the end of a Performance Period, the right to any performance equity program award as to which the performance criteria and any other condition has not then been satisfied shall be forfeited. 8.6 Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the number of shares subject to receipt, issued, retainable and/or vested under a performance equity program award may be adjusted by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the number of shares earned upon satisfaction of any performance goal by any Participant who is a "covered employee" within the meaning of Code Section 162(m). ARTICLE IX Annual Management Incentive Program 9.1 General Terms. The Committee may award annual management incentive program bonuses to Participants upon achievement of such terms and conditions as the Committee determines appropriate. Annual management incentive program bonuses shall -7- consist of monetary payments earned in whole or in part if certain performance goals established by the Committee for a specified fiscal year are achieved during that year. 9.2 Annual Management Incentive Program Bonuses. Each year the Committee shall set forth provisions regarding (a) the performance criteria and level of achievement related to these criteria upon which the amount of the award payment shall be based, (b) the timing of any payment earned by virtue of performance, (c) restrictions on the Transfer of the annual management incentive program award prior to actual payment, (d) forfeiture provisions, and (e) such further terms and conditions, in each case not inconsistent with the Plan. The maximum amount payable to any Participant as an annual management incentive program award intended to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall not exceed the lower of 0.2% of EBITDA for the fiscal year or $2 million. 9.3 Performance Criteria. The Committee shall establish the performance criteria and level of achievement related to these criteria upon which the amount of any award payment shall be based. Notwithstanding anything to the contrary herein, the performance criteria for any annual management incentive program bonus that is intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall be a measure based solely on one or more Qualifying Performance Criteria (as defined in Article X hereof) selected by the Committee and specified within the first 90 days of the performance period. The Committee shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment of any bonus that is intended by the Committee to satisfy the requirements for "performance-based compensation" under Code Section 162(m). 9.4 Timing of Payment. The Committee shall determine the timing of payment of any annual management incentive program bonus. The Committee may provide for or, subject to such terms and conditions as the Committee may specify, may permit a Participant to elect for the payment of any annual management incentive program award to be deferred. 9.5 Termination of Employment. Upon a Termination of Employment for a Participant prior to the end of a fiscal year, the following procedures shall apply as to any annual management incentive program bonus for such fiscal year, unless determined otherwise by the Committee in its sole discretion: (a) Death, Disability or Retirement. Following the death, Disability or Retirement of a Participant, the Participant shall be entitled to receive a pro-rata portion of any annual management incentive program bonus amount payable based upon performance for such fiscal year. Such pro-rata portion shall be paid at such time as the other Participants receive bonuses and shall be determined by multiplying (i) the amount of the annual management incentive program bonus that the Committee determines would have been payable to the Participant for the fiscal year, times (ii) a ratio equal to -8- the number of full months of the Participant's employment with the Company during the fiscal year divided by 12. (b) Other Termination of Employment. Subject to Article XII, unless the Committee provides otherwise, upon a Termination of Employment for any reason other than death, Disability, or Retirement prior to the end of a fiscal year, the right to receive any payment from the annual management incentive program bonus for that fiscal year shall be forfeited. 9.6 Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount to be paid under an annual management incentive program bonus may be adjusted by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the amount earned upon satisfaction of any performance goal by any Participant who is a "covered employee" within the meaning of Code Section 162(m). ARTICLE X Qualifying Performance Criteria The performance goals established by the Committee with respect to performance equity program awards and annual management incentive program bonuses may be based on one or more of the following qualifying performance criteria selected by the Committee: (a) shareholder value added, (b) cash flow, (c) earnings per share, (d) EBITDA, (e) return on equity, (f) return on capital, (g) return on assets or net assets, (h) revenue growth, (i) income or net income, (j) cost control, (k) operating income or net operating income, (l) operating profit or net operating profit, (m) operating margin, (n) return on operating revenue, and (o) market share or circulation, all as determined by the Committee. Performance may be measured on a Corporate, Group, business unit or consolidated basis and may be measured absolutely or relative to the Company's peers. The Committee may adjust the performance goals to account for the effects of Extraordinary Items. ARTICLE XI Nontransferability No awards granted under the Plan may be Transferred, other than by will or by the laws of descent and distribution. Further, all stock options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. Notwithstanding the foregoing, at the discretion of the Committee, a Nonqualified Stock Option may be transferable -9- by the Participant solely to members of the Participant's immediate family or trusts or family partnerships for the benefit of such persons, subject to such terms and conditions as may be established by the Committee. ARTICLE XII Change in Control Upon the grant of an award or as otherwise provided by the Committee consisting of members of the Incumbent Board (as hereinafter defined), upon a change in control of the Company all outstanding stock options shall become exercisable, all shares subject to performance equity program awards shall be delivered as if the performance goals for the designated period had been fully achieved and all annual management incentive program awards shall be paid out as if the performance for the current fiscal year had been fully achieved. For purposes hereof, a change in control of the Company shall mean: (a) the acquisition, other than from the Company, by any person, entity or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act), excluding for this purpose the Company, the Robert R. McCormick Tribune Foundation, the Cantigny Foundation and any employee benefit plan (or related trust) sponsored or maintained by the Company or its Subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or (b) individuals who, as of May 6, 1997, constitute the Board of Directors of the Company (as of May 6, 1997 the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the stockholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the members of the Board, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) shall be considered as though such person were a member of the Incumbent Board; or (c) approval by the stockholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such approval do not, immediately after such reorganization, merger or consolidation, own, directly or indirectly, 50% or more of the -10- combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the reorganized, merged or consolidated company, or a liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company. If any amounts payable to a Participant pursuant to the Plan are deemed to be "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code, the Committee may provide in the award that the Company shall pay to such Participant in addition to any amounts payable pursuant to the Plan an amount which -- after all federal, state and local taxes imposed on the Participant with respect to such amount are subtracted therefrom -- is equal to the excise taxes imposed on such excess parachute payment pursuant to Section 4999 of the Code. ARTICLE XIII Adjustment Provisions 13.1 If the Company shall at any time change the number of issued shares of Common Stock without new consideration to the Company (such as by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Common Stock) or make a distribution of cash or property which has a substantial impact on the value of issued Common Stock, the total number of shares of Common Stock available for awards under the Plan, the number of shares which may be made subject to Incentive Stock Options, the maximum number of shares which may be made subject to a stock option grants during the term of the Plan and the maximum number of shares under Section 8.2 hereof shall be appropriately adjusted, and the number of shares covered by each outstanding award shall be equitably adjusted. 13.2 In the case of any sale of assets, merger, consolidation, combination or other corporate reorganization or restructuring of the Company with or into another corporation which results in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof (an "Acquisition"), subject to the provisions of the Plan and any limitation applicable to the award: (a) any Participant to whom a stock option has been granted shall have the right thereafter and during the term of the stock option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of shares of Common Stock which might have been obtained upon exercise of the stock option or portion thereof, as the case may be, immediately prior to the Acquisition; and -11- (b) except as otherwise provided in Article XII, any Participant to whom performance equity program awards have been awarded shall have the right thereafter and during the term of the award, upon fulfillment of the terms of the award, to receive on the date or dates set forth in the award, the Acquisition Consideration receivable upon the Acquisition by a holder of the number of shares of Common Stock which are covered by the Award. The term "Acquisition Consideration" shall mean the kind and amount of securities, cash or other property or any combination thereof receivable in respect of one share of Common Stock upon consummation of an Acquisition. 13.3 Notwithstanding any other provision of the Plan, the Committee may authorize the issuance, continuation or assumption of awards or provide for other equitable adjustments after changes in the Common Stock resulting from any other merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence upon such terms and conditions as it may deem equitable and appropriate. 13.4 In the event that another corporation or business entity is being acquired by the Company, and the Company assumes outstanding employee stock options and/or stock appreciation rights, the aggregate number of shares of Common Stock available for awards under the Plan shall be increased accordingly. ARTICLE XIV Amendment and Termination The terms and conditions applicable to any stock option or other award may be amended or modified by mutual agreement between the Company and the Participant or such other persons as may then have an interest therein. The Board of Directors may amend the Plan from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the Participant's consent. No amendment of the Plan shall be made without stockholder approval, if such amendment increases the number of shares of Common Stock reserved under the Plan or the maximum number of option shares which may be awarded to any Participant in any five-year period or if stockholder approval is otherwise required by law or regulation or stock exchange rule. -12- ARTICLE XV General Provisions 15.1 Successor. All obligations of the Company under the Plan, with respect to awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 15.2 Unfunded Status of Plan. This Plan is intended to be unfunded. With respect to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. 15.3 No Right to Employment. Neither this Plan nor the grant of any award hereunder shall give any Participant or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time. 15.4 No Assignment of Benefits. No award under the Plan shall, except as otherwise specifically provided hereunder or by law, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and any such benefit shall not in any manner be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. 15.5 Taxes. The Company shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan after giving the person entitled to receive such payment or delivery notice as far in advance as practicable, and the Company may defer making payment or delivery as to any award if any such tax is payable until indemnified to its satisfaction. The Committee may, in its discretion and subject to such rules as it may adopt, permit a Participant to pay all or a portion of any withholding taxes arising in connection with the exercise of a nonqualified stock option or receipt of shares relating to a performance equity program award, by electing (i) to have the Company withhold shares having a Fair Market Value equal to the amount to be withheld or (ii) to deliver shares previously owned for at least six months having a Fair Market Value equal to the amount to be withheld. -13- 15.6 Governing Law. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (without regard to applicable Delaware principles of conflict of laws). ARTICLE XVI Effective Date and Stockholder Approval The Plan was adopted by the Board of Directors on December 10, 1996, to be effective December 29, 1996, subject to stockholder approval. -14- EX-11 3 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)
First Quarter Ended ------------------------------------------ PRIMARY March 30, 1997 March 31, 1996 - ------- -------------- -------------- Income from continuing operations $ 64,505 $ 50,379 Discontinued operations of QUNO, net of tax - 89,317 -------------- -------------- Net income 64,505 139,696 Preferred dividends, net of tax (4,699) (4,696) -------------- -------------- Net income attributable to common shares $ 59,806 $ 135,000 -------------- -------------- Weighted average common shares outstanding 122,546 123,432 -------------- -------------- Primary net income per share: Continuing operations (A) $ .49 $ .37 Discontinued operations - .72 -------------- ------------- Total $ .49 $ 1.09 ============== ============= FULLY DILUTED - ------------- Income from continuing operations $ 64,505 $ 50,379 Additional ESOP contribution required assuming all preferred shares were converted, net of tax (3,288) (3,374) -------------- ------------- Adjusted income from continuing operations 61,217 47,005 Discontinued operations of QUNO, net of tax - 89,317 -------------- ------------- Adjusted net income $ 61,217 $ 136,322 -------------- ------------- Weighted average common shares outstanding 122,546 123,432 Assumed conversion of preferred shares into common shares 11,101 11,406 Assumed exercise of stock options, net of common shares assumed repurchased with the proceeds 1,377 1,492 -------------- ------------- Adjusted weighted average common shares outstanding 135,024 136,330 -------------- ------------- Fully diluted net income per share: Continuing operations $ .45 $ .34 Discontinued operations - .66 -------------- ------------ Total $ .45 $ 1.00 ============== ============
(A) Primary net income per share from continuing operations is computed by deducting preferred dividends, net of tax, from continuing operations and then dividing by weighted average common shares outstanding. EX-12 4 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 Quarter ------------------------------------------------------------------ Ended 3/30/97 1996 1995 1994 1993 1992 ------------- ---------- ---------- ---------- --------- ---------- Income from continuing operations before cumulative effects of accounting changes $ 64,505 $ 282,750 $ 245,458 $ 233,149 $ 204,646 $ 179,534 Add: Income tax expense 45,760 191,663 167,076 158,698 142,212 120,089 Losses on equity investments 10,855 13,281 13,209 9,739 1,857 1,903 ------------- ---------- ---------- ---------- ---------- ---------- Subtotal 121,120 487,694 425,743 401,586 348,715 301,526 ------------- ---------- ---------- ---------- ---------- ---------- Fixed charge adjustments Add: Interest expense 15,574 47,779 21,814 20,585 24,660 35,301 Amortization of capitalized interest 520 2,108 2,253 2,362 2,392 2,434 Interest component of rental expense (A) 2,450 9,362 8,200 8,236 8,732 8,182 ------------- ---------- ---------- ---------- ---------- ---------- Earnings, as adjusted $ 139,664 $ 546,943 $ 458,010 $ 432,769 $ 384,499 $ 347,443 ============= ========== ========== ========== ========== ========== Fixed charges: Interest expense $ 15,574 $ 47,779 $ 21,814 $ 20,585 $ 24,660 $ 35,301 Interest capitalized 1 168 610 - 1,099 1,092 Interest component of rental expense (A) 2,450 9,362 8,200 8,236 8,732 8,182 Interest related to guaranteed ESOP debt (B) 4,718 20,134 22,057 24,017 25,742 27,019 ------------- ---------- ---------- ---------- ---------- ---------- Total fixed charges $ 22,743 $ 77,443 $ 52,681 $ 52,838 $ 60,233 $ 71,594 ============= ========== ========== ========== ========== ========== Ratio of Earnings to Fixed Charges 6.1 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 5 FDS
5 This schedule contains summary financial information extracted from the March 30, 1997 condensed consolidated statement of income and condensed consolidated balance sheet and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-28-1997 DEC-30-1996 MAR-30-1997 7,383 14,656 412,904 37,372 83,580 718,615 1,496,382 832,656 4,752,231 774,097 0 0 304,094 1,018 1,224,599 4,752,231 0 593,919 0 278,724 0 0 15,574 110,265 45,760 64,505 0 0 0 64,505 .49 .45
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